APPENDIX 1
53/06
DECISION UNDER DELEGATED
POWERS
DECISION CANNOT BE TAKEN
BEFORE MONDAY, 4 DECEMBER
2006
Title: TRANSFER OF IN-HOUSE SELECTIVE
TENDER LISTS TO CONSTRUCTIONLINE
REPORT TO THE CABINET MEMBER
FOR RESOURCES AND TOWN/PARISH COUNCIL EMPOWERMENT
PURPOSE
1.
To consider transferring
the Council’s existing selective tender lists for
building and civil engineering consultants and contractors to Constructionline,
a national pre-qualification register of construction services, and close down
existing in-house tender lists.
BACKGROUND
Current Selective Tender Lists
2.
The
Council currently maintains its own selective tender lists for consultants and
contractors relating to building and civil engineering works and uses these
lists to procure consultants and contractors to deliver the Capital programme.
The current in-house lists are reviewed every
three years. To undertake this review,
even to the most moderate and acceptable standards, requires a considerable
amount of investment in both staff and finances from the Council. This is counterproductive to the efficiency
saving targets which have been set.
Constructionline
3.
Constructionline
is an initiative from the Rethinking Construction Agenda aimed at modernising
the construction industry and streamlining the procurement process. It is an initiative that has gained
considerable momentum and credibility over the last few years throughout the
construction industry and is now widely regarded as a genuine example of best
practice. Constructionline is a national
pre-qualification service and provides details of approved consultants and
contractors from the Constructionline website.
Constructionline has been developed through a public/private partnership
between the Department of Trade and Industry and Capita Business Services.
4.
Over
12,700 consultants and contractors nationally and 32 consultants and
contractors locally are registered with Constructionline. Each has met all of the pre-qualification
requirements. Constructionline now has
some 1,300 clients using the service ranging from Central Government, Local
Authorities, Housing Associations, Universities, Further Education and NHS
Trusts.
5.
The
Council became a client member of Constructionline in August 2002.
6.
The
Council’s Standing Orders were amended and signed off by Members in June 2005
to permit the use of Constructionline for the procurement of consultants and
contractors.
Benefits of Using Constructionline
7.
The
service provides a single source of pre-qualification information on suppliers
across all sectors and significantly reduces the administrative burden of
evaluating numerous duplicate pre-qualification forms required to maintain
in-house selective tender lists. By
using Constructionline valuable resources are released which will assist the
Council in achieving efficiency savings and service improvements made by
eliminating the need to maintain in-house selective tender lists.
8.
Consultants
and contractors are vetted according to strict management, technical, financial
and health and safety criteria laid down by The
Department of Trade and Industry. All
consultants and contractors must meet the pre-qualification criteria before
they can be included on the Constructionline database.
9.
Constructionline
use the services provided by the Contractors Health and Safety Assessment
Scheme to assess all Health and Safety documentation in order to comply with
HSE requirements on assessing and monitoring consultants and contractors.
10.
All
information held by Constructionline is relevant and up-to-date. Accounts, certificates, public liability
insurance and company policies are reviewed annually. A complete assessment of firms registered is
carried out every two to three years maintaining the Council’s requirement for
auditability and accountability in the procurement process. Any notices of liquidations, receiverships or
irregularities are immediately updated on the database.
11.
This
service provides a national central electronic database of information on‑line
giving access to up-to-date details of consultants and contractors, including
track record details covering a whole range of construction services. Full support is provided via the internet or
telephone help lines.
12.
The
Constructionline database will permit the Council to search for local Island
companies and, where specialist services are required, which are unavailable on
the Island, to allow the Council efficient
access to mainland companies who are able to provide these services. In addition to this the functionality of the
system will allow the Council to compile a list of local Island
consultants and contractors who have historically delivered a good service to
the Council.
13.
The
Notional Value (maximum value of work consultants and contractors have been
assessed to undertake) on the Constructionline database is calculated using the
Department of Trade and Industry’s approved formula. If a contractor or consultant is not
satisfied with their agreed Notional Value it can only be amended by
Constructionline following a further review of annual accounts or an approved
technical reference from the Council.
See Appendix 1.
14.
The
financial bandwidth on the list of local Island
consultants and contractors can be adjusted at any time by the Council,
provided that the consultant or contractor has previously worked for the
Council and have undertaken contracts to the value higher than the Notional
Value calculated by Constructionline.
15.
Constructionline
can be used to prevent construction companies from employing
non-Constructionline approved companies.
This can be achieved by adding a clause to tender documentation which
states that all sub-contractors employed by the main contractor must be
Constructionline approved and registered.
16.
Constructionline
is currently a free service to the Council.
