CONSTRUCTION JOURNAL

What the Value Toolkit means for procurement

RICS is contributing to the development of a toolkit that will require contractors to look further than cost when bidding for government projects

Author:

  • Steven Thompson

03 February 2021

In July 2020, the Construction Innovation Hub began the development of a Value Toolkit, a digital resource to help central government departments in England make informed decisions about investments. RICS is one of the professional bodies contributing expertise to the project.

The work stems from the Procuring for Value initiative – led by the Construction Leadership Council, with Ann Bentley at the helm – which recommended that project investment decisions ought to be based on a greater number of factors than just initial capital cost. Such decisions have sometimes been made on the basis of the lowest cost, with the government mindful of paying only what is absolutely necessary for taxpayer-funded assets.

The Value Toolkit is instead based on four project factors – so-called capitals – that clients are to consider when launching and seeking approval for their projects. These are:

  • natural:

    including air, climate, water, land, resource use, and biodiversity

  • human:

    including employment, skills and knowledge, and health

  • social:

    including influence and consultation, equality and diversity, and networks and connections

  • produced:

    including life-cycle cost, investment return, production, and resilience.

RICS and RIBA are working together to develop the produced-capital part of the Toolkit and have formed a joint working group of experts to do so.

The HM Treasury Green Book already requires government clients to set their priorities according to a number of factors, not just price. The Public Services (Social Value) Act 2012 obliges social value to be considered alongside capital cost. There has, however, often been a disconnect between business case rationale and how a project is then delivered, with lowest-cost procurement often the driving factor. The Value Toolkit will add another three kinds of capital to existing arrangements and ensure that value is considered across all the stages of a project, thus taking informed decision making to a new level.

How the toolkit will work

Government clients will use the Toolkit when preparing the business case for an individual project or programme of work. The Toolkit will prompt clients to set their priorities and weigh them according to importance, scored using a consistent and objective approach that enables like-for-like comparisons between different kinds of project. As the project then moves from initial business case approval to delivery, the Toolkit will guide the selection of the most appropriate delivery model and the development of enhanced commercial strategies.

As a digital resource, the Toolkit enables clients to test different scenarios and decision weightings quickly in real time, so various options can be easily appraised.

In line with the ambitions of the Construction Playbook – launched by the government in November 2020 – the process is outcome-based, in that the Toolkit asks the client to answer questions such as "What does a successful project outcome look like?" This outcome might prioritise natural capital, such as a reduction in net carbon during construction and the life of the asset, or human capital, such as an increase in the number of apprenticeships or new full-time jobs created.

“The Toolkit enables clients to test different scenarios and decision weightings quickly in real time, so various options can be easily appraised”

Development and deployment

The Construction Innovation Hub has already been testing the Toolkit in its current form with government departments, and feedback from this process will be incorporated into the completed version.

The Toolkit has initially been prepared for public-sector use, and will launch in the UK and the devolved administrations in April. In future, it will be cascaded through the private sector, encouraging firms to embed the procurement principles.

Many RICS members and firms will already have been involved in advising government clients on preparing and submitting business cases to the Treasury. RICS will therefore be developing guidance on the use of the Toolkit to support members and firms in this area.

To ensure that the project is presented in a uniform way, the Toolkit will include a complete library of metrics which clients can select from. In the construction cost classification, there will be reference to RICS standards – such as NRM, due to be published in a revised and updated form in 2021 – and international standards – such as ICMS. RICS members and firms should therefore be aware of the provisions of such standards when using the Toolkit.

We believe that the Value Toolkit is a ground-breaking piece of work that will improve the way public sector procurement is undertaken.

“RICS will be developing guidance on the use of the Toolkit to support members and firms”

sthompson@rics.org

Related competencies include: Managing projects, Procurement and tendering, Programming and planning

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