Blog Author: James Green, Pellings
When all parties play fairly, open book procurement can be a positive experience for the whole project team, as consultant Pellings, architect PRP and contractor Bouygues found on a recent housing scheme in Kent.
Open book procurement has its supporters and detractors, with the latter often claiming that contractors are up to no good, or manipulating the process. But if all parties play the game fairly, the experience should only be positive.
That has been the experience of Pellings, working as employer’s agent and cost consultant for Ashford Borough Council, with architect PRP and contractor Bouygues, on a £17m 104-unit “extra-care” housing scheme for older people at Farrow Court in Ashford, Kent. The scheme started in 2013 with a four-year programme.
Ashford had previously gone down the fixed-price procurement route on smaller, infill residential projects. With Farrow Court as a flagship scheme it wanted to ensure the best chance of a successful outcome and chose the “open book” route. The appeal was the desire to use a collaborative approach, where the council, Pellings and Bouygues would work as partners to reach mutual decisions at each stage.
Adopting a two-stage tender process, Bouygues was appointed at an early stage, even before planning consent was obtained, so it could work with the client and the architect to bottom out what would work.
The advantage of this was to shorten the timespan between consent and starting on site. Invariably a planning consent is followed by many months of procuring the contract, but at Ashford, consent was forthcoming in May 2013 and construction work started in September.
As part of Pellings’ role, we discussed the right contractual route with the team and advised on the preferred approach. PPC 2000 was considered but, because of lack familiarity with it, wechose the Standard JCT Design & Build contract that included a mechanism bolted on to deal with the pain/gain open book process.
Construction with no surprises
The ethos of this approach is that it creates open dialogue. As much as possible there are no surprises; the client understands the contractor’s challenges and the contractor is given time to understand the client’s objectives.
With this approach, Ashford was able to agree a ring-fenced margin for Bouygues, together with agreed preliminaries budgets and subcontractor packages in advance.
To incentivise the contractor to deliver to cost, a pain and gain contingency was added, where if the subcontractor package costs came in below budget the client and contractor would share in the bonus or contingency. If it was over, the contractor was penalised.
This route delivered value for money, allowed a collaborative approach and enabled the parties to manage risks, so that unexpected problems were resolved by all parties working together and reducing any cost over-runs.
Reviewing subcontractor packages
All subcontractors were engaged on the basis that there was a break clause between phases so that the subcontractors could walk away if the commencement of phase two sat outside the time window. By the same token, the client could terminate subcontractor packages where performance was below the expected standard.
The client team as part of the open book method came together to review these packages and as a result of their performance decided that it would be beneficial to procure new brickwork, steelwork and drylining packages.
We were also required to change the phase two demolition contractor at the start of this phase, as the original subcontractor demanded a significant price increase. A quick decision meant a new subcontractor was engaged without impact to the programme.
As an additional bonus, taking the “openbook” approach has helped to inform another similar extra-care project in nearby Tenterden, where experiences have been shared in workshops on ideal kitchens and bathrooms for elderly residents, for example.
The key word in “open book” is “open” where the contractual parties are totally open about the project procurement and work together to deliver what the client wants. Where this happens, there is more likelihood of a project being delivered on time and on budget.
James Green is a partner at Pellings.
This article was originally published in the 4th February 2018 edition of Construction Manager.