1. Measuring Efficiencies In Construction
John Ioannou – Head of Commercial Delivery, Construction
National Highways & Transport Network, Spring Conference
13th May 2010

2. Public Sector expenditure: the big picture
Total Public Sector expenditure is £641bn[1], of this
Pay makes up £158bn
Grants make up £227bn
Procurement is £221bn
Central Government
Total expenditure £290bn (45% of ps)
Of this, 22% or £63bn is procurement
Wider Public Sector
Total expenditure £350bn (55% of ps)
Of this, 45% or £158bn is procurement
[1] OGC analysis (providing figures gross of income) of data underlying HM Treasury, Public Expenditure Statistical Analyses 2009, Cm 7630

3. The big picture: construction
Industry output of £122bn: 9% of GVA - bulk of assets is infrastructure
Public sector procures c.30% of all construction output (approx. £20bn). Government spend impacts on UK economy
A fragmented industry: it employs 2-3m in c.250,000 firms
A vehicle for service improvement
Sustainability issues are key: the built environment accounts for 45% of UK energy use; up to 50% CO2 emissions
Total procurement is £221bn out of £641bn total public sector spend.

4. OGC’s role Delivering VfM from third party spend
Delivering projects to time, quality and cost, realising benefits
Getting best from government estate: manage staff relocation, provide expertise on regeneration and asset management through E-Pims
Delivering sustainable procurement and sustainability: develop and implement plans to reduce public sector generated carbon emissions, waste, energy consumption and monitors delivery
Supporting the delivery of Government policy goals e.g. SMEs, regeneration, low carbon emissions, diversity……
Improving central Government capability in procurement, project and programme management and estates

5. Collaborative Procurement
Deliver VfM from third party spend through working together to buy common goods and services and embed best practice
By improving understanding of public sector category expenditure
Sharing best practice tools and methodologies across the public sector such as Contracts Database, category management and Supplier Relationship Management (SRM)
Developing an SRM programme across all the key strategic suppliers within collaborative categories
Optimising effective use of buying organisations
Ensuring collaborative solutions work with and help shape broader policy and CSR agendas
Driving public sector category strategies

6. Facilitating engagement & efficiency
Central Government: liaison with key Departments, cascading information through to Non-Departmental Public Bodies
Wider public sector: close working relationships dialogue with the National Improvement & Efficiency Partnership for Construction, RIEPs, local authorities, trade bodies, contracting authorities
Supplier Relationship Management programme:
Created supplier forum
Held supplier seminar with top 30 firms
Run 3 pilots concerning Common Assessment Frameworks with roll out across industry and development of Strategic Alignment Agreements

7. Efficiency, efficiency, efficiency
In 2009 a major efficiency report outlined key drivers to improve delivery and VfM by:
Improving MI to establish areas of spend
Making better use of buying organisations
Increasing proportion of spend through buying organisations and collaborative strategies
Savings of £459m achieved over 2008/9
This year’s target is £770m
Procurement in construction is expected to contribute £1.4bn savings over next 3 years

8. Initiatives: Achieving Excellence in Construction
The partnering and integrated team approach: avoiding fragmentation and adversarialism
Development of long-term relationships: one off lowest cost is OUT
Improved skills development and empowerment: effective Project Sponsorship, collaboration, tools and ‘Infrastructure’
Adoption of performance measurement indicators: if you are not counting you are only practicing; Public Sector Construction Database
Use of tools for value and risk management and whole-life costing: Gateway, AE4, Green Book and Green Book Supplement, Fair Payment in Construction, Demand Management and Market Analysis
NAO confirmed AEC assisted public sector to save c.£800m but expects this initiative to save £2.6bn pa

10. PCSD (Project Performance): Key Input Data
Contract Sum / Outturn Cost
Forecast completion date / Actual completion/readiness for service date
Defects at completion
Supplier details
Fair payment charter
Environmental assessment type (i.e. BREEAM, DREAM, CEEQUAL, LEED)
“Many organisations will already be collecting this data”

13. Performance reports produced from PSCD
ORGANISATION X AEC Specific
Project Performance and resulting
Benefits
Your contribution to the overall savings of £197m is £2.0m, which is calculated using the Org X average project performance figure of 6.7%.
Please consult your spending team or the HMT VfM team if you intend to include this as part of your Departments VfM savings and have any queries about its qualification.

14. PSCD (Forward View): Spend Trends
This data provides a valuable insight into public sector spend trends

15. PSCD (Forward View): DfT spend 2010/11

16. The way forward: working together
Collaboration with you to:
Understand high level construction project performance trends
Aggregate demand and facilitate development of frameworks
Embed best practice and capability
Use key channels to generate and strengthen dialogue between clients and suppliers
We’re all under increasing pressure to do more with less. By working together we can ensure that savings continue to be released for use in front line services.

17. Thank you John Ioannou – Head of Commercial Delivery, Construction
Building better, together
Helping Government deliver best value from its spending
Contact OGC:
Service Desk: E: W:
The Pan Government Collaborative Procurement programme is an initiative led by key organisations and policy groups across the public sector, and enabled by the OGC. The Programme is designed to improve the value for money the Government is able to achieve from its collective spend through a joined up approach to the procurement of common goods and services and forms a core strand of the Government’s Operational Efficiency Programme.