20. Economic and financial standing of framework suppliers

Construction frameworks can make major strides in stabilising supply and demand and in supporting industry profitability. However, supplier insolvencies that are attributable in part to current procurement practices, particularly lowest price bidding, continue to fuel client concerns that construction is a volatile sector. The Construction Playbook states the need for 'a minimum standard when assessing the risk of a supplier going out of business during the life of a contract' in order to 'safeguard the delivery of public works projects' (p.12). All review participants recognise the importance of this minimum standard.

Many industry review participants question the value of client and supplier resources being repeatedly devoted to pre-qualification through multiple, different selection questionnaires. They also note that the selection information provided by suppliers can quickly become out of date and they suggest that a central source of up-to-date data should be made available to clients and to framework providers. Participants welcome the Construction Playbook statements that the Government supports a 'Standard Selection Questionnaire (SQ)' and that 'some standard information may be obtainable via the Supplier Registration Service' (p.52).

Industry participants suggest that clients and framework providers should use a standardised approach to selection such as the 'BSI PAS91' pre-qualification questionnaire or the 'Common Assessment Standard', so that suppliers do not have to answer new and different questions for each framework selection process. For example, the Common Assessment Standard enables suppliers to achieve certification once a year through an online portal by evidencing their compliance in 12 areas of potential risk: Health and Safety, Identity, Financial, Corporate and Professional Standing, Anti-Bribery and Corruption, Modern Slavery, Environmental, Quality Management, Equality, Corporate Social Responsibility, Information Security and Data Protection, and Building Information Modelling.

Industry review participants comment that client concerns regarding the economic and financial standing of prospective framework suppliers can lead to onerous requirements for minimum insurance levels, bonds and guarantees that are not always proportionate to the size, risk and complexity of the framework and framework projects. They note that this can exclude SMEs from framework opportunities, and they request a tiered system that is more flexible and not overly risk averse.

The Construction Playbook proposes that a 'Contract Tiering Tool should be used to determine the stringency to which bidders are tested, with higher thresholds for more critical contracts. Assessment should be proportionate to the size, risk and complexity of the contract, flexible, not overly risk averse, and clearly outlined in the SQ' (p.54).

Specific actions include:

Framework strategy

■  Consider and establish:

■  an approach to assessing the economic and financial standing of prospective framework suppliers that is proportionate to the size, risk and complexity of the framework programme and the framework projects, and that is flexible and not overly risk averse

■  what stringency is recommended by the Contract Tiering tool, with higher thresholds for more critical projects

■  relevant standard information that can be obtained via the Supplier Registration Service.

Framework procurement

■  Use PAS91, the Common Assessment Standard or another recommended standard selection questionnaire.

■  Reflect the stringency recommended by the Contract Tiering tool, with higher thresholds for more critical projects.