Frameworks – what are they?

Presentation for North Wales Constructing Excellence Club

3rd July 2008

Contents

• Framework Definitions

• Setting up a Framework Agreement

• Call-offs

• Framework Types

• Framework Examples• WAG Estates Consultancy

FA• NISMP Major Works FA• WWCA• TSIF

• Framework Challenges

Framework Definitions

The European Definition

“A framework agreement is an agreement between one or more contracting entities and one or more economic operators, the purpose of which is to establish the terms governing contracts to be awarded during a given period, in particular with regard to price and, where appropriate, the quantities envisaged.”

“Contracting entities may regard a framework agreement as a contract within the meaning of Article 1(2) and award it in accordance with the Directive.”

The European Definition

“Where contracting entities have awarded a framework agreement in accordance with the Directive, they may avail themselves of Article 40(3)(i) when awarding contracts based on that framework agreement.”

Article 40

3. Contracting entities may use a procedure without prior call for competition in the following cases:

(i) for contracts to be awarded on the basis of a framework agreement, provided that the condition above is fulfilled.

OGC Definitions

A framework agreement is a general term for agreements with providers which set out terms and conditions under which specific purchases (call-offs) can be made throughout the term of the agreement

Often agreements set out the terms and conditions for subsequent call-offs but place no obligation, in themselves, on the procurers to buy anything.

The key is that a means of awarding contracts under framework agreements is provided for without the need to re-advertise and re-apply the selection and award criteria from the outset

Setting up a FrameworkAgreement

Setting up a Framework Agreement • A value for money judgement to

proceed

• Scope and types of service are required that will need to be called-off

• The specification is key, as once set you cannot step outside it

• A pricing mechanism must be included although actual prices are not necessarily required

• Advertise in the OJEU as a framework

• Determine all the contracting entities entitled to call-off under the framework

Setting up a Framework Agreement

• Establish length of framework – normally a maximum of 4 years

• Establish the total value

• Determine the frequency and value of call-offs

• Normally, restricted procedures will apply through OJEU

• Determine award criteria

• Select on the basis of most economically advantageous tender or tenders

Setting up a Framework AgreementDoes the

agreement include a

commitment by the procurer to buy something?

This is a framework

contract and should be

treated as any contract under

EC rules

This is a framework

agreement, for which contracts

subject to EC rules are formed only

when call-offs are made under the

framework

Apply the EC rules to advertising and

awarding the framework itself

as if it were a contract to purchase

something. Apply the specific

provisions to call-offs under the

framework.

No

Yes

Call-offs

Call-offs (individual contracts)

• “Contracting entities may not misuse framework agreements in order to hinder, limit or distort competition.”

• Although full EU Directive processes are not needed the relevant EU Treaty principles apply

• The length of call-offs should be appropriate to the purchases and reflect value for money considerations. This should not be a means to simply extend the framework, although call-offs can extend beyond the period.

Call-offs (individual contracts)• Two options for awards

• Use the terms laid down in the framework agreement without reopening competition – used where there is just one provider or based on the primary competition MEAT.

• Hold a mini-competition with all suppliers capable of meeting the need by considering particular mixes of quality and rates and making use of the pricing mechanism, set against the criteria stated in the framework. It cannot be a repeat of the primary competition.

Call-offs (individual contracts)

• Substantive modifications to the terms set out in the framework agreement itself are not permitted.

• It is more a matter of supplementing or refining the basic terms to reflect particular circumstances for individual call-offs.

Framework Types

Framework Types

Supplies from a single provider

• FA for furniture awarded following OJEU and MEAT selection to a single supplier

• Authority calls-off its requirements during the period of the FA on the basis of the terms agreed when the FA was established.

Framework Types

Supplies from several providers

• FA for consumables awarded following OJEU and selection based on financial and economic standing and technical capability. MEATs are entered onto FA.

• The Authority goes to the supplier within the FA whose offer is MEA for the particular consumables required for each call-off.

• The terms of the FA apply and no mini-competition is required.

