Gershon Efficiency Review: Evangelising e-auctions (News analysis)

Gershon Efficiency Review: Evangelising e-auctions

Peter Wooliscroft, the architect of ProCure 21, is set to court controversy with the Office of Government Commerce's plans to save £8bn on public sector construction procurement. Key to the plans is the launch of a controversial £1bn commodities framework contract that will use reverse e-auctioning to set the price. Carol Millett reports.

There is something of the evangelist about Peter Wooliscroft. The former head of the NHS ProCure 21 programme is now part of the Office of Government Commerce’s (OGC) construction and facilities maintenance efficiency unit.

His brief is to help the unit carve £8bn off the cost of public sector construction and FM procurement by 2010, as part of the Gershon Efficiency Review.

A tall order, but one that has fired Wooliscroft with a Messianic fervour. The spirit of Latham is upon him. This, he announces, is an opportunity to "take collaboration to a new level beyond the vision of Latham and Egan".

His enthusiasm for his new mission fills the room. He talks rapidly, barely taking a breath, occasionally thumping the table and waving his arms for emphasis, then leaping up to scribble diagrams on a white board to illustrate a point.

"We are the new face of the OGC. We are an agent for change. This is not a talking shop. We’ve had enough talking. We’ve had the Latham Report for 12 years now. We are saying to clients, we can work alongside you and use our professionalism and experience to identify where your supply chain is shattered and creating waste. We can find the cuckoo in your nest."

Buying power - strategic, direct procurement of commodities

One large cuckoo that Wooliscroft has in his sights is the cost of commodities. "I am appalled by how many clients don’t know how much they pay for their commodities," he marvels. "What we need to do is procure these commodities much more strategically and collaboratively by buying in bulk directly from the manufacturers rather than from the merchants. We believe we can save 24% to 30% on the cost of commodities this way."

To this end, the OGC is about to launch a controversial £1bn commodities framework contract that will use reverse e-auctioning to set the price. Framework members will bid until they reach a tipping point on combined orders for high quality heating systems, windows, doors, bathrooms, and kitchens. Local authorities and registered social landlords across the region will be encouraged to use the framework to give greater economies of scale.

Wooliscroft is also working on a similar deal to supply commodities for the Building Schools for the Future programme through a reverse e-auction framework. He is working with a number of schools contractors to establish an asset register of commonly-used proven products for schools.

Hit the road - pricing for blacktop

Another commodity under scrutiny is blacktop. "Twenty eight million tonnes of blacktop is laid every year by the government, of which 75% is laid by local authorities," explains Wooliscroft. "However, there isn’t a definitive price for blacktop. It varies from £25/t to £90/t." Bulk purchasing could bring some clarity to the way blacktop is priced.

He also wants to see greater collaboration between local authorities and the Highways Agency (HA) so that, for example, local authorities can contract to use HA equipment when it is in their region.

Not surprisingly, these plans are causing alarm in some quarters. The Construction Products Association has already voiced its concern about the government endorsing reverse e-auctions in this way. Wooliscroft is unrepentant. He argues that it is only a small part of the manufacturers’ and merchants’ total market.

He warns contractors to prepare for change. "Contractors have to realise we are moving away from the design, build, construct and manage world into one of framework management, that is, managing a supply chain to get maximum value. If that means procuring strategically through this process, then that is what they owe their clients."

Nor does Wooliscroft have any sympathy for those contractors that factor profit into the supply of materials. He says: "The rules have to be more transparent. Contractors will have to rejig their profit and overhead margins, because in the future they are not going to be able to load commodities with slippage on their profit. Transparency will be going from the bottom of the supply chain to the top."

Come together - profiting from collaboration

In return, he contends the market will be stronger, with government clients ploughing what they save into more projects and forward-thinking firms positioning themselves to profit from this collaborative revolution.

He urges contractors to join the movement. "I want the construction industry to come to my door and tell me how clients can achieve greater efficiency, or to ask how they can help in making the process more efficient, because in the end we will all be the winners."

[Contract Journal, 5 July 2006, News analysis, p. 6-7]