The services provided by the Contractors Health and
Safety Scheme is currently free to the Council apart from an initial
membership fee of £480.
17.
In
addition, Constructionline will provide free training to all Council personnel
who require access to their database.
18.
Some
contractors have expressed concern about the administration arrangements. However, Constructionline will offer a free
service to consultants and contractors who require assistance in completing the
pre-qualification form.
19.
Being
registered with Constructionline can potentially provide Island firms with new
opportunities to bid for work with clients other than the Council – both on
Island and off Island. Indeed, registration with Constructionline
can be a very effective “shop window” for local firms, as it provides much
wider visibility of their overall capabilities to a whole host of potential
clients up and down the country.
20.
From an
economic development perspective construction work awarded to Island
companies has added benefits. The value of the work and the profit it produces
is retained within the local economy. A
sustained level of regular work can provide contractors with greater security
of income which in turn will encourage a more positive approach to an
investment in training/ apprenticeships in a sector where there is a shortage
of these skills. Indeed, the Council’s
ambition to regenerate the Island economy will
rely on these contractors and these skilled individuals if we are to deliver
cost effective projects and a sustainable community.
21.
In this
context it is interesting to note that over the last 5 years, a total of 130
contracts have been awarded using the existing select tender list. Although the list includes mainland
contractors and consultants (32% and 71% respectively), there have only been 19
occasions where they were in competition with Island
companies. In addition, of these only
one has not been awarded to an Island company.
22.
Overall,
provided Island companies register with
Constructionline, it is not anticipated that there will be any reduction in
this proportion of locally awarded contracts.
After all, the entry onto the list is only the first step on the
procurement process and the requirements of the scheme offered by
Constructionline are not significantly onerous.
Furthermore the scheme helps to ensure that the Council procures work
through contractors who are well organised and have adequate health and safety
measures in place to protect the public and its employees.
23.
Finally,
Constructionline also include details of companies that provide the following
services: Education suppliers, providers of registered care homes, suppliers of
disability equipment and leisure services equipment and products. There are no plans to extend its use by the
Council to these wider service areas for the foreseeable future, although this
option may well be explored as part of the review of procurement.
Encouraging Successful Tenders from Small Local Businesses
24.
The
Council is to engage with the local Chamber of Commerce to encourage local
consultants and contractors to join Constructionline.
25.
For
large projects, say £5m and over, the Council is to identify ways in which the
project can be sub-contracted into smaller contracts that can be undertaken by
small local businesses where feasible.
Implementing the Change
to Constructionline
26.
From
approval to using Constructionline’s services a nine month programme will be
implemented to transfer consultants and contractors from current in-house
selective tender lists to Constructionline.
27.
All
consultants and contractors on the Council’s current in-house selective tender
lists will be notified of the Council’s intention to use Constructionline
services and recommended to join Constructionline.
28.
The
Council’s selective tender lists will be forwarded to Constructionline who will
invite consultants and contractors to register with them.
29.
Constructionline
will notify the Council when all consultants and contractors have been assessed
and included on their database. At this
point procurement of all consultants and contractors will be from the
Constructionline database and the Council’s current selective tender lists will
be closed down.
30.
Consultants
and contractors who would like to be included on the Constructionline database
will be expected to pay an annual fee ranging from £70 to £1,275 (excluding
VAT). The fee for contractors is based
on the annual turnover of each company.
The fee for consultants is based on the total number of professionals
and technical staff employed within that company. Fees have not been increased since 1998 and
there are no current plans to increase the level of fees.
31.
Consultants
and contractors will be expected to pay a fee ranging from £55 to £100
(excluding VAT) to the Contractors Health and Safety Scheme every two years for
assessment of their company’s Health and Safety documents and policies.
STRATEGIC CONTEXT
32.
Constructionline
will streamline the procurement process and is regarded as good practice which
was endorsed in the PA Consultants’ Procurement Report dated April 2006 and
will assist the Council in achieving its corporate objectives set out in the
Aim High Vision in achieving a high performing cost effective Council.
CONSULTATION
33.
Consultation
has been undertaken with the Council’s Audit and Procurement Sections, Health
and Safety Liaison Officers Group, Engineering Services, Property Management
Group, NHS Trust and Local Housing Associations. All are supportive of Constructionline as a
pre-qualification service.
34.
A report
on the transfer of in-house selective tender lists to Constructionline was
recommended for approval by the Strategic Asset Management Planning Group on
the 20 June 2006.
35.
Consultation
with the National Federation of Builders who support the use of
Constructionline.
36.
The
Cabinet Member for Resources and Town/Parish Council Empowerment has consulted
with the Chamber of Commerce who expressed some concern with regard to
Constructionline fees.
