Features - Business

Going direct: Why direct award is back in business

As public sector budgets continue to be squeezed, local authorities are increasingly looking at ways in which construction projects – many of which are essential to ensure the smooth running of the public estate – can provide the best value for money. Jonathan Parker, head of construction at Pagabo, believes that by making use of direct award, councils are better able to get bang for their buck.

Since time immemorial, there has been the perception from clients that construction projects need to have open market tendering processes to provide value for money, the idea being that this kind of approach makes those bidding for the work more competitive in their pricing.

However, this way of working can be counterproductive and actually put contractors off getting involved in projects. This is especially the case against the backdrop of rising costs, and materials and labour shortages across the construction industry, which are making bids that hold you to a specific cost much less appealing.

The direct approach

Over time, this has led not just to the increased use of frameworks, but also the growing presence of direct award as a way of procuring the right team to work on a given project.

To make use of direct award, a public sector body will first identify a particular contractor it would like to work with on the named scheme, often based on existing relationships from previous projects or a strong background in a certain type of building.

After the scope of the project is discussed, it then falls to the framework provider to undertake quality and price checking, taking this arduous element of the process away from the client and destressing that part of the programme. This leads into the creation of the business case by the client, which shows their colleagues and cabinet members the reasons behind why said contractor is best placed to carry out the scheme.

It is at this point that direct award can be made, which also allows for flexibility in the type of contract being committed to, be that NEC3, NEC4 or JCT.

It’s not about who you know

More so than most others, the construction industry is built on strong relationships within supply chains. When working on major projects, there is an additional element of confidence that comes from design teams that already have existing relationships and – consequently – a strong portfolio of work they have done together.

While framework providers provide opportunities by opening up a network of compliant suppliers, there is intangible value found in building on existing collaboration, something which direct award allows.

This isn’t to say that direct award is a way of waving existing relationships through – in Pagabo’s case, we mandate full transparency in costings to ensure that those using the frameworks are clearly getting the best deal. However, what it does enable is really early engagement between the client and a contractor at RIBA Stage 0. This means that the contractor is on board from the ground up, and that they can lead the programme to ensure buildability.

This also means that the design team can be really tailored to the specific nature of each project, using the contractor’s existing relationships to get the best value for money for the client and also quicken the speed of delivery.

A sure thing

Traditionally, direct award has seen as more suitable for projects at the lower end of the value scale, but its ability to de-risk the procurement process means that it is increasingly being used for larger, higher-value projects.

For example, on Pagabo’s Developer-Led Framework – which covers any kind of development including major regeneration projects – around 85% of schemes procured are done through the direct award route, with those using it keen to take advantage of the greater cost and programme certainty, tailored social value outcomes and the absence of a stressful bid process.

Across all projects procured through Pagabo’s frameworks in the past year, more than half were through the direct award route. Given that construction and infrastructure projects are often the biggest items on a public sector organisation’s balance sheet, the importance of getting the right value for money from them is only going to increase, especially as purse strings tighten.

Direct award provides a route to getting a wide range of schemes moving quickly and in a cost-effective manner, while still following all the necessary compliance requirements that are quite rightly imposed on projects that are built on public money.

While there are still some types of projects that are better suited to the more traditional one- or two-stage procurement routes, direct award is likely to take up an increasingly large share of the market as we enter a perfect storm that combines an uncertain time for public sector budgets with an aging estate.

Whichever procurement route is taken, compliance is key. Working closely with a framework provider like Pagabo, which has a 100 per cent compliance record, is the best way to ensure the procurement process is quick, simple and by the book.

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