With a total capital value of over £1bn, the three schemes set to be procured by the Welsh Government through its Mutual Investment Model are catching the eye, especially in the absence of a pipeline of PF2 schemes. If MIM was ever a well-kept secret the cat is certainly out the bag after the Welsh Government’s technical day in Cardiff on 11 October, but what are the key features of MIM? Read on for our summary.
What is the Mutual Investment Model?
MIM is the Welsh Government’s model for the procurement of major capital projects in Wales. Three schemes are being targeted for OJEU in 2018: redevelopment of the Velindre Cancer Centre in Cardiff, dualling of sections 5 and 6 of the A465 “Heads of the Valleys” road, and additional investment in Band B of the 21st Century Schools Programme, with outline capital values of £230m, £380m and £500m respectively.
Two standard form project agreements were published in March, one for accommodation projects (health and education) and the other for roads, and to many they will be reassuringly familiar. MIM borrows heavily from the NPD model in Scotland and to a lesser extent from PF2.
Crucially however, the problems encountered by the Scottish government with the EUROSTAT rules in 2015 will be avoided and Welsh government officials were keen to emphasise that ONS reviewed the standard form documents before they were published in March and confirmed the MIM schemes would be regarded as “off balance sheet”. Nevertheless, one eye should still be kept on the EUROSTAT rules for other aspects of the MIM schemes, including pass-through of insurance costs, capital contributions by procuring authorities and third party revenue schemes.
A Distinctly Welsh Model
Despite the similarities to the Scottish NPD model, there is a distinct Welsh identity to MIM.
A growing body of legislation enacted in Cardiff Bay is reflected in the standard form documents, including specific provisions requiring compliance with the Welsh Language Standards Regulations 2015 and the Wellbeing of Future Generations Act 2015. The former requires Welsh text on signage and hoardings to be treated no less favourably than English text, and the latter requires procuring authorities to set well-being objectives which the private sector will be required to support and facilitate. In addition, the usual requirement to perform the contract in compliance with all “Law” means bidders need to understand the law applicable not only in England and Wales but also in Wales alone.
Welsh Government policy is also in evidence in the standard form documents, such as a determination that public sector procurement should provide value for money and be a driver of social, economic and environmental benefits. There are obligations to comply with the procuring authority’s community benefit requirements, which are likely to include providing training opportunities, making supply chain opportunities visible to Wales-based suppliers, and minimising waste to landfill. Failure to provide the required community benefits will result in liquidated damages being levied by the procuring authority on the project company, so bidders will need to be sure they can deliver on those requirements. There is also an expectation, though not a requirement, that contractors and service providers sign up to the Welsh Government’s “Ethical Employment and Supply Chains” code of practice, with commitments that include appointing an anti-slavery champion, ensuring suppliers are paid within 30 days, and considering paying all staff the living wage.
Other features of the standard forms show that MIM has moved with the times. Building Information Modelling (BIM) protocols will be used as standard, and the schemes will have a separate Wi-Fi sign-off by the Independent Tester including a retention from payments until Wi-Fi completion is achieved.
Attendees at the technical event were undoubtedly keen to hear the updates given by the Welsh Government officials, and there was plenty to digest. There was news that there would be no equity competitions for the Velindre and 21st Century Schools schemes, and confirmation that schemes would most likely have a 90-10 debt to equity split with the Welsh Government taking 15-20% of the equity. There was also news that Welsh Government is underwriting the unitary charge, that bids should be fully funded with lender technical advisers already actively involved, and that strict adherence to a two-year procurement process from OJEU to financial close is expected.
Further updates, including timelines, will be available from the Welsh Government in due course, and queries through the MIM section of the Welsh Government’s website were encouraged.
MIM is very much then a Welsh procurement model for the 21st century. The infrastructure industry will be pleased to see these three schemes progressing, and hopeful it can help deliver them as quickly and smoothly as possible.