Councils are mixing 'best value' and Egan ideas that could be ... - The end of the tender trap

The public sector is by far the largest provider of work for the construction industry. Yet, an estimated 85 per cent of all local authority contracts are let on the basis on one thing alone - cheapness. Concepts such as value for money and partnering were alien cultures and weren't allowed to dislodge the Thatcherite doctrine of compulsory competitive tendering (CCT).

In spite of John Prescott pledging that central Government will be a demanding client, which by inference is taken to also mean local government, a coterie of private sector clients almost hijacked the reforming agenda that the Deputy Prime Minister demands from construction as outlined in Sir John Egan's Construction Task Force report Rethinking construction. Significant local authority involvement was missing from the Task Force's agenda for change. But no more.

Last week, CJ reported exclusively on the bust-up between Government and public and private sector clients which saw the Task Force give ground to the Construction Industry Board. Clients rebelled against the Task Force's prejudice towards large, repeat-business private clients at the expense of both public sector organisations and occasional clients from the private sector. The Task Force wilted and CIB chairman Tony Jackson was appointed to the steering group that is charged with implementing Egan's recommendations.

GOODTIMING

The move is seen as good news for occasional clients and local authorities. It comes at a time when local authorities are being encouraged to look towards obtaining 'best value' and entering into partnering agreements.

This train of thought was evident in Egan's report, which stated: "Too many clients are undiscriminating and still equate price with cost, selecting designers and constructors almost exclusively on the basis of tendered price. This tendency is widely seen as one of the greatest barriers to improvement. The public sector, because of its need to interpret accountability in a rather narrow sense, is often viewed as a major culprit in this respect. The industry needs to educate and help its clients to differentiate between best value and lowest price."

Egan opined that the moves towards best value and partnering would not compromise public accountability. One long-time local authority official wasn't so sure that it was as simple as the Task Force makes it out to be. He observes: "I think that a lot of people have cause for legitimate concern. In many people's eyes, partnering is seen as a cosy relationship and they are blind to the fact that partnering is about working together with common goals and within a contractual arrangement."

Martin Evans, policy and technical director with the CIPFA, the institute for public sector financial controllers, says some councils may have concerns about public accountability in the light of the proposed changes. "Some local authorities may prefer the rule-based approach of CCT, although they won't say so publicly."

Evans adds: "CIPFA would argue that whenever a local authority enters into an [partnering] agreement, it is important that there are proper provisions for corporate governance."

In his move to end CCT, Egan has found an unlikely ally in the form of the Association of Direct Labour Organisations (ADLO). "We welcome the fact that CCT is now recognised as a failure. ADLO has been campaigning against it since 1982." So says ADLO adviser Nick Walkley.

ADLO is all in favour of strategic partnership and Walkley does not foresee any conflict over public accountability if a local authority appoints its sibling dlo over something as potentially nebulous as best value. "Adlo can provide a transparent chain of accountability. The same cannot always be said of a private supplier."

Under the Government's best value pilot programme, it will be left to individual authorities to define what constitutes best value to suit each council's specific requirements. Legislation has been laid down which outlines the principles and the management processes that authorities must adopt. Draconian steps will be taken by Government against authorities which fail to meet performance standards in the same way as in education where the administration of some schools has been taken out of local control and replaced by Central Government officers.

Best value is an ethos, not a list of rules, so a "range of ideas are being implemented" by councils, says a Local Government Association spokeswoman. Councils may talk to each other and compare ideas but they are autonomous and have to address local issues, so the only common link is the mantra of the four Cs: Challenge, Compare, Compete, and Consult.

"Those are at the heart of best value", says the spokeswoman. Boiled down, the four Cs demand that councils:

l Ask if they are the agency best placed to do a task.

l If they are, then they must weigh their own performance against others doing comparable work.

l When placing contracts they must "go beyond" CCT to other forms of tendering and market testing, and compare the service they get from contractors to that received by other councils.

l Be more reactive in consulting the public for views on what is wanted and being received from councils and their contractors.

To help councils determine what best value may mean for them, the Department of Environment, Transport and the Regions (DETR) launched two-year pilot projects with 53 councils in England in April. There is a parallel study underway among Welsh councils. Each council has a different portfolio of services to test best value ideas with some, such as London Borough of Camden (see box) and Portsmouth City Council, among those with an emphasis on re-assessing how to drop CCT in construction procurement and what bid systems could be used instead.

