National Highways: poorly performing contractors barred from bidding for work

National Highways is “extremely likely” to stringently assess the performance of suppliers on its new £30bn major framework, the roads body’s head of procurement has said.

In an interview with Construction News about the forthcoming Integrated Delivery Framework, Malcolm Dare (pictured) said the client had already started excluding poorly performing contractors on its existing framework from bidding for some work.

“In the last 12 to 18 months, there have been cases where we’ve told suppliers ‘you’re not eligible to bid for this’,” he said.

“Based on performance, either there’s a clear supplier who’s top dog and they get awarded the work, or we run a mini-competition with two or three suppliers and they bid for the work. Where we’ve run mini-competitions, we’ve excluded others who have not performed to the required standard, and that will continue.”

Such exclusions have already led to improved performances from some suppliers, he added.

Dare was speaking about the body’s current five-year, £8.7bn Regional Delivery Partnership (RDP) framework for road works. It is set to be replaced by a new 10-year Integrated Delivery Framework (IDF), estimated to be worth £20bn-£30bn, to deliver much of its Road Investment Strategy work.

Consultation has begun on the shape of the new framework, although CN can reveal that National Highways is looking at extending RDP beyond its expiry date of the end of 2024 in order to bridge the gap to the start of the IDF, which may not operate until 2026.

Dare, the government-owned road client’s executive director of commercial and procurement, said the strict performance metrics were also set to feature in the new framework.

“I can’t say it will definitely be in IDF because we’ve got to go through consultation and due process, but it’s extremely likely that it will be based around ‘those that perform the best will get the work and those that don’t perform to the required standard will get no work’,” he explained.

This approach also means that there might be fewer winners on the next framework, proportionally relative to the number of projects it covers.

“My personal view is that […] we should have fewer suppliers. I think we’ll have fewer suppliers on IDF than RDP, and we will select based on capability and proven performance,” Dare said. He added that in industries in which he has previously worked, such as aerospace, defence and consumer goods, the trend has been towards a smaller number of suppliers winning more work.

And for companies looking to win places on the new framework, working on their productivity is among the best things they could do, he advised.

Dare explained that the client aims to get contractors and other supply chain partners to improve their productivity, as that is a key requirement throughout the industry, with projects such as the Get It Right Initiative looking to reduce the amount of resource wasted on rework to rectify errors.

“If people understand what we’re talking about and make those improvements now, they’ll be in a good place when it comes to tendering because they’ll understand the type of performance that is very likely we’ll build into our requirements,” he said.

“With some suppliers, I’m [already] seeing some clear improvements coming through; with others, less so. But everyone, including us, can make significant improvements.

“The bottom line is that, as a sector, we have to get better at delivering on time and on budget, and IDF is just the next evolution to drive that on-time, on-budget performance where we can deliver more value for money for the taxpayer.”

A contract notice for IDF is planned to be issued in February next year. Initial market-engagement workshops are already underway and running weekly until 29 March in Birmingham, and further engagement is pencilled in for the summer. More information can be obtained via the National Highways eSourcing Portal.

While consultation for the previous RDP framework was taking place in early 2018, the industry was rocked by the collapse of Carillion, which went under with £7bn in liabilities. During that period, Jim O’Sullivan, who was then head of Highways England (before it was renamed National Highways), told CN that the body had re-evaluated how it measured its suppliers’ financial viability as a result.

This assessment work continues under Dare, who joined the client in January 2019. He said he regularly checks the financial health of 30-40 key suppliers – not just contractors – on a rolling annual basis.

In January, the client made project bank accounts – which hold money in trust in case a lead contractor goes out of business during delivery of a scheme, and protects smaller firms’ cash – the default option for its business.

It had been an optional feature since 2012, but now all companies are included in the process unless they specifically opt out.

“You go back as far as Carillion, which happened before I joined, and the fact that we had project bank accounts was vital to the financial stability of a lot of the tier-two supply base that Carillion was using,” he said. “I think project bank accounts are absolutely fantastic; they are now business as usual and will be built into IDF.”