In September 2024 Fenwick Elliott held a lively panel debate on “Constructing the Gold Standard” (the “Review”), Professor David Mosey’s independent review of Public Sector Construction Frameworks written in 2021, and steps taken to implement its recommendations since publication. The Review was aimed at building on the Construction Playbook published in 2020 (before COVID hit). 

During the session Professor David Mosey spoke passionately about how the 24 recommendations made in that report could be used to fulfil the potential of frameworks “as a powerful engine-room for improved value, reduced risks and excellent project outcomes”. For a disputes’ lawyer who all too often deals with the consequences of ill thought through frameworks and heavily amended call-off contracts, it provided an opportunity for reflection on how these disputes could potentially be avoided if frameworks are set up to succeed in the first place.

Problems highlighted in the Review

By way of a refresher, the Review highlighted the waste seen in public sector frameworks with “multiple, speculative construction frameworks that are not connected to specific pipelines of work”. In 2021 there were 2,000 active public sector construction frameworks in the country. The Review noted that there was a 20% to 25% chance of a supplier winning a framework project (when call-off contracts were taken into account) with an average bid-costs of £247,000 for contractors and a maximum of £1 million for major bids. One project would therefore need to produce a profit of £4 million to cover major bid costs (i.e. to break even) before there any value is added to the supplier. Other issues flagged by the Review included speculative frameworks with no work pipelines attached, overly complex bid procedures and documentation, complex performance measurement which were not used for value improvement, excessive use of mini-competitions, and a hesitation to use the award of more work as an incentive for excellent performance.

More generally, the issues reported by the supply chain included shopping around for the lowest fee levels on different frameworks, not using their own frameworks or believing in their objectives, not allowing time for project planning on call-off contract, appointing team members from other frameworks and using heavily amended standard forms which don’t reflect the framework objectives.

It was in the context of these issues that the Review aimed at improving the performance and value offered by public sector frameworks.

How can the recommendations help?

The recommendations sit across the whole of the procurement and construction process and are aimed at ensuring that the opportunity for added value on frameworks is embedded from the start. The Review notes the overall aims are as follows:

“■ An outcome-based strategic brief that drives economic, social and environmental value with strategic supplier proposals for delivering that brief 

■ Multi-party relationships that align objectives, success measures, targets and incentives with commitments to joint work on improving value and reducing risk 

■ A timetable of strategic actions to improve integration, value and outcomes, for example using MMC, digital technologies, ESI and Supply Chain Collaboration 

■ Transparent costing, call-off, performance measurement and incentives that provide a fair return for suppliers and drive value rather than a race to the bottom 

■ Framework management systems that support collaboration and dispute avoidance.”

Detailed case studies are set out in the Review as evidence for what can be achieved in the right conditions and these sit behind the recommendations in question. Indeed, Professor David Mosey noted during his presentation that “Gold Standard review case studies include ‘Trial Project’ framework alliance contracts through which clients and suppliers in housing, roads and justice projects achieved efficiency savings averaging 18.5% plus improvements in quality, safety, social value and environmental value”.

So why is this still needed?

To my mind, perhaps the most important goal of the recommendations is “transparent costing, call-off, performance measurement and incentives that provide a fair return for suppliers and drive value rather than a race to the bottom”. All too often the disputes we are involved with feature such heavily amended NEC contracts (the call-off contracts) that the original risk balance is completely skewed setting contractors up to fail (or at least failing to make any profit). Given the NEC itself advises against this, it is hard to see why government departments regularly fail to adhere to the guidance sitting behind the contract they use so often. 

The race to the bottom for publicly funded contracts all too often results in disputes as contractors (or their suppliers) seek to try and recoup their losses. Indeed, ISG’s insolvency (and they had £1.84 billion of government contracts at the time they went under) only serves to underline the necessity of ensuring a fair risk balance and the Construction Playbook mantra of “fair return”.

Professor David Mosey also made the point during our panel session that by setting up a framework with an integrated supply chain sitting below the main contractors, the impact of insolvencies such as ISG’s on those lower down the supply chain could hopefully be minimised for those projects. This reflects Recommendation 22 (“Establish shared and transparent framework systems through which to manage and mitigate risks of a supplier’s financial distress”). More generally, the opportunities for innovation and better long-term value in public works by using integrated and properly motivated teams should be self-explanatory. The benefits derived from keeping teams together so that lessons learned are not “unlearnt” are all too often undervalued. 

Next steps?

It remains to be seen how the new Labour government will implement the recommendations from the Review. However, organisations such as Constructing Excellence which seek to educate and embed the behaviours advocated in the Review can only a be a good thing. For those involved in public sector works, I would encourage them to review the organisations website and certification scheme. Whilst it is tempting to shrug shoulders and assume old patterns of behaviour are unlikely to change, the optimism and drive of those campaigning for these changes will hopefully prove to be infectious (and supported by the new Procurement Act when it finally comes into force).