Colin Cram Asks – Should Construction Procurement In UK Local Government Be Centralised?

We haven’t always seen eye to eye with ex-civil servant procurement executive Colin Cram, particularly in terms of his views that Tesco was a good role model for public procurement (which came unstuck a little when Tesco came unstuck a lot) or his desire to centralise everything that moves in public procurement. However, credit where it is due, his most recent article about public sector construction procurement on the Guardian Public Leaders Network website is worth reading and raises interesting issues, even if his proposed solution has its own flaws.

The Grenfell Tower fire shows, he says, that “the traditional model of construction procurement by local authorities and housing associations in England is no longer viable”. He puts that down to two factors: that few councils can afford the expertise needed for the procurement (and management we suspect) of major construction or refurbishment projects, and the risk of unhealthy relationship or even corruption between council officials (or elected representatives, we might add) and suppliers.

He is right to draw attention to reduced scrutiny of local government in recent years since the Audit commission was abolished, and to say that most contracting fraud occurs after contracts are awarded. “This can be done in a number of ways, such as using sub-standard materials or unapproved building techniques. Spotting such practices depends on the team or person managing the contract having enough expertise to recognise what is happening”.

He then comes back to his usual theme of more centralisation. In Singapore, apparently, a housing development board is responsible for 80% of the country’s construction and management of homes, which ensures safety in design and construction. Cram therefore wants a similar UK body, mandated from the centre, that would do the letting and management of major contracts, with housing associations and local authorities themselves “to retain responsibility for commissioning projects”.

I’m not sure what that last comment means given that “commissioning” in public sector terms has come to include the whole procurement process really. But it highlights one of the drawbacks with such schemes – where do you draw the dividing line between the responsibilities of the council or housing association, and that of the separate procurement body? While running the tendering process can be “outsourced” fairly easily, who is responsible for specification and contract management, at each end of the tender process?

The history of central and mandated organisations is also not very good in the UK public sector. It is easy for them to become complacent, to lose sight of the need for efficiency or to keep up with the latest thinking. The performance of the initially much-heralded UK central government back-office shared services programme has been somewhere between “disappointing” and “shambolic” so far, for example.

However, having made those criticisms of the Cram philosophy, we will end on a more positive note. He is quite correct to say that relatively small public organisations struggle to have the skills and resource to manage complex programmes and procurements. It may well be that some greater centralisation or collaboration (perhaps a better word) is the right route here; we acknowledge that. So the questions become around how centralised the model should be; should this just be construction or could this be part of a wider procurement strategy; and how do you develop a workable operating model.

We have mentioned before the Surrey and East Sussex County Councils’ shared services venture, for which procurement was the initial trail-blazer. Perhaps authorities collaborating and coming together in that way, to form shared procurement groups that have a critical mass of leverage, skills and resources, including in the construction field, would be the right way to go?

No doubt the debate will continue!

Voices (3)

  1. Mark Lainchbury:

    Another positive from Colin’s idea.
    Price rigging cartels would presumably be easier to spot, if contracting was centralised.

    http://news.bbc.co.uk/1/hi/programmes/file_on_4/6284126.stm

    http://www.telegraph.co.uk/finance/newsbysector/constructionandproperty/2788332/Construction-cartel-may-have-cost-taxpayer-300-million.html

    1. Dan:

      Wouldn’t centralised contracts lead to fewer, bigger contracts? In which case, it could just as easily lead to the formation of cartels.

  2. Dan:

    Colin is correct to highlight the small size of some contracting authorities – some housing associations currently manage only a few dozen properties. However, there is another option to centralisation and collaboration – consolidation. Housing associations are able to merge with each other to form larger entities. This comes with problems of its own, but it would solve the problem of scale.

    Another issue is one of location – rural contracting authorities are going to find it more difficult to find the right resources and contractors to carry out the work – for example there is a shortage of key skills in the Lake District and surrounding areas. That’s the kind of local knowledge that a centralised entity just wouldn’t be aware of.

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