Framework Types

Consultancy services

• FA for consultancy services awarded following OJEU and selection based on financial and economic standing, technical capability, track record, quality systems and fee rates. MEATs are entered onto FA.

• Hourly rates for different categories and grades are included in the FA.

• Mini-competitions are held for call-offs, engaging only those with capability for the required services and establishing which company offers MEA for the mix of grades and rates required.

Framework Types

Minor Works

• FA awarded to several contractors following OJEU and MEAT.

• Contractors provide a range of services over a wide area.

• Hourly rates, call out charges and levels of quality set in the FA.

• Authority goes to the contractor providing MEAT on basis of original award criteria for the particular need.

• No mini-competition required.

• Alternative would be to award a FA to a single contractor in separate regions.

Framework Types

Major works

• FA required for building office units.

• FA awarded to a number of contractors following OJEU and MEAT based on financial and economic standing and technical capacity.

• Awards are made on basis of a particular mix of quality and unitary prices.

• Mini-competitions used to select MEAT for the unit required.

Framework Examples

WAG Estates Consultancy FA• Three Consultants providing

commercial services over three years.

• Primary selection based on technical ability and track record

• FA established hourly rates for staff types and grades based on WAG standards (professional / technical)

• Minor commissions – MEA provider selected on basis of rates and capability

• Major commissions – mini-competition with MEA established via quality of people, methodology and fee (35%/35%/30%)

• No integration between suppliers

NISMP – Major Works FA

Lead Contractor(Supply Chain)

Mechanical&

Electrical Engineer

Civil /StructuralEngineer

Lead Designer

& Quantity Surveyor

Building & Civil

Contractor

Mechanical&

Electrical Contractors

Lead Contractor = Single company, consortium or joint venture with total turnover £35m (each party to consortium turnover £10m)

Framework Value•£550m to £650m

Project Value•All capital projects in excess of £500k with no upper limit

No of Contractors •8 framework participants lead by a Lead Contractor

Framework Duration•Maximum of four years with opt out after two years

Project Location•Throughout Northern Ireland

Framework access•Any Government Department as part of DE •Agencies •Local Authorities and subsidised bodies/grant recipients

Project Types•offices, laboratories/specialist buildings, colleges, sport /art facilities etc

NISMP – Major Works FA

NISMP – Major Works FAObjectives Improve the process for the appointment of Contractors

Use contracts that support collaborative working

Adopt the NEC suite of contracts

Improve standards in health and safety

Move to proactive management of H&S and the creation of a safety culture

Meet Sustainability targets set by the DE Achieving excellence Sustainability action plan

Implement proactive performance monitoring of Contractors

KPI’s developed based on constructing excellence Improve value for money

NISMP – Major Works FA

Primary Competition

Principles of ITT selection process

• Criteria to be met for appointment to Framework of 8 Lead

Contractors (with Designers) • key commercials • Quality & Capability of Organisations • Quality led assessment criteria • Based on 80/20 ratio (price and non-price)

Secondary Competition Quality section which is specific to the individual project

(based on one or more from the following list)

• Commercial (application of Fee cost of ECI)

• Capability

• Risk and commercial management

• Continuous improvement

• Health and safety

• Sustainability

• Human resources

• Supply chain

NISMP – Major Works FA

NISMP – Major Works FAContract strategy D&B Contractor appointed on two-stage NEC3 contract

with break clause Stage 1: Contractor appointed to complete or develop

detailed design with client and establish target price (Pre-construction Services)

Stage2: Contractor instructed to construct project with payment based on defined cost (measured on open book basis) plus Fee with pain/gain sharing on target price

DE (or Consultants from Professional Services Framework)

Development of Project Brief Project Management Cost Management Architectural and other technical advisory services

Welsh Water Capital Alliance

• Set up by Dwr Cymru Welsh Water (DCWW)

• Delivered 60% of AMP3

• 2000 – 2005

• Budget circa £650m

South West TeamCSOs, Sewerage& Process WorksMorrison Construction Meica Process Ltd Black & Veatch Contracting*; United Utilities; EC Harris; ChandlerKBSSouth West Wales

