Public Sector Procurement RIBA Position Paper 8 April 2011

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1 Public Sector Procurement RIBA Position Paper 8 April 2011 Background: This position paper on access to public sector procurement and public tendering processes for architects services has been endorsed by the RIBA Policy and Strategy Group and the RIBA Practice Committee. It has been developed in response to an extensive piece of research, undertaken by Walter Menteth RIBA, into the impact of public procurement policy on the architects profession and the overall market for construction design and procurement in the UK, and investigative work undertaken by Alan Wilkinson RIBA and the Suffolk Association of Architects. The aim of this paper is to inform RIBA policy and government lobbying, coordination with the Construction Industry Council (CIC) and the Architects Council of Europe (ACE), the RIBA s response to the EU public procurement green paper, and RIBA Practice Committee activity on relevant standards and codes of practice. Headline statistics: 97% of UK architects practices are businesses which employ less than 50 people 79% of UK architects practices employ 10 or fewer people, i.e. are micro-businesses 77% of UK architects work in businesses employing less than 50 people 40% of UK architects work in micro-businesses (Source: Database of RIBA Chartered Practices 2010) A tender condition for a 1m turnover threshold excludes over 50% of the professions available individual talent and reduces market access to just 15% of architects practices. (Source: RIBA/Colander Business Benchmarking Survey 2010) Position Statement: There are a number of issues which have the effect of restricting bids within the EU procurement system, as interpreted and applied at national level in the UK, and there is a case for urgent reform. It is statistically evident that current public sector procurement is inequitably market targeted. The system establishes a series of barriers to the market, prevents open competition (and therefore price differentiation) and innovation, and often has the effect of stopping small, local, experienced, specialist and niche consultancies from accessing business. In a free and open market the market profile will follow an exponential distribution curve. The application of any threshold beyond which work cannot be obtained is in effect market targeting, and may lead to market distortion. Thresholds commonly distorting the public sector procurement of architects services include minimum turnover and insurance requirements, and the use of frameworks and contract

2 aggregating or bundling. Figs 1 and 2 illustrate the distorting effect of this on the UK architects market. Fig. 1: Median turnover of RIBA Chartered Architects by Size of Practice 2

3 Fig. 2: Distribution by size of UK architectural practices The current public sector procurement system incurs project delays, is overly complex, and attracts significant additional industry costs, which impact negatively on businesses of all sizes. The system is tailored to the specific needs of larger construction programmes, with the difference between private construction contractors and professional service consultancies inadequately differentiated. There is no evidence to suggest that industry costs in relation to achieving best value for money have improved, nor have economies of scale delivered savings through the EU mechanisms for joint procurement, for all but larger contracts. The increasing threat of legal challenge, or the perception of it, has lead to further constraint and necessitated ever more risk averse attitudes by procurement professionals. The implementation of EU procurement rules is neither to the letter, nor in the spirit, of the guiding legislation, EU directive 2004/18 or the EC Small Business Act Current EU procedures fail to address sustainable procurement. Instead they incentivise energy depletion and CO 2 emissions. Emissions and energy costs need to be factored in if national legislation and EU treaty obligations are to be met, energy dependence reduced, and economies restructured. VAT rates incentivise CO 2 emissions, by distorting the construction market in favour of the new build sector, and discriminate against smaller consultancies and private contractors by reducing their market share; a review of this taxation regime which stems from the post-war imperative for re-construction should be considered. 3

4 To effectively address open market access by all consultancy professionals it is suggested that the EU should have set aspirations for the percentage of works going to small and in particular micro businesses. The industry is burdened by bureaucracy, costs and timescales that are inefficient for tendering all but the largest of works, and impose a burden on practices of all size. Simplification, with reductions in time and cost, should be the priority. To address this we suggest the EU thresholds be lowered or, if possible, removed, and a new fast track low cost light tender procedure be adopted for smaller projects. Selfcertification of pre-qualification could be adopted for light tenders, and a collegiate portal formed by the institutes of construction industry professionals, for accessing accreditation information and standardized pre-qualification data for larger tenders. Within current EU procurement there is a perception of significant, systemic mismatch between project requirements, their type, end users, and value; and the appropriate experience, capabilities and added value of consultancy service providers. Recommendations: EU Green Paper on Public Procurement Simplify access to the public procurement market, with proportionate and appropriate light tendering procedures for smaller projects based upon selfcertification of pre-qualification. Position EU procurement thresholds at the lowest possible level. Avoid incentives for market distortion by bundling or aggregation of contracts, or time limit appointments based on frameworks to a maximum of three years, to facilitate fair market access. Encourage greater use of open competitions. Base procurement on Most Advantageous Tender rather than Most Economically Advantageous Tender, and take account of design quality indicators, whole-lifevalue and cost-in-use as well as capital cost. Formally recognise the separate role of professionals in procurement and the value of professional institute accreditation, and encourage single accreditation portals. Synchronise construction professional insurance markets across the EU, or require the adoption of project-based insurance for public sector work, to create market harmony across the EU. Exempt bottom-up, third sector work which has a limited element of public funding. Factor CO 2 emissions into the procurement of goods and services; travel distance to be assessed in light tenders. UK Government Encourage procuring authorities to make tendering procedures simpler, cheaper and more accelerated, allowing wider market access. Promote greater use of single project procurement and open competitions. 4

5 Require pre-qualification selection criteria to be proportionate to the scale and nature of the project. Re-prioritise and clarify VAT exemptions to promote sustainable development. Impose restraint on poor employment practice. PAS 91 Introduce further guidance on the use of PAS 91 in the appointment of professional construction consultants. (The current document is heavily geared towards the requirements of contracting organisations.) PQQ Accreditation Work with CIC to achieve reform of current accreditation systems or to develop a collegiate portal for a pan-professional system. 5