Fenestra Journal – Public Sector Special

Published: 8th June 2007

Considerable confusion exists within the private sector over the relationship between public sector procurement policies as set out in Best Value and by Gershon. Adrian Wyatt, of social housing door specialist Permadoor examines the relationship and explains how the challenges that it presents can be overcome.

There have been a lot of rumblings in the industry of late that Best Value and efficiency targets are contradictory. Critics across sectors, not just the window and door industry, protest how can it ever be possible to meet criteria and targets for efficiency when they must also meet targets for resident and community involvement, transparency and sustainability to mention but a few? Surely there is an inevitable and inherent conflict between price and service?

But far from pulling in opposite directions efficiency targets set by Gershon compliment Best Value and there is little point those of us in the private sector trying to persuade ourselves otherwise. Best Value was introduced in 2000 bringing with it a new set of criteria for public sector procurement, not driven solely on price as its predecessor Compulsory Competitive Tendering had been but on service and quality. This included criteria for continuous improvement, not just lip service but actual and demonstrable improvement both of product quality and services. It included performance measures for goods and services, added value rather than simple product delivery and critically, tenant involvement.

When Gershon came to the table four years later suggesting that this needed to be accompanied by greater efficiency and in particular more effective procurement, the private sector recoiled. It saw Gershon as leading an onslaught on price at a time when local authorities were calling for ever higher standards of service. How could suppliers after all, be expected to invest time and money attending residents group meetings and tenant associations, to increase the quality of products and install and maintain them better at a time and deliver it all at lower cost. To the private sector it appeared and continues to appear for many that Gershon not only wanted to have his cake but to eat it.

But this argument fails to fully reflect the reality. Efficiency as argued by Gershon is in fact a theme common to Government policy in the past decade embodied in not only Best Value but in subsequent policy. What is different is that in increasing pressure on price, it sets the window and door industry, as it does others, a new challenge at a time when it is delivering increasingly sophisticated products and services and when raw material and energy prices are spiralling and dramatically increasing overheads.

But if you look a little more closely, there are clear consistencies in Best Value and Gershon and subsequent policies. Best Value places huge emphasis on continuous improvement, not just of products but of services and operation. Secondly, it champions sustainability. Together they are both drivers for greater efficiency.

Sustainability is particularly important in Best Value. It is not simply about whether your doors or windows can be recycled but how your products are made, how they perform, are maintained and how they can contribute to building more sustainable communities and this embodies a drive for efficiency in the form of sustainable modes of manufacture. Permadoor has recently been awarded the environmental accreditation ISO14001. As part of the accreditation process it has invested in new and more energy efficient plant equipment, increased the amount of waste it recycles, cut energy consumption and reviewed its delivery programmes to cut the number of journeys made by its delivery teams. This has helped us not only meet Best Value criteria for sustainability and continuous improve but to drive forward efficiency within our own operation.

The emphasis we are seeing on efficiency post-Gershon isn’t really new, it has and is there in Best Value and subsequent policy drivers. The Latham Report in 1994 for example, called on the public sector and its suppliers to work more effectively together on construction and refurbishment projects. This theme was further developed in Egan’s ‘Re-thinking Construction’, published in 1998.

Amid a raft of targets to cut costs and construction time, what both were saying was that there was too much time and money was being wasted and if only everyone would sit down and discuss what they needed and when they needed it, projects could be delivered more efficiently. These efficiencies could then be shared between partners.

This made sense for local authorities because projects were delivered on time and at lower cost. For the constructer and their suppliers things were better because they took a share of the savings in performance bonuses, while contracts were awarded over a longer period, making it easier to plan more effectively and in so doing make additional savings and efficiencies. This move towards partnering has since become a firmly established part of Best Value. Sitting side by side with targets to increase tenant involvement are those to deliver projects more efficiently, taking less time and at lower cost. Gershon simply argued that these and continuing efficiencies should be exploited to lower costs.

Gershon’s recommendations have, however, undoubtedly been interpreted by many within the public sector as an opportunity to secure lower prices by joining buying consortia or in a new and more aggressive approach to contract negotiation. At the same time local authorities have withdrawn a number of contracts awarded through partnering arrangements on the grounds that they had not been issued openly through the OJEU process and didn’t meet regulations on competition.

Collectively these factors have made the market very competitive and some suggest that there has been a move back towards the award of contracts on lowest price as embodied in CCT. This is despite the continuing expectation that criteria for service and product development and improvement under Best Value will continue to be met. And this is the challenge, to continue to develop better products and services despite the pinch on price.

So what’s the solution? Current market conditions make higher prices unlikely, at least in the medium term. At the same time the drive for new and better products and services will continue. Set against a backdrop of rising raw material and labour prices, there can only be one answer and that is to become more efficient. Permadoor has spent the last decade not only investing in its service but in its operation, in its plant equipment and in its relationship with its suppliers to drive down our own costs. We are delivering a better product but we are doing it more efficiently, reducing energy consumption and waste and by implication our overheads. Government policy has gone through a number of shifts in emphasis but since Best Value there has been a consistent theme of improvement and efficiency. Post-Gershon, suppliers have had to find efficiencies of their own to absorb pressure on price. For the moment the balance between service and price is just about sustainable but the public sector must also be realistic and understand that costs can not be absorbed by their suppliers indefinitely.