Developing the next generation of the Capital Works Management Framework

Developing the next generation of the Capital Works Management Framework Presented by David O’Brien Senior Construction Adviser The Office of Government Procurement

David O’Brien Construction advisor to the Office of Government Procurement, Chair of the Government Contracts Committee for Construction, Head of the Construction Procurement Policy Unit, Architect

Programme • Genesis of the Capital Works Management Framework • Government Objectives for the CWMF • 2014 review of the performance of the Public Works Contract • Developing the next generation of the CWMF

Genesis of the Capital Works Management Framework • Significant cost over-runs on projects between 1994 - 2004. • Comptroller & Auditor General report on civil engineering projects 2000 – 2003. • Construction Procurement Reform Initiative commenced in 2004 – objectives: • Cost certainty at tender award stage; • Better value for money; and • More efficient delivery of public works projects. • Further codification of procurement case law in the 2004 Directives. • Public Works Contracts introduced in 2006. • Mandatory for all majority Exchequer-funded construction projects since 2007. • Capital Works Management Framework completed 2009.

Government Objectives for the CWMF • Cost certainty at tender award stage; • Better value for money; and • More efficient delivery of public works projects.

Capital Works Management Framework - 2019 • 6 suitability assessment questionnaires • 10 forms of construction contract, 1 framework agreement • 2 forms of conditions for consultants • 13 Forms of Tender • 13 Instructions to Tenderers • 30 Model Forms • 32 Notification letters • 4 template forms for cost control • 3,500 pages of guidance • 9 circulars and growing to support what will be a €11.6bn Capital Programme

Review of the performance of the Public Works Contract • Review undertaken in 2014 • Report published – available on Construction Procurement Reform website ‘The extent to which the public works contracts can be considered fixed price is directly proportionate to the level of risk transfer…. …. guidance suggests that a risk should only be transferred where a contractor is in a position to evaluate that risk and price it accordingly….. Where risk is retained by the contracting authority and those risks materialise, the contractor is entitled to an increase in the contract sum. Where the risk is transferred and that risk materialises, the contractor is not entitled to an increase in the contract sum. Where a project is poorly defined, which can arise for a variety of reasons, a fixed price, lump-sum contract will not deliver the desired outcome because it is not designed to cater for such circumstances.’

Review of the performance of the Public Works Contract • Conclusions: • Risk transfer not operating satisfactorily because the market was not pricing risk; • Formal dispute mechanisms triggered early due to notification requirements in the contract; • Poor definition of Works Requirements due to poorly resourced design teams. • Recommendations: • Bill of quantities to be the primary reference document for tender purposes on employer-designed contracts • Direct tendering of specialist works packages • MEAT award for projects in excess of €2m • Review the ADR mechanisms in the public works contracts • Develop a Medium Term Strategy

Implementing the recommendations of the Review 2016 Interim Amendments - Objectives • To rebalance the risk currently transferred in recognition of changed circumstances; • To reduce the potential for costly disputes; • To provide greater detail on the tendered price;

Implementing the recommendations of the Review Consultation, communication and drafting 2015 Amendments published in January 2016 • Bill of Quantities to a defined standard becomes an Employer risk (Item 17 Schedule, part 1K) • Reserved Specialist process introduced for direct tendering of specialist works • Project Board introduced on all projects over €5m • Standing Conciliator on all projects over €10m

Developing the next generation CWMF ?

Key issues raised by industry stakeholders • Inflation which is not recoverable under either the public works or works-related services contracts; • High level of risk transfer; • Construction contracts awarded on the basis of price; • Services contracts, although awarded on a MEAT basis, price is usually the determinant; • Uncapped liability sought in public works and works-related services contracts; • Adversarial nature of the public contracts; • The administrative burden associated with the public procurement process.

