12.11.2019

Think Piece: Benefits of two-stage procurement – by John Finlay

Former NWCH Board member and a driving force behind the creation of the Hub and it’s early success, John Finlay, now of Value in Construction, recently gave us his thoughts on the benefits of 2 stage tendering. Take a look at this interesting read from one of the great minds of construction procurement below.

The Two-Stage Open Book model of procurement which NWCH is based on reduces industry bidding costs, enables faster mobilisation and provides clients with the opportunity to start work earlier with a single  integrated team which tests and positively challenges design, risk, waste and cost issues all in advance of start on site, following full project/contract award at the end of the second stage.

Let’s consider a little bit about the negatives that can, and frequently do, emanate from single stage/lowest price tender procurement process and then consider how the Two– Stage approach can prevent these negatives from kicking-in. Also, look into the additional positives created by this approach.

Key questions to be asked by Clients, and get answers to, before opting for single stage / lowest price tender procurement are as follows:

  • How well developed and robust are your brief, designs, risk and waste evaluations, budget provisions, appropriate project delivery timeframes, contextual to the project outcome expectations, prior to tendering on a single stage lowest price basis? (Any of the above elements that could be in a better place prior to tender will create negatives that will impact post- contract). 

Unfortunately, many single stage/lowest price tender processes proceed without one or more elements of the above having received sufficient attention or consideration. 

The ‘Get It Right Initiative’  November 2015 Report –  Improving Value by Eliminating Error – A Strategy For Change,  announced that up to 21% of the construction industry’s turnover is spent correcting errors, which can and do relate to any aspect or stage of project creation/delivery. Much of the reasoning behind these very concerning statistics emanates from the reality of the point made in the previous paragraph, i.e. many single stage / lowest price tender processes proceed without one or more elements referred to above having received sufficient attention / consideration. 

Let’s now consider how the Two-Stage Open Book approach can counter the negatives referenced above, and subsequently result in better overall value outcomes, including lower costs. 

Two-Stage Open Book approach in a collaborative working environment, which is the essence of NWCH, facilitates robust development and healthy challenge of the brief, designs, risk and waste evaluations, budget provisions, appropriate project delivery timeframes, by all project stakeholders, Client representatives, Consultants, Main Contractors and those members of their supply chain, including designers, who can bring relevant knowledge, experience and expertise to impact positively on the work in hand, and the decisions to be made, prior to contract agreement at the end of the second stage.

It is the ‘collaboration’ of all stakeholders at the second stage that makes the massive difference  ….. ‘issues’ of whatever nature ( cost , risk, design, waste, deliverability etc. ) are dealt with positively, thus removing negative outcomes that would otherwise only surface ‘post contract’ when it is too late to deal with them without negative consequences. This approach is largely absent in single stage / lowest price procedures, which tend to be dominated more by a series of ‘silo’ operations / processes in contributory organisations, which are then ‘mechanically assembled’ into a tender enquiry.

The construction industry has many great examples of collaborative  Two – Stage Open Book procurement providing better value, smoother delivery, and conflict free outcomes. However, this approach, unfortunately, is still not the ‘norm’. Too few construction industry clients ‘get’ how this approach can deliver better outcomes than single stage lowest price tendering.

As a public sector client in the North West who is not already one of the 103 who have already opted to use Two – Stage Open Book, you could help to make it the ‘norm’,  and reap the benefits, by choosing NWCH for your future projects.

If you wish to have a conversation to further explore and understand HOW collaborative Two – Stage Open Book really delivers, please do not hesitate to contact us. 

nwch@nwconstructionhub.org

0161 219 6213

Alternatively, you can contact John Finlay of Value in Construction at Johnf.valic@gmail.com.

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