Legislation

The Government, however, does not plan to do nothing until the councils report and its White Paper on local government in July opens the door to introducing framework legislation for best value, next spring. Secondary legislation would flesh out the best value rules by "drawing upon the experience of the pilot projects", says the spokeswoman. But she believes the Government may begin consultations on secondary legislation next spring, well before the pilot projects have been completed.

"We're trying to get the Government to allow local government a period of time to determine what best value is before any secondary legislation," she says. "We've a lot to learn about what best value is in practice".

The main document LGA is working with in its ruminations is the Construction Clients' Forum's proposed 'pact' between clients and the industry, Constructing Improvement. An adviser to the LGA says the report echoes the thrust of the references to 'competition' in the recent White Paper on Local Government, and that it "encourages people to work more closely in the interest of clients, so fosters more of a partnership approach."

Partnering means many things to many people in the private sector, never mind the public sector clients who are turning their minds to its good and bad points. To help them along the way, the LGA is to introduce them to Constructing Improvement within the next few weeks in an effort to inform and keep some sort of consensus to what partnering might be in all types of clients' relationships with the construction industry.

Whether the CCF report is embraced or ignored by local authorities is their prerogative. Through the best value pilot projects public sector clients may be refining ideas, but the new opportunity for them to have a hand on the tiller piloting the maiden voyage of the "Egan" is also a responsibility. Best value calls for measurements and comparisons, so ignoring the best of the rest - such as the parallel partnering system used by the MoD's 'Building Down Barriers' project - could lead to problems later.

DIFFERENCES

However, the CCF's pact and best value are not necessarily synonymous. The adviser says: "I can't say yet that Constructing Improvement is best value for construction in the public sector but it can contribute."

They may eventually hold similar ideas only with different titles, which is not a unique circumstance for an industry plagued by reports, such as Egan's.

Although not on Egan's Task Force, some of the hands that produced the CCF's pact to industry had more than a passing involvement in drafting Rethinking Construction.

That strategic co-ordination of words, and the recent power games behind the scenes, gives the industry a first chance to see some of the threads that run from Egan's ideas through the CCF pact to best value.

Whether the threads snap, or not, depends not only on the local authorities' pilot projects but also their reaction to the CCF's pact when it lands on their desks in the coming weeks.

CIPFA's Evans does concede that there is a certain "vagueness about the concept" of best value. He adds: "Best value is a real challenge and unlike CCT, it covers the whole range of services. Authorities will have to produce continued downward pressure on costs." The public sector is by far the largest provider of work for the construction industry. Yet, an estimated 85 per cent of all local authority contracts are let on the basis on one thing alone - cheapness. Concepts such as value for money and partnering were alien cultures and weren't allowed to dislodge the Thatcherite doctrine of compulsory competitive tendering (CCT).

In spite of John Prescott pledging that central Government will be a demanding client, which by inference is taken to also mean local government, a coterie of private sector clients almost hijacked the reforming agenda that the Deputy Prime Minister demands from construction as outlined in Sir John Egan's Construction Task Force report Rethinking construction. Significant local authority involvement was missing from the Task Force's agenda for change. But no more.

Last week, CJ reported exclusively on the bust-up between Government and public and private sector clients which saw the Task Force give ground to the Construction Industry Board. Clients rebelled against the Task Force's prejudice towards large, repeat-business private clients at the expense of both public sector organisations and occasional clients from the private sector. The Task Force wilted and CIB chairman Tony Jackson was appointed to the steering group that is charged with implementing Egan's recommendations.

GOODTIMING

The move is seen as good news for occasional clients and local authorities. It comes at a time when local authorities are being encouraged to look towards obtaining 'best value' and entering into partnering agreements.

This train of thought was evident in Egan's report, which stated: "Too many clients are undiscriminating and still equate price with cost, selecting designers and constructors almost exclusively on the basis of tendered price. This tendency is widely seen as one of the greatest barriers to improvement. The public sector, because of its need to interpret accountability in a rather narrow sense, is often viewed as a major culprit in this respect. The industry needs to educate and help its clients to differentiate between best value and lowest price."

Egan opined that the moves towards best value and partnering would not compromise public accountability. One long-time local authority official wasn't so sure that it was as simple as the Task Force makes it out to be. He observes: "I think that a lot of people have cause for legitimate concern. In many people's eyes, partnering is seen as a cosy relationship and they are blind to the fact that partnering is about working together with common goals and within a contractual arrangement."

Martin Evans, policy and technical director with the CIPFA, the institute for public sector financial controllers, says some councils may have concerns about public accountability in the light of the proposed changes. "Some local authorities may prefer the rule-based approach of CCT, although they won't say so publicly."

