12 When the Contributions Agency began work on the project, there was no precedent for seeking to use the Private Finance approach to provide office space. This absence of direct precedents was a factor in planning and managing the procurement.
13 The Contributions Agency set up an appropriate team to manage the procurement and sought to use what wider Private Finance precedents they had to conduct the procurement effectively. By including the whole Newcastle estate in the project, they responded to earlier advice that a Private Finance solution was not viable for the Longbenton site alone. They issued an output or performance specification that gave bidders an opportunity to offer innovative solutions to the Department's requirements. They achieved some significant advances in Private Finance Initiative practice including better approaches to dispute resolution, and a clause that allows the Department to occupy space free of charge when temperature limits are breached.
14 The procurement took three years from the Contributions Agency inviting interest to signature of the deal, compared to an initial timetable of nine months which they acknowledge, with the benefit of hindsight, was too short. The effect of this was to involve bidders and the Agency in much higher procurement costs than they had expected and to delay the start of the redevelopment. The preferred bidders, and others, were concerned about the costs they had to bear, although six of the eight bidders stated that they would still be interested in bidding for future Private Finance projects.
15 The length of the procurement left little time between the award of the contract and the expiry of the leases on some existing buildings. The Agency and NEP worked together to minimise the operational consequences of the delayed start and NEP decided to begin detailed design work before the contract was awarded, with the confidence of having agreed commercial terms. At the time of writing, construction of the new buildings is progressing well and the National Insurance Contributions Office do not expect to have to renew any of their current leases for this reason.
16 In a ground-breaking procurement such as this one, it is inevitable that issues will arise for the first time and the tackling and resolution of these issues will extend into the procurement period. The main issues to arise during procurement were:
a) important requirements developed after the start of the formal procurement process;
b) difficulties of inter-agency co-operation within the Department, principally obtaining information on the conditions of existing buildings on the estate;
c) moving to negotiate with a preferred supplier while there remained important areas for negotiation. However, the National Insurance Contributions Office believe that the preferred supplier was appointed at an appropriate time and after a rigorous evaluation process;
d) the Contributions Agency continuing negotiations until satisfied with both the deal and the contract details; and
e) following commercial agreement, NEP took five monthstoconclude its external funding arrangements.