The adoption of Gold Standard practices in procurement, contracting and management is considered essential for the construction industry and its clients to expedite progress and share learning in the delivery of better housing, schools, hospitals, flood defences, rail, roads and other crucial infrastructure. The verification scheme implements the recommendations that emerged from my ‘Independent Review of Public Sector Construction Frameworks’, which was commissioned by the Cabinet Office in early 2021 with a brief to create:
- ‘The components of a gold standard against which to measure frameworks and framework contracts'
- 'Standard contract terms that support the new gold standard'
- 'Training packages to enable early adoption of the new gold standard.’
The review attracted 120 contributions from framework providers, clients, design consultants, contractors, manufacturers, managers and advisers. It analysed frameworks and framework contracts worth £180 billion procured by Crown Commercial Service, Department for Education, Department for Work and Pensions, Environment Agency, Highways England, H.M. Revenue and Customs, LHC, Ministry of Justice; Network Rail, NHS Procure 22, NHS Shared Business Services and the members of the National Association of Construction Frameworks.
‘Constructing the Gold Standard’ captures the outcomes from the review and describes an integrated and collaborative approach to the procurement, contracting and management of frameworks and framework alliances. Over 2,000 public sector construction frameworks are currently active, some of which deliver good value and can enable excellent project outcomes. However, many other frameworks are less ambitious and less successful, and some are vehicles run for profit by private sector providers.
'Constructing the Gold Standard' sets out 24 recommendations to help clients identify what questions they should ask when creating and implementing construction frameworks and framework alliances, what answers they should expect and how they can make informed decisions. All 24 'Gold Standard' recommendations have been endorsed by government and 50 industry bodies in the September 2022 update of the ‘Construction Playbook’.
All review participants agreed that ‘construction frameworks are widely recognised as the best medium through which procurement and contracting can deliver transformational improvements, overcoming the ‘Groundhog Day’ of lost learning from one project to the next.’ However, many also emphasised a ‘pressing need to refresh and energise frameworks by adopting more transparent and efficient practices designed to reduce waste and improve outcomes.’ Their submissions revealed that:
- ‘In addition to client procurement costs, the average bid cost for each major framework is over £247,000 for contractors and over £130,000 for consultants, with a maximum of up to £1 million in each case.’
- ‘Transformational change will only come if Gold Standard frameworks create aggregated and harmonised programmes of work, and if they attract new commitments to improved value for money, efficiency, safety, social value, net zero carbon and whole life value.’
Industry contributors reported serious instances of waste and missed opportunities:
- When clients and their advisers procure speculative frameworks that incur major bid costs but are based on inflated ‘pipelines of work.’
- When clients and their advisers treat frameworks as a quick fix to avoid undertaking their own public procurement, rather than an opportunity to participate in a ‘strategic engine-room to generate improved value.’
- When clients and their advisers procure frameworks that do not create ‘consistent, fair, value-based systems’ for team selection and evaluation, for contract award and for performance measurement.
- When clients destabilise framework relationships by spot-purchasing among different frameworks and do not recognise the value of multiple clients ‘sharing experience.’
- When clients, consultants, contractors and suppliers do not commit to collaborative ‘framework contracts that integrate client needs, supplier investments, supply chain contributions and collaborative risk management.’
The independent review found that ‘although most Gold Standard recommendations start with framework providers, clients and managers, their successful implementation also depends on consultants, contractors and all supply chain members adopting equivalent framework practices and commitments. Its recommendations ‘include specific activities which should be implemented at each stage in the life of a construction framework, namely its strategy, procurement, contract and management.’
'Gold Standard' recommendations include the need to:
- Improve industry commitments by offering sustainable pipelines of work.
- Prioritise safety and net zero carbon and convert framework objectives into specific actions.
- Invest in framework management that demonstrates value for money for clients and suppliers.
- Improve economic, social and environmental outcomes through ‘early supply chain involvement’.
- Identify SME strengths and use ‘Supply Chain Collaboration’ systems to maximise social value.
- Improve investments in MMC by awarding framework call-off contracts for portfolios of work.
- Integrate teams and create a whole-life ‘golden thread’ of asset information using digital technologies through a multi-party ‘framework alliance contract’.
- Allocate framework and project risks based on market engagement and use joint framework systems for early risk mitigation and efficient responses to risk events.
- Create transparent pricing mechanisms for frameworks and call-offs that maximise cost certainty and ensure prompt payment.
Review participants shared case studies and examples of good practice which show how 'Gold Standard' frameworks and framework contracts deliver:
- ‘Better, safer, faster and greener outcomes'
- 'Net zero carbon and social value targets through joint actions'
- 'Improved safety through whole life value and digital information'
- 'Industry investment through aggregation, standardisation and optimal use of modern methods of construction (MMC)'
- 'Improved efficiency and innovation through strategic use of early supply chain involvement (ESI)'
- 'Improved contributions from SMEs, including local and regional businesses'
- 'Efficiency savings for clients and industry through consistent, transparent documents'
- 'Savings for clients and industry through collaboration and dispute avoidance’.
