In the fourth part of our series on contract management pitfalls, we look at the risks arising out of varying the terms of construction contracts.
Using our “templates”, our team, led by Andrew Millross, developed the procurement and contract documents in close collaboration with Derby Homes. We used a tightly focused competitive dialogue procedure to explore indicative proposals from 4 bidders. This focus on the bidders’ solutions generated positive energy and gave Derby Homes confidence in an excellent outcome from the procurement.
Mobilisation of the contract has been very well received, particularly by the trade technicians. Derby Homes is already seeing evidence of how the new materials supply arrangements will promote greater efficiencies within its direct labour organisation (DLO) and a re-energised relationship with the supplier (who was the incumbent).
We encouraged Derby Homes to use a “lean”, focussed competitive dialogue procedure. We had a single round of meetings with each supplier to discuss their “mark-ups” of the legal documents. Through this dialogue, Derby Homes were able to express their aspirations in a much clearer way than would have been possible under the restricted procedure. The suppliers also welcomed this procedure. It helped them better understand what Derby Homes were looking for and involved them in the procurement process, resulting in improved final tenders. Competitive dialogue was new to Derby Homes, and they were keen to manage it in-house. We encouraged Derby Homes to “frontload” drafting the procurement and contract documentation and to hold back issuing the OJEU notice until this had been done. This enabled the procurement to run without delays, with Derby Homes demonstrating a professional approach to the suppliers.
When discussing pricing, we identified that Derby Homes needed to have fixed “all-inclusive” materials prices, both for leaseholder work and to enable them to price as competitively as possible when tendering for external contracts. This led to the decision to adopt a purely price based approach (where the price included the costs of delivering the contract and running the stores). For this contract this was preferable to a target cost or cost reimbursable approach, which would have resulted in higher initial prices with a rebate.
We also encouraged Derby Homes to place more weight in the contract award criteria on quality, technical merit and customer service, rather than on price. This recognised that the real value of the contract would be through better supply arrangements leading to greater efficiencies in carrying out repairs, with less downtime collecting materials and a higher first-time fix rate. The IT interface was also important to Derby Homes, so this also carried a high weighting in the award criteria.
In summary, this was a very successful procurement of an important relationship that should serve Derby Homes well for the next 10 years.
Shaun Bennett, Director of Investment and Regeneration at Derby Homes says:
“I am delighted with the outcome; the support from Andrew enabled our team to grow in confidence throughout the procurement process. Finalising contracts and mobilisation has been a pleasure as a result of the dialogue with suppliers. Our materials now costs less and we have the expertise of the Grafton Group within the team to help us deliver reliable services for the next ten years”
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