Agenda Item No 8
The Vale of Glamorgan Council
Corporate Performance and Resources Scrutiny Committee: 13 December 2016
Report of the Managing Director
Value for Money - Property Section Procurement
Purpose of the Report
- To update Members on the processes followed to achieve value for money in the procurement process undertaken by Property Section.
- That Members note the processes followed by Property Section to achieve value for money in the procurement process.
Reason for the Recommendation
- To address points raised by the Corporate Performance and Resources Committee regarding achieving value for money in the procurement process.
- Property Section are the Council's in-house consultancy service, designing and managing a significant proportion of the Council's building, refurbishment and maintenance works included within the agreed capital programmes.
- The following process is applied when procuring construction works:
- Following meetings with the client or the departmental representative the outline design is signed off.
- Detailed design of the project is completed by the multi-disciplinary design team.
- The client signs off the final detailed design.
- Tender documents including preliminaries, specification, pricing document and drawings detailing the requirements of the project are prepared.
- A minimum of three suitable contractors (as required by the Procurement Code of Practice) will be selected using Constructionline. Additionally the Council's in-house service will be invited to tender when capable of undertaking the required works. It is normal practice for Property to invite more than the stipulated minimum. Constructionline was funded by the Office of the Deputy Prime Minister and is the UK's leading procurement and supply chain management service. It permits compilation of randomly generated tender lists based on project specific criteria. Sell2Wales has previously been used however due to the value and nature of the projects undertaken this has been found to be ineffective, with large numbers of companies expressing an interest in tendering for work who were not suitable.
- Tender documents are sent out in electronic format to all contractors. This includes a non-collusion document which must be signed by all tenderers submitting bids.
- All tenders are returned as sealed bids to the Council's Head of Legal Services. Those submitted by the stipulated deadline are opened at the same time by a minimum of two Council officers and recorded in the Tender Receipt Register. Those submitted after the deadline are not considered.
- Tenders are evaluated to confirm that they meet the requirements of the Invitation To Tender documentation, including a reasonable level of pricing to confirm that the tender sum is not unreasonable for the works being carried out and contain no qualifications.
- Subject to the agreement of the relevant Cabinet Member, the lowest compliant bid is recommended for acceptance by the Head of Finance.
- Following formal acceptance of a tender, the Council enters into an industry standard contract (e.g. JCT or NEC3 suite of contracts) to undertake the works.
- The appointed contractor will be the one whose tender submission is compliant and affords the most economically advantageous tender and best value for money.
- There will be occasions when market fluctuations in labour or material costs for example due to a strengthening economy will result in the returned quotes being higher than the initial estimate. In the large majority of cases however, the initial estimate is sufficient to carry out the planned works.
- Specific issues have been raised by the Corporate Performance and Resources Committee regarding the recently completed installation of new heating boilers at Gladstone Primary school regarding value for money achieved on this project which will be addressed below.
- For high value works and services (e.g. 21st Century Schools Programme), contractors / consultants are procured using framework agreements such as SEWSCAP and those maintained by the National Procurement Service (NPS).
Relevant Issues and Options
- Value for money in the procurement process is achieved through the use of Constructionline which provides a pre-vetted list of contractors selected in accordance with a range of criteria including the size of the project, the type of work and geographical location of the contractor's office. Utilising these criteria will ensure the most appropriate contractors are invited to tender for each scheme.
- The inclusion of the non-collusion document in the tender documentation ensures that all tenderers are aware of the Council's policy on collusion during the tender process and requires a signature to confirm that each contractor abides by this policy.
- The tender documentation also states that it is the Council's discretion not to appoint the lowest tenderer even if their tender is compliant with the invitation to tender. This is to prevent the appointment where the lowest bid is considered to be unrealistic e.g. where the level of pricing tendered is clearly untenable. Whilst this is an infrequent occurrence, in the event of such circumstances the tenderer is contacted to confirm that their tender allowed for all requirements of the Council's Tender documentation.
- Tenders are awarded on the basis of being the Most Economically Advantageous Tender to the Council. On larger scale projects (typically 21st Century Schools Projects) this will include a quality matrix. On smaller schemes this is based solely on price as all compliant tenders will meet the requirements stipulated in the specification and drawings.
- The Property Section is in the process of setting up framework agreements for smaller scale works. This will reduce tendering costs incurred by the Council in procuring lower value building work.
- Each tender list is randomly generated on Constructionline each time it is run. Consequently the same suppliers do not consistently appear at the top of the list of potential tenders for projects of a similar nature and size. Tender lists are generally compiled by selecting the two companies providing the most economically advantageous tender for the last contract of similar type (provided that they are still Constructionline registered). This is supplemented by sequentially going down the Constructionline list to select the contractors. This process provides rotation of contractors and affords impartiality on the part of the officer compiling the tender list.
- A recent review of contracts awarded over the last 12 months has been undertaken. Having considered the results of this review it is clear that contracts have been awarded on their individual merit and in line with Council Policy.
- Regarding the renewal of boilers at Gladstone Primary school, Cabinet approved a budget of £85,000 within the 2016/17 Learning and Skills Asset Renewal capital programme. Following a tender exercise where five companies were asked to tender, the lowest compliant tender inclusive of fees and all associated costs such as asbestos removal was £130,000.
- Gladstone Primary school is one of the Vale's largest Victorian Primary schools (approx. 3,200m² within two separate buildings) and is served via an extensive heating system. The pipework therefore is of a larger diameter whereby it was more expensive to join the pipework by welding other than the quicker more cost efficient method used for small installations being that of a compression system; and
- The boiler is housed in a basement boiler house which was in a poor condition which required redecoration of all walls and floors in order to create a reasonable working environment for future maintenance contractors;
- There was the added complication of having to remove a significant quantity of very old and heavy plant containing asbestos from the basement up very steep steps, this being the only means of access;
- Likewise, getting the new plant into the boiler house via steep steps added to the complication and cost;
- Building controls have to be run throughout the school to connect to internal sensors, the larger the school the more expensive this element of works.
- After evaluating the submitted tenders was determined that in the estimating process these factors were under estimated resulting in the high cost of this scheme relative to the initial budget.
- The installation of the boiler has been completed and is anticipated to cost slightly less than the approved budget of £130,000.
- All estimated budgets included in future capital programmes are to be sense checked by a second experienced officer to ensure that future estimates are as accurate as possible. However as noted in paragraph 5 above there are certain unforeseen factors that can impact on the tenders submitted.
Resource Implications (Financial and Employment)
- The Property Section is responsible for delivering a significant proportion of the Council's building related Capital Programme across all directorates except housing.
Sustainability and Climate Change Implications
- There are no sustainability and climate change implications arising from this report.
Legal Implications (to Include Human Rights Implications)
- There are no legal implications arising from this report.
Crime and Disorder Implications
- There are no crime and disorder implications arising from this report
Equal Opportunities Implications (to include Welsh Language issues)
- There are no equal opportunities implications arising from this report.
- To comply with the requirements of the Council's Contract and Financial Procedure Rules and its Procurement Code of Practice.
Policy Framework and Budget
- This report is for information only.
Consultation (including Ward Member Consultation)
- Ward Member consultation is not required on this matter.
Relevant Scrutiny Committee
- Corporate Performance and Resources
Mark Haynes - Project Manager, Consultancy
Lorna Cross - Operational Manager, Property
Martyn Lewis - Commercial and Quantity Surveying Manager
Carys Lord - Section 151 Officer