CONSTRUCTION JOURNAL

Service aims to pair major firms and local SMEs

A service set up in Cumbria is championing the contribution SMEs can make to the local economy when they are matched with large corporations contracted to work on major projects

Author:

  • Dominic Doig FRICS

24 May 2023

Overhead image of meeting table with people around it

Without question, 2020 was a pivotal year for our industry. But it would also have a lasting impact on the quantity surveying profession and its vision for the future.

During the first lockdown I read an article by Dr Jas Kalra and Prof. Jens Roehrich, procurement academics and members of the Hinkley Point C Innovation Lab, entitled 'Swimming with the big fish'.

This led me to make contact with Jas, who shared two case studies from his work with the Innovation Lab which delved into the fresh approach taken by Ken Owen, EDF's commercial and procurement director, for the new nuclear power station in Somerset.

Ken's approach was innovative for several reasons. He put in place a clear and coherent strategy to engage with local stakeholders from the outset. He mapped out capabilities and matched them with work requirements. And he actively led on the development of supplier capabilities to meet project requirements.

Understanding the region's economic structure and appointing highly motivated local champions to drive the approach forward, he brought together local businesses, not-for-profits and educational organisations to ensure a positive legacy was achieved.

Jas and Jens' piece ignited a spark in my team at Solomons Europe. Making up over 99% of UK businesses and employing over 61% of the total workforce, we believe SMEs hold the key to the nation's economic growth and prosperity and that they have a crucial role to play in rebuilding and regenerating our regional economies after the pandemic.

Because SME leaders are free from the constraints of corporate bureaucracy and systemised decision-making, they can be more agile and adaptive to change, innovation and risk. They are well positioned to make local investments that create jobs, pioneer technologies, upskill the local workforce, and create countless other opportunities for local communities. Given the right chance, they can also do this quickly.

However, they also often lack the time, money or resources to provide these opportunities without investment or clear commitment from other organisations.

With this in mind, we decided to provide visibility for the positive changes SMEs could create, highlighting their untapped potential to contribute to local economic recovery. This led us to create the Swimming with the Big Fish movement in Cumbria.

Initially our aim was simply to extol the virtues of SMEs to anchor institutions across the region – to persuade them to put SMEs at the forefront of their thinking in their procurement decisions and offer long-term, high-value contracts that would allow them to invest and grow locally, supporting and embedding local supply chain resilience and creating the opportunities for long-term supplier relationships, which would create confidence in sustainable futures and opportunities for innovation.

SMEs advocate for value to local economy

We chose to start the movement in West Cumbria because not only do we have a depot in Cockermouth, but the area is also home to Sellafield, a nuclear facility which had recently awarded four 20-year contracts to deliver major site decommissioning works under its own Programme and Project Partners (PPP) initiative to major contractors KBR, Wood (now Jacobs), Morgan Sindall Infrastructure, and Doosan Babcock (now Altrad Babcock).

PPP is an innovative Project 13 enterprise framework. A key principle of PPP's commercial model is the award of agreements of up to 18 years with key delivery partners (KDP) through NEC4 Engineering and Construction Contracts and NEC4 Professional Service Contracts, amended to align with the PPP framework principles.

These include performance defined by outcomes at enterprise level and not purely project performance, commitment to partner, develop, support and utilise SMEs willing to invest and grow in the region, and achieving early contractor involvement through embellishing framework teams with expertise from contractors and subcontractors.

Work packages include KDP2 Steelwork, KDP3 Heating Ventilation and Air Conditioning, KDP4 Electrical and Instrumentation, KDP5 Mechanical Pipework, KDP7 Access, Scaffolding, Insulation and Painting, KDP8 Concrete Structures, Groundwork and Blockwork, and KDP9 Building Fit-out.

This approach presented a unique opportunity for the 'little fish'. Not only was it bringing significant investment to the region, but it also incentivised framework winners to involve SMEs to deliver a long-term socioeconomic legacy.

Solomons Europe brought together a group of local multidisciplinary SMEs to articulate what could be achieved. Together we produced a report making clear the commitments that these enterprises could make to create jobs and apprenticeships, boost skills and have a positive social impact if awarded meaningful long-term contracts.

These SMEs pledged to create 300 new jobs, spend a minimum of 50% in the local supply chain and to invest locally in new facilities. In short, in exchange for increased opportunity, under fair and sustainable contract terms that span years instead of months, they could make a significant difference to the local economy. The goal was to offer SMEs a hand up, not a hand out and the chance to capitalise on PPP's model of collective incentivisation.

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Matchmaking local firms with big contractors

The pledges made by local SMEs and the clear impact they could make in West Cumbria struck a chord with local stakeholders, in particular the PPP Executive team, given their commitments to Sellafield and to achieving their critical success factors in terms of jobs, skills and the creation of resilient local economies.

