Cost led procurement

[edit] Introduction

The main aims of the Government Construction Strategy were to ‘change the relationship between Clients and Industry’ and achieve a 15-20% reduction in public sector construction costs by 2015. The Government Construction Task Group report 2012 developed three potential new strategies to help achieve these aims:

• Cost Led Procurement (CLP).
• Integrated Project Insurance (IPI).
• Two Stage Open Book.

All three involve early contractor involvement, transparency and integration. Along with a reduction in costs, they are expected to contribute to a reduction in project risk, improved programme accuracy and an enhanced working relationship between client and the supply chain.

[edit] Background

The Cost Led Procurement method is ‘...intended to allow industry to use its experience and knowledge to develop innovative solutions through leveraging design, materials, subcontracting, direct labour and experience to the advantage of the Public Sector Client...focused on achieving target costs whilst maintaining, if not improving value’ (Cabinet Office, 2014).

In Cost Led Procurement, the project details are clearly identified and a ceiling cost calculated. Typically, an integrated supply team (one or more) is identified through a framework agreement and the team work together to complete the project at below the ceiling cost. In subsequent similar projects within a framework, Cost Led Procurement offers the opportunity for further reduction of costs.

The project is offered to suppliers outside the framework if none of the existing teams are able to deliver the project below the ceiling cost.

[edit] Structure

The CLP plan involves five phases:

• Inception.
• Selection of contractor.
• Design and cost development.
• Construction.
• Operation

The flow chart from the 2014 Cabinet Office publication, Cost Led Procurement Guidance outlines the process.

[edit] Trial projects

Two trial projects were run using the CLP method: Upper Mole and Rye Harbour. The Rye Harbour scheme was successful in achieving a 6% saving through reducing the project programme.

This article contains public sector information licensed under the Open Government Licence v2.0 ref Cabinet Office, Cost Led Procurement Guidance 2014.

[edit] Related articles on Designing Buildings Wiki

• Framework agreement.
• Government construction strategy.
• Integrated project insurance.
• Integrated supply team.
• Managing the procurement process.
• Optimised contractor involvement.
• Procurement route.
• Supply chain.
• Supply chain management.
• Sustainable procurement.
• The benefits of e-procurement in construction.
• Two stage open book.
• Value for money.

[edit] External references

• Cost Led Procurement Guidance
• Government Construction Strategy
• Government Construction Task Group Report
• New Models of Construction Procurement