The Government Procurement Strategy has set out plans to introduce two new procurement models which will revolutionise the way public buildings are bought. The first provides "challenging cost benchmarks" which framework contractors must meet or risk seeing work tendered outside the agreement. The second offers a guaranteed maximum price underwritten by insurance, which also extends to protection against defects. The construction industry is waiting for news on where these new procurement models will be trialled - they are likely to come from small scale one-off demonstration projects, but not much more is known at this stage. The new cost benchmark approach would be best suited to a sector where plentiful data is available, with education seeming the best fit. Challenging benchmarks would require the construction industry to innovate to achieve savings, perhaps by involving a greater level of pre-fabrication offsite in projects.
The new approach is driven by Government departments' targets of 20% efficiency savings laid down by the Cabinet Office. Approaches differ between departments, with the Ministry of Justice seemingly using a model where they attempt to identify what proportion of their spending goes on 'product'. The concern from contractors with this approach is that it concentrates on minimising contractor margin rather than on maximising efficiency.
Further news on the trials is expected shortly, giving contractors more certainty and the Government a starting point for a procurement overhaul in the public construction sector.