According to The Construction Playbook published by the Government in December 2020, ‘engaging early with the supply chain and developing clear, appropriate outcome-based specifications are critical factors in achieving timely and cost-effective delivery’ for public sector construction projects. With the main drivers of success in construction projects being cost, time, quality, management, technology, safety, organisation, and environment.
In this article, with support from Arcadis, Key Account Manager Natalie Palframan explores why it is important to consider the benefits of early market engagement with contractors to ensure an effective procurement strategy to deliver successful project outcomes.
What is early market engagement?
Early market engagement takes place before any procurement activities commence and is a soft market test to share information about your project to understand the level of interest and capability of the market as a whole, rather than an individual contractor’s capabilities. Communicating key information about your project early allows contractors to express interest and demonstrate the value they can offer.
Why is early market engagement with contractors important?
The earlier strategic information about the project is communicated with the market, the more opportunity this creates for contractors of all sizes, SMEs, manufacturers, or specialist trades to register their interest, helping to secure enough responses to achieve a robust and competitive appetite across all levels of the supply chain. This can positively shape and inform improved design, delivery, and operational outcomes. With a mutual benefit to both public sector contracting authorities and suppliers, early engagement promotes forthcoming procurement opportunities, enables collaboration and facilitates open discussion about project risks or challenges. Allowing the contractor market the best possible opportunity to prepare itself for supply opportunities will result in the buyer receiving more and better quality offers to select from.
The process also allows for an integrated approach and understanding of the deliverability of the project. It could present alternative solutions or a more innovative methodology that delivers better outcomes. It certainly helps to establish the types of relationships and skill sets needed within the supply chain and the market’s attitude towards risk and commercial modelling, which will better inform the procurement route to market.
How to carry out early market engagement
It is important to observe the key principles of public procurement when conducting any market consultation activities, which are equal treatment, proportionality and transparency, non-discrimination and a process that prohibits any supplier from gaining an unfair advantage.
The best way to communicate with the contractor market in the early stages is to release a Prior Information Notice (PIN). This is effectively an early shout out to the market that a project opportunity is coming up and open consultation ahead of the tender release is taking place.
Early Supply Chain Involvement
To achieve the intended whole life value of the project, public works projects and programmes should seek early supply chain involvement (ESI). The sooner a contractor participates in a project, benefits such as collaboration during the design process, input into buildability discussions and advice, planning of the project stages, and sharing innovation and best practice can take place. This can minimise changes, reduce cost, manage risk, and improve timescales.
An Effective Procurement Strategy
Early market engagement delivers a range of benefits that help to form an effective procurement strategy. Focussing on project outcomes rather than project scope supports innovation, best value and solutions that can deliver on social value, net zero and sustainability objectives. Collaboration from inception lays a solid foundation for a good relationship between buyer and supplier throughout contract management and throughout the future project lifecycle. Early market engagement increases efficiency and reduces project timelines by identifying opportunities and mitigating risk.
Understanding the market, its capabilities and what is needed to best improve project outcomes gives a clearer perspective on the procurement activities required to select the right contractor. Two stage tendering is the procurement route that best supports early engagement. This method provides ‘open book’ transparency of sub-contracted tender lots which gives contractors more flexibility. Bids are submitted based on an initial project design and contractors compete for preferred contractor status. With a pricing schedule and programme of works provided, this encourages a collaborative approach, reducing the time and resources needed to complete the bid and lessening the risk to the contractor. The preferred bidder moves to the second stage where the client will appoint a contractor under a Pre-Construction Services Agreement (PCSA). This is a formal agreement to provide specified services, including further design input, buildability advice, technical advice and detailed cost information from the contractor prior to entering into a formal building contract. At this stage a full design or fixed sum to carry out the works is not within the agreement. This further supports the early communication and collaboration with contractors ahead of commencing project works.
Procure Partnerships understand the importance of early contractor market involvement in construction projects. As a reputable and experienced UK procurement framework specialist, with specific expertise in construction frameworks, we identify opportunities to improve value for money and deliver environmental and social value throughout the public procurement process. We give public sector bodies assurance that our tried and tested procurement methods will result in a suitable, trusted, and reputable contractor appointed to deliver your project.
Phil Tranter, Associate Project Manager, Arcadis: “Regardless of market conditions Arcadis always advocates early discussions with the Contractor Market when it comes to procurement, for which there is no ‘one-size fits-all’ solution. Procurement must cover Route to Market and the proposed Form of Contract and all recommendations have to be project specific. Early engagement (especially in today’s ever-changing market) is always undertaken to gauge Contractors’ opinions on wider procurement issues, in particular: proposed route to market; market conditions and risk allocation; programme (in terms of tendering, design and delivery); buildability and phasing. In our opinion, Contractors willing to engage at an early stage are clearly going to work in a collaborative manner with the Client and the Arcadis team for the good of the project going forward”