37.
Letters
of support have been received from consultants and contractors registered with
Constructionline, confirming the benefits from inclusion on their database.
FINANCIAL AND BUDGETARY
IMPLICATIONS
38.
The Council currently spends £10,000 per annum within the Engineering Services
budget reviewing and maintaining the in-house selective tender lists.
39.
The
list for Property Management is currently closed but will
need reviewing shortly as a result of the 3 yearly requirement
to review and this is likely to cost £10,000 per annum to review and maintain,
which is not currently provided within any budgets.
40.
Inflationary
increases mean that the costs of maintaining in-house selective tender lists
are likely to increase by 10% per annum.
41.
By not
utilising Constructionline, the Council will need to find £10,000 per annum for
Property Management to maintain their lists and £2,000 per annum as inflation
for both services.
42.
Constructionline
is currently a free service and as such will not cost anything, save an initial
one-off payment of £480 for membership of the Contractors Health and Safety
Scheme.
43.
Utilising
Constructionline will avoid incurring the costs detailed in paras 39 to 41 and
additionally generate a £10,000 saving in the Engineering Services budget.
LEGAL IMPLICATIONS
44.
The
Council does need to guard against restrictive or anti-competitive practices
and thereby demonstrate that its supplier selection processes are fair and that
probity is beyond doubt. It also needs
to adequately test the market to ensure value for money is achieved. Thus, Constructionline would be used in a
very similar way to the current in-house list to select those firms that are
invited to tender for various construction work in the
future.
OPTIONS
45.
Option 1 - The Council use Constructionline to
procure the services of consultants and contractors to deliver building and
civil engineering projects and other Council functions requiring the services
of consultants and contractors and close down existing in-house selective
tender lists.
46.
Option 2
- To continue to manage and maintain the Council’s current in-house selective
tender list for consultants and contractors at an annual cost of £20,000, plus
£2,000 year on year cost increases.
EVALUATION/RISK
MANAGEMENT
47.
By adopting Option 1 the Council can achieve
efficiency savings and standardise the procurement process ensuring all
consultants and contractors are vetted in accordance with national guidelines
set by the Department of Trade and Industry.
48.
Option 1 will ensure that all consultants and
contractors are assessed to comply with the Council’s Standing Orders and the
HSE requirements to reduce the risk of employing companies that are not
financially viable or do not meet the required Health and Safety standards set
out by the HSE.
RECOMMENDATION
49.
Option 1
- The Council use Constructionline to procure the services of consultants
and contractors to deliver building and civil engineering projects and other
Council functions requiring the services of consultants and contractors and
close down existing in-house selective tender lists.
BACKGROUND
PAPERS
Sir John Egan’s Report on Rethinking Construction 1998
Latham Report – Constructing the Team 1994
National Procurement
Strategy
Gershon Report
APPENDICES
1. Letter from Constructionline
explaining how notational values and financial bandwidths can be amended.
CONTACT
DETAILS
Mike Cesar, Design and Programme Manager, Regeneration Services, Property
Management Group, '
01983 821000 ext. 3259,
e-mail [email protected]
25.09.2006
Mr M Cesar
Design and Programme Manager
Property Management Group
Isle of Wight Council
County Hall
High St
Newport
PO30 1UD
Dear Mr Cesar
Further to our conversation, this letter is to clarify the
points we discussed:
1. Notation
Values
2. Bandwidths
3. Supplier
lists
With regard to notation
values: The notation value is the maximum
recommended value of contract for an individual supplier for a particular work
category. It is calculated using the
value of satisfactory references and data from the company’s balance sheet.
This value is established at the time of a supplier’s initial
registration. It is adjusted under one
or all of the following circumstances:-
·
on review by Constructionline accountants following
a supplier’s request
·
on receipt of updated (annual) accounts
·
on receipt of new (satisfactory) references
·
on receipt of information regarding a supplier’s
trading situation which Constructionline accountants believe will affect its
financial capacity
The reference review is every
three years or when submitted on a more frequent basis. The system now provides
the facility for this to be completed on-line by Clients thus providing a
quicker process.
Under the Supplier list function
the Client has the ability to compile a local list. The criteria for that list
is at the discretion of the Client.
Therefore lists can be compiled in bandwidths if so desired. This does not affect the notation value of
the contractor’s record. It is simply an
admin function within the Client processes.
The Supplier list that will be compiled under the
previously mentioned function will be applicable to the Isle of Wight
Council.
The contractors will be registering on the national
database but it is their prerogative to decide where they wish to work.
I hope that this clarifies the
points for you
Yours sincerely
Alison Bailey
Alison C Bailey
Client relationship Manager South East
Constructionline