As a medium to implement the other Gold Standard recommendations, recommendation 4 recognises the need to ‘reduce procurement costs, improve value and reduce risks by wider adoption of a standard form Gold Standard framework alliance contract…that:'
- Aligns the objectives, success measures, targets and incentives of clients and suppliers
- Provides transparent performance measurement and work allocation procedures
- Requires joint work by clients and suppliers to improve value and reduce risk
- Translates framework objectives into actions with clear timescales and outcomes.’
This recommendation builds on the 'Construction Playbook' requirement that ‘a successful framework contract should be based around principles that align objectives, success measures, targets and incentives so as to enable joint work on improving value and reducing risk.’ The 'Gold Standard' review brief required recommendations for ‘standard contract terms that support the new Gold Standard’, and the Construction Playbook' states that the published ‘FAC-1’ framework alliance contract ‘is a good example of a standard form framework contract that can achieve… many of the ambitions set out in this Playbook.’
The Crown Commercial Service Gold Standard submission described how ‘The FAC-1 Framework Alliance Contract enables the government to align its strategies in construction with the key objective policies outlined in the Construction Playbook. The benefits of this drive improvements across the construction industry including:
- Ability to influence design through earlier contractor engagement
- Connecting whole life considerations through an integrated supply chain
- Focus on newer and safer working practices in construction
- Options for innovative construction methods and technologies
- More opportunities for SMEs, specialists and local providers
- Sustainable solutions and environmental benefits
- Collaborative risk management and dispute avoidance.’
The GRAHAM Gold Standard submission stated that:
- ‘Most frameworks that we operate under adopt the use of a bespoke Framework Agreement for appointment to the Framework. Exceptions to this are the CCS and NHS SBS Frameworks that adopt the FAC-1 Alliancing agreement. This is an approach we support.’
- ‘Many Framework Agreements that we are a party to facilitate the adoption of varying project level forms of contract by users, as does FAC-1.’
'The Construction Playbook' recommended that alliancing arrangements ‘should be considered on more complex programmes of work as the effective alignment of commercial objectives is likely to improve intended outcomes as well as drive greater value for money’. It recognised that the Crown Commercial Service framework alliances are ‘integrating FAC-1 and Project 13 principles.’
The new 'Gold Standard Verification Scheme' assesses the claims made by framework providers and by clients who procure their own frameworks or framework alliances, and it provides a measure of quality for clients who use frameworks and framework alliances and for suppliers who bid for them. The scheme operates in two stages to establish whether applicants achieve ‘Partial Verification’ and then ‘Full Verification’. Applications for verification are made via Constructing Excellence accompanied by a written commitment to adopt 'Gold Standard' frameworks, framework contracts and action plans.
Constructing Excellence has established a 'Gold Standard Task Group' whose members are drawn from framework providers, clients, advisers, suppliers and government stakeholders. Governance of the 'Gold Standard Verification Scheme' resides with this task group and all submissions to the scheme are reviewed by them.
A panel of ‘Independent Verifiers’ are appointed with the approval of the 'Gold Standard Task Group' based on their willingness, independence and hands-on experience in procuring frameworks that have 'Gold Standard' features. The scheme will operate as follows:
- The applicant will complete a Questionnaire which will be the basis for initial feedback from an approved 'Independent Verifier' with recommendations in respect of 'Partial Verificationor' in respect of rejection of the application, and which will be reviewed by the Gold Standard Task Group to identify areas that are of concern or require a particular focus during the 'Full Verification'
- The 'Independent Verifier' will then carry out 'Full Verification' of the applicant’s processes and action plans to assess how they comply with the 24 Gold Standard recommendations and to recommend 'Full Verification' or rejection of the application.
- The findings of the 'Full Verification' process will then be reviewed by the Gold Standard Task Group who will recommend whether there is enough evidence to verify the applicant to the Gold Standard.
Constructing Excellence and King’s College London have piloted the Gold Standard Verification Scheme with seven clients and framework providers, namely Crown Commercial Service, LHC, CHIC, Places for People Procurement Hub, Environment Agency, SCAPE and Ministry of Justice. All seven submitted detailed Questionnaire responses and supporting documentation by reference to the 24 Gold Standard recommendations, and all seven have been approved by Gold Standard Task Group as successfully achieving 'Partial Verification'.
As the 'Gold Standard Verification Scheme' develops, Constructing Excellence and King’s College London will support the Gold Standard Task Group in facilitating the work of a community of framework providers and clients who implement Gold Standard frameworks and alliances. This will include the exchange of Gold Standard case studies and the offer of training.