South East TeamCSOs, Sewerage &

Process WorksAMEC Capital Projects;

Black & Veatch Contracting*; United

Utilities; EC Harris; ChandlerKBS

South Wales & Herefordshire

North Wales Team CSOs, Sewerage &Process WorksGalliford Northern; Meica Process; EC Harris; United UtilitiesNorth Wales

Water Team Water Network Team

& Water Process TeamLaing Utilities; United

Utilities; ChandlerKBS; EC Harris; Black &

Veatch Contracting*; Wales & Herefordshire

(* Formerly Paterson Candy Ltd)

The Capital Alliance Structure

The Capital Alliance Structure

[NB: Sewage Operating Contractors (SOCs), Network Development Consultants (NDCs), Sewage Pumping Station Contractors (SPSs) etc are key interfaces]

South West TeamMorrison Construction Meica Process Ltd, Black& Veatch Contracting*; United Utilities; EC Harris; ChandlerKBS

South West TeamMorrison Construction Meica Process Ltd, Black& Veatch Contracting*; United Utilities; EC Harris; ChandlerKBS

North Wales TeamGalliford Northern; Meica Process Ltd; EC Harris; United Utilities

North Wales TeamGalliford Northern; Meica Process Ltd; EC Harris; United Utilities

Strategic Group Representatives from across Alliance

Strategic Group Representatives from across Alliance

Water TeamWater Network Team & Water Process TeamLaing Utilities; United Utilities; ChandlerKBS; Black& Veatch Contracting*; ECHarris

Water TeamWater Network Team & Water Process TeamLaing Utilities; United Utilities; ChandlerKBS; Black& Veatch Contracting*; ECHarris

Alliance Development Team Representatives from across AllianceAlliance Development Team Representatives from across Alliance

Delivering Support Services

DeliveringKey

ProcessesSouth East TeamAMEC Capital Projects; Black& Veatch Contracting*; United Utilities; EC Harris; ChandlerKBS

South East TeamAMEC Capital Projects; Black& Veatch Contracting*; United Utilities; EC Harris; ChandlerKBS

(*Formerly Paterson Candy Ltd)

The Alliancing Approach

People & Relationships• Safe environment• Innovation & challenging• Openness, honesty & trust• Respect for people• Team working• Celebration of success• A learning, not a blame

culture• Effective communications• Ownership

Task & Finish Teamso Risko Commercial – costo Commercial – Contract

Administrationo Purchasing/Hireo Stakeholder Managemento IT/ISo Qualityo Design

Continuous Improvement KPIs Common processes Non man marking Realistic targets Business improvement

teams Supply chain

management Shared risks Shared best practice Investment in people

development

The Alliancing Approach

The Benefits & ImpactsMoved from input to output specification

• Works that work!

Shared delivery of DCWW Business Plan

Incentivisation: • No build = more profit for all• Strategic element driving

shared best practice

Continuous Improvement programme monitored through BEM

Outperformed tough financial targets• 26% plus 2% better than AMP2

Supported DCWW’s OPA benchmark

Procurement Strategy – why TSIF

Waste Retrieval and Processing

FED / Ponds Deplanting

and Demolition

CW PumphouseMiscellaneous

Safestores -Reactors 1 & 2

ILW Store

High

High

Value

Ris

k

•Strategic Analysis of Work Scope

Procurement Strategy – why TSIF Cooling Ponds / Waste seen as

high risk because• Uncertainty of scope• Uncertainty of risk / cost• Environmental & Safety

issues• Programme implications

using Self Manage approach• The mix of skill sets called for• Interface issues• The need to retain

knowledge and training

Strategic Integrated Frameworks seen as the way forward

Procurement Strategy – why TSIFThe Benefits that Magnox expects –

• Programme certainty• Increase in competence and capability• Improved long term relationships• Corporate Social Responsibility in action• Flexibility and responsiveness to providing solutions• Use of Parental Assets of each Partner• Integrated approach to solutions using best resource available• Loose work boundaries, simple to vary the work scope• Learning from Partners, Knowledge transfer• Scale of Economies Leading to cost benefits• Best value product and service• Better sharing and management of risk• Foster innovation and Organisational Learning

Why an Integrated Framework (alliancing)?

