A Gold Standard framework alliance contract describes the joint risk management processes through which the framework provider, clients, manager and suppliers exchange information in relation to the risks they face and decide what actions to take. Joint risk management is crucial to effective collaboration, and Gold Standard framework machinery for active risk management includes:
■ A contractual system for the efficient sharing of risk information and agreement of risk management actions, enabling 'early risk work focused on achieving project strategic objectives and alignment' (p.49)
■ The use of ESI for 'exploring opportunities to develop solutions that help mitigate risk through joint working before construction commences' (p.48)
■ A contractual structure that connects the framework provider, clients, manager and suppliers through systems for 'sharing of appropriate risk registers and transparent communication on risk allocation with prospective suppliers and the supply chain' (p.49)
■ A multi-party framework level 'joint register with contracted suppliers which is aligned to project and wider outcomes' (p.49), and which is managed and updated with agreed risk management actions and timescales.
Construction projects and programmes involve many risks that cannot be fully assessed and dealt with in advance. These can range from unpredictable project site conditions to supplier insolvency, and the Covid-19 pandemic has shown how clients and suppliers can respond rapidly to unforeseeable events using collaborative framework relationships.
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NHS Procure reports that 'During the Covid-19 pandemic NHS Procure 22 delivered several of the Nightingale Hospitals using a collaborative approach across its Principal Supply Chain Partners with a central Project Management Office delivering multi-site solutions to severely accelerated timescales'. |
The Playbook emphasises the need to 'apply a proactive risk management approach with suppliers incorporating early warning and joint decision- making '(p.50). Gold Standard framework machinery for proactive risk management includes:
■ Interconnected contractual early warning systems at framework level and project level
■ A contractual Core Group or the equivalent as described in Section 23, comprising individuals representing the framework provider, clients, manager and suppliers who are required to manage framework risks collectively, who receive early warnings and who seek to agree risk mitigation actions.
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NHS Shared Business Services report that: 'At an overarching framework level, we chose to utilise the FAC-1 form of contract due to the prominence it gives to having a framework level Risk Register and also its core focus on collaboration' 'The collaborative nature of the FAC-1 helps us as it contains mechanisms within it that lean heavily towards a decision- making process that is embarked upon by all parties working together towards a common unified goal'. |
A framework early warning system requires notification of risk issues and exploration of the reasons behind them. If early warning of an emerging problem is issued as soon as the problem arises, this enables timely decisions and actions to be taken and helps disputes to be avoided. Early warning combined with a framework Core Group or equivalent decision-making forum:
■ Requires the framework provider, clients, manager and suppliers to review risk issues quickly and openly
■ Encourages them to disclose important information and to agree mitigating actions
■ Supports agreed resolution of potential conflicts and implements the Playbook commitment to avoidance of disputes (the 'conflict avoidance pledge' at p.44).
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The SCMG Trial Project framework alliance reports that it used its core group to resolve 'potential disputes with the benefit of full cost and time information plus the motive to retain long-term relationships' (Annex 3 case study 8). |
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Recommendation 18: Allocate risks based on framework market engagement and use joint framework systems for early risk mitigation and efficient responses to risk events To address industry concerns regarding costly and unsustainable risk transfer, this review recommends that framework providers, clients and managers implement risk allocation informed by market engagement, that they create and update a shared contractual risk register with suppliers to jointly manage risks at framework level and help eliminate, reduce and mitigate potential risks on framework projects, and that they respond efficiently to framework risk events through a framework early warning system and joint decision-making group. |
Specific actions include:
Framework strategy
■ Consider and scrutinise proposals for risk management and risk allocation to ensure they have been informed by genuine and meaningful market engagement.
Framework procurement
■ Evaluate supplier proposals to deliver better value for money and to focus on delivering agreed contractual outcomes in response to client commitments to:
■ collaborative risk management throughout the commercial lifecycle that supports successful delivery and sustainable outcomes from the framework programme and each framework project
■ a proactive approach to identifying and managing risks and opportunities, using the framework contract and project contracts effectively to drive improvement, innovation and value throughout the commercial lifecycle.
Framework contract
■ State:
■ a shared system for the framework provider, clients, manager and suppliers, at framework level, to develop solutions that help eliminate, reduce and mitigate risks
■ use of ESI, through joint working before construction commences on each framework project, to develop solutions that help eliminate, reduce and mitigate risks and to ensure that risk allocation is appropriate
■ a proactive risk management approach for the framework provider, clients, manager and suppliers, at framework level and at project level, incorporating early warning and joint decision-making
■ alignment of risk management systems to the strategic outcomes set out in the Project Outcome Profile for the framework programme and each framework project.