From the initial Swimming with the Big Fish movement, Solomons launched an SME matchmaker service intended to identify like-minded enterprises prepared to support growth and investment in the region, subject to a long-term contract, and to match these to the PPP and key delivery partners to support successful outcomes in their delivery contracts.

Over the past two years, the matchmaker team has provided support to PPP by seeking out and proactively pairing high-performing SMEs with the major businesses tendering for frameworks as key delivery partners (KDPs) to support the PPP programme.

Members of the matchmaker team drill into SMEs' key qualities, capabilities, experience, pledges and growth potential. They do this through a questionnaire that assesses them against PPP's critical success factors, and grades them gold, silver or bronze depending on the answers given in their submission.

They then pair SMEs with relevant KDPs and host face-to-face meetings between the two organisations to see if a match is achievable. If so, the matchmaker team facilitates the creation of joint heads of terms (HoTs) which crystalises commitments from both parties ahead of incorporation and the signing of a long-term framework agreement.

Follow on contracts are drafted with the support of the matchmaker team, incorporating expected profit and key performance indicators (KPIs) that aim to fulfil the pledges made by SMEs on job creation, apprenticeships, skills enhancement and a wide variety of local investment.

Initial pledges made during the matchmaker assessment are firmed up during contract negotiations and once the scope of work has been agreed, their pledges become KPIs. Once work begins, the SME is incentivised to hit these KPIs. Their ability to do so has a direct impact on the profit they make, which is why setting realistic and achievable goals from the outset is so crucial.

Companies on both sides pleased with process

At the time of writing, 113 SMEs have been through the matchmaker process and a total of 36 HoTs have been agreed between SMEs and KDPs with its support. Now that the majority of KDP frameworks have been awarded, the team is currently focusing on getting these HoTs converted into contracts.

One of the SMEs that has been involved since inception is West Cumbria-based Delkia, a specialist integrator of safety-related and mission-critical systems. The business has pledged to create the equivalent of 20 new full-time jobs, ramp up its apprentice recruitment, expand its facilities and establish a new STEM facility in its hometown of Egremont.

They aim to promote the understanding of advanced control system technology, including cyber technology and machine learning advances, for its employees, apprentices and wider community, should it secure a PPP contract.

Delkia's business development director Dick Monaghan says the matchmaker's independent assessment, as well as its ongoing support, has proved invaluable. After receiving a gold grading, the business has gone on to sign HoTs with Balfour Beatty Kilpatrick for the KDP3 HVAC, KDP4 Electrical and Instrumentation and KDP5 Mechanical Pipework work packages, along with NG Bailey also on KDP4.

He says: 'The companies bidding for KDP status are getting an honest overview and endorsement of SMEs such as ours from an independent source. We're over the moon with the matchmaker assessment outcome and hope it will lead to the long-term work we need to grow and invest in the region.'

In February, Sir Robert McAlpine was unveiled as the KDP for concrete structures, groundworks and blockwork framework, which could be worth £1bn over the next 17 years. It pledged to open a regional office, recruit local workers and suppliers, and invest in apprenticeships and training as part of its bid.

The company's pre-construction director Dragan Barnett says: 'I was very impressed by the passion shown by the matchmaker service when talking about SMEs and their potential at our first meeting.

'We quickly recognised that the strategic case for investing in SMEs was strong and that we could offer greater social impact in West Cumbria by working with them over the long term. It's not an approach we've come across before and it's refreshing to see the service bridge the gap between tier-one contractors and SMEs.

'It's amazing to hear SMEs' ideas for growth and investment and shows us their potential. The matchmaker process has been mutually beneficial. For SMEs, having an intermediary that understands their growing pains and can help them identify the support they need from tier-one contractors is important so they can grow their capability and capacity. For us, we've expanded our supply chain by securing long-term relationships with several SMEs that we haven't previously worked with but have shown great potential.'

He adds: 'It's certainly made us think about SMEs differently and, while it is early days, we're already starting to develop some ideas about how we can take a similar approach on other long-term framework opportunities.'

'It's refreshing to see the service bridge the gap between tier-one contractors and SMEs'

Encouraging contracts for positive change

The ultimate aim of the matchmaker service is to optimise commercial and social value outcomes from large-scale investments and construction activities – not just at Sellafield but across the entire Northern Powerhouse.

We want it to inspire, support and encourage clients, main contractors, specialist subcontractors and all supply chain partners to work in harmony and achieve successful project outcomes, while improving the lives, skills and career prospects of local communities.

The original goal for Swimming with the Big Fish was to help draft contracts for positive change. To achieve this, collaboration, partnering, a spirit of mutual trust and shared goals are needed to replace traditional, rigid and automated systems and adversarial relationships.

Our approach is local first, creating meaningful connections between people and leaving a lasting legacy and expertise to maintain the future asset over its lifecycle.

Dominic Doig FRICS is managing director of Solomons Europe

Contact Dominic: Email

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