Developing the next generation CWMF • Arises out of the review of public works contracts – 2014 • Significant changes in the legislative and commercial environment • Necessitating a root and branch review of the procurement of public works • Will consider topics such as: • risk management; • price variation; • liability, indemnity and insurance; • appropriate quality : price weightings in MEAT awards; • encouraging co-operative behaviour; • incorporating digital technologies; • introduction of performance evaluation; and • alternative contracting strategies.

Objectives guiding the next generation CWMF • Develop procurement and contracting strategies that prioritise quality solutions and support the most efficient means of delivery; • Embed appropriate risk management measures within the project development, procurement and construction stages; • Deploy digital solutions throughout the project delivery stages. 2 Key themes: Risk & Quality of Information

Risk Risk is an ever present element of a construction project’s delivery and where it arises it impacts cost and time. It will compromise quality (and quantity) where the budget cannot sustain the increased cost. Many risks associated with construction projects materialise after significant resources are committed. Steps: • Assess risk across the entire project lifecycle • Review risk appetite – examine the associated behaviour • Review risk management • Consider the ways it can be improved

Quality of Information Risk and quality of information are inextricably linked. Project risk can be greatly reduced through access to quality information. Information is also central to project definition. Where a project is poorly defined, its successful outcome is placed in considerable jeopardy by allowing the market to compete where priceis the determinant. Without quality information it is impossible to make informed decisions. Uninformed decisions usually have negative cost and quality consequences.

Methodology • Progressive refinement rather than a ‘reboot’ • Horizontal and vertical work streams that will result in: • Consultation; • Publication of position papers; • Submissions invited; • Recommendations by GCCC; • Implementation - which may involve workshops, etc.

Upcoming Position Papers Consultant Engagement • Commenced with bilateral meetings with professional bodies in Oct. 2018; • Paper to be published imminently; • Standard set for a definitive project brief • Scope of service to be derived from the brief; • Detailed fee breakdown to reflect detailed scope of service; • Better definition of roles and responsibilities within the design team; • Dedicated reporting lines to be established.

Upcoming Position Papers BIM • June 2016 - National BIM Council launched; • November 2017 - Government announces implementation of digital technologies in public works; • December 2017 - ‘Roadmap to Digital Transition’ launched by National BIM Council; • 2015/2016 informal information sharing meetings amongst public bodies using BIM; • Formalised as a consultative forum under GCCC in 2018; • Dedicated GCCC BIM sub-group established in 2018; • Workshops with public sector bodies being organised.

Upcoming Position Papers Broader adoption of digital technologies • Currently reviewing opportunities to digitise certain stages of procurement and project identification. • Suitability assessment to tie into the electronic European Single Procurement Document (eESPD) • Developing links between project brief, scope of service and fee breakdown

Upcoming Position Papers Price Variation • Review of price variation provisions in both the conditions of engagement and works contracts; • CPI is the current provision in the Conditions of Engagement and Appendix 6 to PV2 – this is not reflective of inflation pressures in the industry • Consultant economist to be engaged to review suitability of established indices Risk Management • Engagement with GCCC on scoping work stream. Liability, indemnity and insurance • Consultation to commence with industry and public bodies shortly.

Procurement & Contracting Strategy CWMF2 will, determine the optimum procurement and contracting strategy taking into account; i. the quality of the operational asset ii. the available resources (including the budget) iii. risk profile of the project provide the most efficient means of engaging the necessary resources, whether consultants or contractors, in a manner that is compliant with procurement rules and Government policy;

Risk CWMF2 will, require risk identification from the earliest stage of the project; set minimum standards for the information necessary for each stage of a project's development; determine who is best positioned to manage risk at the different stages of a project's development.

Performance CWMF2 will, provide the means to measure the performance of a project and its key actors during the course of its delivery and beyond into its operation; provide the means to review project outcomes to determine whether they have met their objectives and ensure that learnings are captured to inform future deliveries.

CWMF2 ?

Developing the next generation of the Capital Works Management Framework