Review of Scottish public sector procurement in construction

4. Governance, accountability and leadership

4.1 Overview

4.1.1 Within the Scottish Government and wider public sector, there are a number of individuals professionally qualified in construction disciplines and others whose remit includes construction, including staff in finance, procurement, legal services and business policy. In addition, substantial capability exists within organisations such as Health Facilities Scotland, the Scottish Futures Trust, Transport Scotland and the Scottish Prison Service, as examples. However, this expertise is not drawn together to provide leadership and guidance to Scottish public sector construction procurement as a whole.

4.1.2 At present, without such leadership and guidance, public bodies concerned with construction procurement have developed their own guidelines which can be inconsistent and at times over-elaborate, although there is also much evidence of good practice.

4.1.3 There is a need for:

• a focal point for policy guidance to enable a more coherent approach which is compliant with procurement law but does not build unnecessary costs for client and contractor;
• policy leadership to ensure that infrastructure is properly planned using a design- led, whole of life cost approach; and
• guidance to ensure that the vast Scottish annual spend on construction is carried out in the most economically effective way and supports the sustainability of the Scottish economy to the extent possible within the boundaries of EU law.

4.1.4 There is also significant potential to make construction more efficient by maximising opportunities for contracting authorities to collaborate, and share best practice - particularly in the local government and social housing sectors.

4.1.5 Following the McClelland report, a number of centres of expertise have been established to provide leadership and co-ordination in the public procurement of goods and services, and the main parties are described in appendix 3. However, the McClelland report touched only briefly on construction, and the structures which have been established are mostly not designed to deal with the particular aspects of this activity.

4.2 Strengthening construction procurement policy leadership

4.2.1 The implementation of our recommendations, and the development of policy relating to standards and best practice will require central co-ordination.

4.2.2 It is therefore our recommendation that there should be a strengthening of the construction procurement policy function within the Scottish Government to execute this role.

4.2.3 Recommendation:

The construction procurement policy function within the Scottish Government should be strengthened.

4.2.4 This policy function should be under the clear control of a senior manager within the Scottish Government, and should be suitably resourced to set the policy for construction procurement in Scotland, to be a central source for advice and to drive the adoption of best practice across the public sector. A combination of the wide range of construction procurement undertaken by the public sector in Scotland and resource constraints may mean this is achieved to some extent by collaboration with, or secondments from, other departments and agencies. There are already a number of staff who deal with aspects of construction within the Scottish Government, and the strengthened policy function should draw on existing resources to the extent possible. However, it will need a suitable blend of procurement, design and construction skills, at an appropriate level of expertise, and this will require some recruitment.

4.2.5 Although we recommend that this capability and capacity should be strengthened within the Scottish Government, and it is clearly appropriate that government retains responsibility for developing policy, we recognise the delivery expertise which has been built up across the public sector, and as such, it may be appropriate for Scottish Ministers to commission work to support policy development from those other bodies with proven expertise. All parties will need to ensure that they work closely and in co-operation with each other to ensure that their activities and functions are complementary and co-ordinated, in a manner consistent with the wider Public Procurement Reform Programme, and within the bounds of policy set by the Scottish Government. There must be no duplication of effort, and there is no room for "turf wars".

4.2.6 The Scottish Government senior manager charged with strengthening its construction procurement policy should be required to ensure that stronger links are forged amongst the various parts of the Scottish Government and the wider public sector with an interest in construction as that policy is developed and implemented. It will be important to ensure that existing public procurement strategy, policy and systems fully accommodate and integrate construction and goods and services procurement across the public sector.

4.2.7 A number of public sector bodies deal with highly specialised aspects of infrastructure procurement and we have seen many examples of good practice. It is not intended that the Scottish Government should supplant or replicate this specialist knowledge. However, a more cohesive approach will require liaison with such specialist teams in order to ensure that the principles of good practice set out in this report are fully adopted across the public sector. One of the roles of the Scottish Government should be to identify and enable the sharing of such approaches. Short‑term secondments from specialist bodies would be an excellent way of ensuring that best practice is garnered and shared.

4.3 Responsibility for implementing recommendations

4.3.1 In order for the measures which we outline in this report to succeed, we believe that it will be important to set out clearly who is responsible for taking forward them forward. In some cases, the recommendation itself makes such a decision obvious. As regards most of the recommendations, however, arguments can be made for a variety of different ways of allocating lead responsibility.

4.3.2 In general terms, we believe that policy should be the preserve of central government, but there is clearly scope for some of our recommendations, which relate more to the delivery of construction projects, to be taken forward by other parties with relevant experience.

4.3.3 We have not sought to draw that distinction in our report. Partly, this is because the distinction between policy and delivery is not always absolute. It is also important, however, that those who are charged with taking our recommendations forward are 'bought-in' to doing so.

4.3.4 Accordingly, one of the first tasks which will need to be undertaken immediately by the strengthened policy resource within the Scottish Government will be to work with all key parties to determine a suitable division of responsibilities.

4.3.5 Recommendation:

As a matter of priority, the strengthened construction procurement policy function within the Scottish Government should, in collaboration with other bodies key to the implementation of our recommendations, determine lead responsibility for delivering each recommendation.

4.4 Chief Construction Adviser

4.4.1 Our recommendation is that the construction procurement policy function within the Scottish Government should be strengthened. However, we also believe that there is a role for an independent champion of reform.