Evans adds: "CIPFA would argue that whenever a local authority enters into an [partnering] agreement, it is important that there are proper provisions for corporate governance."

In his move to end CCT, Egan has found an unlikely ally in the form of the Association of Direct Labour Organisations (ADLO). "We welcome the fact that CCT is now recognised as a failure. ADLO has been campaigning against it since 1982." So says ADLO adviser Nick Walkley.

ADLO is all in favour of strategic partnership and Walkley does not foresee any conflict over public accountability if a local authority appoints its sibling dlo over something as potentially nebulous as best value. "Adlo can provide a transparent chain of accountability. The same cannot always be said of a private supplier."

Under the Government's best value pilot programme, it will be left to individual authorities to define what constitutes best value to suit each council's specific requirements. Legislation has been laid down which outlines the principles and the management processes that authorities must adopt. Draconian steps will be taken by Government against authorities which fail to meet performance standards in the same way as in education where the administration of some schools has been taken out of local control and replaced by Central Government officers.

Best value is an ethos, not a list of rules, so a "range of ideas are being implemented" by councils, says a Local Government Association spokeswoman. Councils may talk to each other and compare ideas but they are autonomous and have to address local issues, so the only common link is the mantra of the four Cs: Challenge, Compare, Compete, and Consult.

"Those are at the heart of best value", says the spokeswoman. Boiled down, the four Cs demand that councils:

l Ask if they are the agency best placed to do a task.

l If they are, then they must weigh their own performance against others doing comparable work.

l When placing contracts they must "go beyond" CCT to other forms of tendering and market testing, and compare the service they get from contractors to that received by other councils.

l Be more reactive in consulting the public for views on what is wanted and being received from councils and their contractors.

To help councils determine what best value may mean for them, the Department of Environment, Transport and the Regions (DETR) launched two-year pilot projects with 53 councils in England in April. There is a parallel study underway among Welsh councils. Each council has a different portfolio of services to test best value ideas with some, such as London Borough of Camden (see box) and Portsmouth City Council, among those with an emphasis on re-assessing how to drop CCT in construction procurement and what bid systems could be used instead.

Legislation

The Government, however, does not plan to do nothing until the councils report and its White Paper on local government in July opens the door to introducing framework legislation for best value, next spring. Secondary legislation would flesh out the best value rules by "drawing upon the experience of the pilot projects", says the spokeswoman. But she believes the Government may begin consultations on secondary legislation next spring, well before the pilot projects have been completed.

"We're trying to get the Government to allow local government a period of time to determine what best value is before any secondary legislation," she says. "We've a lot to learn about what best value is in practice".

The main document LGA is working with in its ruminations is the Construction Clients' Forum's proposed 'pact' between clients and the industry, Constructing Improvement. An adviser to the LGA says the report echoes the thrust of the references to 'competition' in the recent White Paper on Local Government, and that it "encourages people to work more closely in the interest of clients, so fosters more of a partnership approach."

Partnering means many things to many people in the private sector, never mind the public sector clients who are turning their minds to its good and bad points. To help them along the way, the LGA is to introduce them to Constructing Improvement within the next few weeks in an effort to inform and keep some sort of consensus to what partnering might be in all types of clients' relationships with the construction industry.

Whether the CCF report is embraced or ignored by local authorities is their prerogative. Through the best value pilot projects public sector clients may be refining ideas, but the new opportunity for them to have a hand on the tiller piloting the maiden voyage of the "Egan" is also a responsibility. Best value calls for measurements and comparisons, so ignoring the best of the rest - such as the parallel partnering system used by the MoD's 'Building Down Barriers' project - could lead to problems later.

DIFFERENCES

However, the CCF's pact and best value are not necessarily synonymous. The adviser says: "I can't say yet that Constructing Improvement is best value for construction in the public sector but it can contribute."

They may eventually hold similar ideas only with different titles, which is not a unique circumstance for an industry plagued by reports, such as Egan's.

Although not on Egan's Task Force, some of the hands that produced the CCF's pact to industry had more than a passing involvement in drafting Rethinking Construction.

That strategic co-ordination of words, and the recent power games behind the scenes, gives the industry a first chance to see some of the threads that run from Egan's ideas through the CCF pact to best value.

Whether the threads snap, or not, depends not only on the local authorities' pilot projects but also their reaction to the CCF's pact when it lands on their desks in the coming weeks.

CIPFA's Evans does concede that there is a certain "vagueness about the concept" of best value. He adds: "Best value is a real challenge and unlike CCT, it covers the whole range of services. Authorities will have to produce continued downward pressure on costs."