Tried and tested

• Latham/Egan

• Constructing Excellence

• It works

• More cost effective

• More for less

• Better value

• Build on successes elsewhere

Risk mitigation

• Alignment of contractors / client

Sharing of best practice

• Business improvement

• incentivisation

Asset optimisation

• Opex/capex balance

• Best whole life solutions

• Focused on outputs ( rather than scope)

TSIF Working ArrangementsMagnox collaborating with

• A Civils & Demolition Partner• A Mechanical & Electrical Partner• A Decontamination & Operational Partner• A Design Partner

Four equal Partners with separate but complementary contracts with Magnox

A virtual company • Single business plan with one set of numbers!• Mutual goals

Joint incentivisation

Corporate governance• Independent audits, benchmarking, market testing, target

cost setting, etc

TSIF Working Arrangements

Framework Contracts• ECC Option C – Target Cost with Activity Schedule• Works Orders for Core Management Team and Projects• Fixed Fee• Performance Adjustment (KPIs)• Defined Cost based on Schedule of Cost Components• Project Share Mechanisms

Strategic Agreement• TSIF Business Plan• Dispute resolution• Strategic Share Mechanism• Common processes

TSIF Working ArrangementsSteering Group

Core Management Team

IntegratedProjectTeam

IntegratedProjectTeam

IntegratedProjectTeam

IntegratedProjectTeam

Tier 1 & 2

Tier 2 & 3

Tier 1 & 2(& 3 at times)

TSIF Working ArrangementsRole of TSIF

• Manage programme of works to suit NTWP (and balanced resources)

• Manage spend to suit NTWP budgets and profiles• via incentivised target costs (combined) & KPIs

• Manage safety, health, environmental and quality• Identify and develop work scopes – specifications,

designs, procurement• Identify appropriate resources for each project• Form integrated teams to deliver discrete projects• Develop supply chain• Capture and deploy best practice

TSIF Procurement EventObjective

• To award 4 Framework Contracts• Predominantly Civil Engineering / Demolition• Predominantly Mechanical & Electrical• Predominantly Decontamination / Waste Handling• Predominantly Design• Three year durations plus two year option

• Based on most economically advantageous• Set against the criteria in the ITT (2.2.1)• Using the weightings in the ITT (2.2.2)

• Qualitative Response - 50%• Commercial Response - 15%• Presentations, interviews, visits - 35%

• Ensuring the best fit of skills from each Framework

TSIF Procurement EventProcess

• OJEU Call for competition - October 2004• Pre-qualification evaluation - November 2004• Establish tender list and issue ITT - December 2004• ITT Return - January 2005• Tenderer Presentations - February 2005• Shortlist - End of February

2005• Interviews / Visits - April 2005• Internal approvals - May 2005• Preferred Partner Shortlist - June 2005• Preliminary Contracts Awards - July 2005• Preparation Phase / Negotiations - July - September

2005• Framework Awards - October 2005

TSIF Procurement Event

Preferred Partners

• Civil Engineering / DemolitionCostain

• Mechanical & ElectricalAMEC

• Decontamination / Waste Handling AK Engineering

• Design ServicesProject Services

Framework Challenges

Framework challenges

• Meeting the rules without being inefficient

• Right sizing the call-off arrangements

• The conflict between supply chain competition and collaboration

• Maintaining competitive tension whilst encouraging shared best practice

• Making it effective for all participants

• Getting on the framework can be an expensive event, so the rewards need to be evident and available.

Framework challenges• Making the primary procurement

event flexible enough to allow the framework to develop.

• Selecting the right participants, not only to deliver the services / works but to bring innovation and enthusiasm.

• Balanced selection to ensure local supply chain is not destroyed

• Ensuring that the Employer leads on SCM below tier one

• Keeping the leadership focussed on the big picture – the road ahead not just the next bend and the rear-view mirror!

Questions?

Contact – slander@chandlerkbs.com