4.4.2 This will be a senior figure who has credibility with the public sector, with the industry and with Ministers. With direct access to Ministers, the task of this individual will be to champion the reform programme and identify and seek to eliminate slippages in the timetable for its implementation. The role will include working with industry on those aspects of the programme which are the responsibility of the industry and acting as a conduit between industry and Ministers.

4.4.3 Recommendation:

A Chief Construction Adviser ( CCA) should be directly appointed by the Scottish Government

4.4.4 This would be an empowered role and the tasks of the CCA would be to:

• Champion the implementation of this report by challenging both the public sector and industry on pace and progress;
• Challenge industry to modernise and innovate its processes, practices and relationships;
• Be a supportive, enabling, but challenging partner of the Scottish Government; and
• Be a conduit for industry to raise strategic or policy concerns or to approach Ministers.

4.4.5 It is not intended or envisaged that the role of the CCA will be to allow the bypassing of commercial procedures for resolving disputes between industry and clients. Such disputes should be handled through the normal channels for dispute resolution.

4.4.6 The role of the CCA is likely to be a fixed-term appointment, capable of being refreshed and reviewed. We envisage that the appointee would be directly accountable to and have direct access to Ministers. While the individual must have strong expertise in construction and procurement, leadership strengths are likely to be equally crucial.

4.4.7 The CCA should be a member of the Public Procurement Reform Board ( PPRB), which is discussed further later in this chapter.

4.5 Relationship to the wider procurement reform programme

4.5.1 We are conscious that there are already a number of working groups involved with the procurement reform agenda and have considered whether it is desirable to add construction to their remit. The principal groups driving the current procurement reform agenda are the PPRB and the Procurement Reform Delivery Group ( PRDG).

4.5.2 Chaired by the Deputy First Minister, the PPRB's purpose is to provide strategic direction and support and monitor progress on the procurement reform agenda. Under its direction, the existing Public Procurement Reform Programme, focused mainly on goods and services, has made significant progress in improving procurement, driving efficiency, increasing transparency and standardisation of processes. As such, we believe the PPRB should be ultimately responsible for the success of the construction procurement reform programme.

4.5.3 The PRDG takes direction from the PPRB and reports to and provides assurance to the Board on the implementation of the reform agenda. It is responsible for ensuring that the reform programme remains on course to deliver benefits, and that obstacles to delivery and benefits realisation are removed or reduced. It collectively owns the existing reform delivery plan, and it leads, drives and facilitates the work to develop collaborative national and sectoral approaches to procurement across the public sector in Scotland. Membership of the Group includes the heads of the national and sectoral procurement centres of expertise.

4.5.4 The agenda of the PRDG is already full and its composition does not include any substantial construction focus. To make rapid progress with the construction procurement reform agenda, we believe there is a need for a mechanism to bring together the main spending authorities and industry. We envisage that this should report to the PPRB within existing governance structures for procurement reform.

4.5.5 Recommendation:

A mechanism should be established under the existing Public Procurement Reform Programme to bring together key stakeholders to drive the procurement reform agenda as it relates to construction.

4.5.6 The purpose will be to provide a strategic forum for discussion of implementation issues and agreement of joint plans of action. The focus should very much be on the strategic, rather than the operational.

4.5.7 Representation should be drawn from leadership levels across both industry and relevant parts of the public sector, including, but not exclusively, the main spending authorities. It may also be appropriate to include some representation from those who have responsibility for driving employment and sustainability policies. Clearly, some commercially sensitive agenda items may need to be discussed with only the public sector representatives present.

4.5.8 Members of such a grouping should be fully empowered to speak and act on behalf of their sector. In some sectors in particular, such as local authorities and industry, achieving this will in itself require some effort and co-ordination.

4.5.9 Our vision is that the CCA will lead this grouping, or that some other independent figure with strong experience in construction or procurement, and credibility with industry and the public sector, should lead it until the CCA is appointed.

4.5.10 One of the CCA's roles will be to challenge and to liaise with industry and we recommend that industry should be represented in this grouping. In chapter 10 we comment directly on the industry role in relation to the reform agenda. The Construction Scotland Industry Leadership Group has recently been formed and it provides an obvious vehicle for leadership engagement with industry. However, further thought may need to be given to the composition of this new group to enable it to carry out such a task.

4.6 Fitting the pieces together

4.6.1 The structure we envisage for implementing our recommendations and providing leadership thus comprises three parts. The first is to establish the role and reporting relationships amongst the Scottish Government and other key parties to the reform programme, maximising synergies with wider public procurement strategy, policy and systems; the second is the appointment of a Chief Construction Adviser; and the third is a mechanism to bring together the key spending authorities and industry. A fourth part could be regarded as the leadership within the construction industry itself.

4.6.2 In summary, our recommendation is that Scottish Government should own policy, advice and guidance; that work should maximise synergies with wider public procurement reform; that the Scottish Government should collaborate and commission work from those internal areas with relevant expertise, such as the Health Directorate's Capitals and Facilities Division, and other bodies, including SFT, to assist on delivery aspects. The role of the CCA is to champion the reform programme and to challenge the government, wider public sector and industry on pace and progress. A mechanism is needed to bring together the disparate parts of the public sector involved with infrastructure procurement and the industry to provide a forum for debating implementation issues and for driving the reform agenda, within the existing governance structures of the procurement reform programme. The linkages of our suggested approach can be illustrated in the following diagram: