Framework Scotland

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					                                                                            Board Meeting
                                                                            02 12 08
Frameworks Scotland                                                         Open Session
                                                                            Item 7.1
Introduction

NHS Grampian has a significant capital programme over the next ten years. In the
past capital projects have been procured mainly through the traditional method which
involves the appointment of a design team, the design of the facilities, detailed
specification and the issue of tenders for construction to major construction
companies. A notable exception to this is the procurement of the new Dental School
which has been undertaken through a two stage procurement process.

Over the past year Health Facilities Scotland has put in place a national framework to
support NHS Boards in the development of major capital projects. This process –
Frameworks Scotland – will apply a “partnering” methodology (similar to the process
used for the Dental School), and the creation of principal supply chain partners
(PSCPs) and professional services contracts (PSCs) to provide a complete service.
Health Facilities Scotland are expected to complete the Frameworks Scotland
appointment process during November 2008 and it is for Health Boards to make use
of the framework as required to deliver major projects.

Aim

This paper summarises the Frameworks Scotland process and proposes its
application to major projects included in NHS Grampian’s capital programme.

Discussion

1           Annex 1 to this paper summarises the Framework Scotland in question and
            answer format. Annex 2 summarises the process applied to the selection of
            PCSPs and PSCs.

2           Health Facilities Scotland has completed a procurement process that has
            resulted in the appointment of five principal supply chain partners (PSCPs) and
            a range of professional services contracts (PSCs). The PSCPs are consortia
            which provide a full range of services to support the planning, specification and
            implementation of major capital projects including construction, health planning
            and project management. The PSC contracts have been awarded to
            professional consultants providing health planning, project management, cost
            management and other services that can be used by NHS Boards to deal with
            a range of issues, and to supplement internal resources in the development of
            major capital projects.

3           The Scottish Government has advised that, whilst the adoption of Frameworks
            Scotland by NHS Board is not mandatory, specific reasons for not adopting the
            approach would have to be given should the Framework not be selected by a
            Board.

4           NHS Grampian has a significant capital programme with a range of high value
            projects over the next ten years. There are major challenges associated with
            the delivery of this programme within agreed timescales and significant
            resource will have to be applied to ensure success regardless of the approach
            adopted.


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5           Similar approaches – Procure 21 and Delivering for Health – have been in
            place in England and Wales respectively for some years. Independent advice
            received indicates that this has been successful and of benefit to NHS
            organisations.

6           An external view on the advantages and disadvantages of using the framework
            has been sought and this is summarised in annex 3. The main benefit
            anticipated is the application of a broad based and experienced team which can
            support option appraisals, business case preparation, detailed design,
            construction and post project evaluation. There is also an expectation that the
            PSCPs appointed to take forward early projects will be motivated to be
            successful as this will determine whether a PSCP obtains further work from
            NHS Boards.

7           The procurement process adopted by Health Facilities Scotland required
            potential partners to submit rates for profit and overheads. The costing of a
            specific project would be undertaken on an open book basis but it will be
            necessary for a NHS Board to put in place a team to ensure that the costing is
            monitored and that the project ultimately provides good value for money.


8           The current NHS Grampian capital plan has been reviewed to assess the
            suitability of projects for the Framework based on the potential capital values.
            The following projects would be appropriate in terms of value:

             Emergency Care Centre

             Cancer Centre

             Ambulatory Care Project

             Aberdeen Health Village – To full Business Caser completion only

             Dr Gray’s Hospital

             Forres Hospital/Health Centre

             Capital funded primary care projects – Whinhill/Foresterhill Medical Centres

9           The above projects are at different stages of development but it is possible to
            use the Framework at any stage in the development of a project from
            completion of Initial Agreement

10          The most immediate project which would benefit from the application of the
            framework is the Emergency Care Centre. This project is at an advanced stage
            and the use of the Framework would avoid the need to undertake a competitive
            tendering exercise for the construction phase.

Recommendation

11    The Frameworks Scotland as a procurement process was approved at the
meeting of the Asset         Investment Group on the 23 November.

12          The NHS Grampian Health Board is requested :
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            (a) to note the benefits of providing large/complex projects through the
            Frameworks Scotland procurement process to meet our challenging capital
            programme.


             (b) to approve the use of Frameworks Scotland to assist in the timely delivery
            of appropriate projects within the Capital Plan.




G Smith
Head of Service Development
November 2008




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Annex 1

Introduction

The procurement process for the Frameworks Scotland initiative was formally
launched in January 2008 following Scottish Government approval of the Project
Initiation Document and associated budget proposal on the 21st December 2007.

NHSScotland proposes to appoint a number of Principal Supply Chain Partners
(PSCPs) to undertake Capital Projects on behalf of NHS Boards and Special Health
Boards throughout Scotland. The framework will be a strategic and flexible partnering
approach to procurement of publicly funded construction work and will complement
other procurement initiatives in development such as HUB. The PSCP must therefore
clearly demonstrate their willingness and capability to undertake capital projects in all
areas of Scotland.

The PSCP may be engaged to undertake a variety of duties including service
strategies, estate strategies, business planning, developing the brief, design
development and construction works. In addition to the construction phase of a
project, the PSCP can be appointed at various stages in the capital project planning
process from the Initial Agreement stage, Outline Business Case stage or up to the
Full Business Case stage. Ideally the PSCP is appointed early in the process,
typically between IA and OBC approval.

A framework for professional services will also sit alongside the main PSCP
framework to allow the NHS Boards to appoint technical advisors. This will help fulfil
the roles of Project Manager, Supervisor and Cost Advisors (all required under the
proposed NEC form of Contract), CDM Co-ordinators and Healthcare Planners.

At this time, the framework process is at tender stage. Tenders will be returned on 31st
July 2008 and following this there will be a detailed evaluation period. PSCPs and
PSCs will be appointed to the frameworks in late autumn 2008.

1. Why change the traditional approach to construction procurement?

There is overwhelming evidence that the traditional approach to construction
procurement fails to satisfy clients and does not generate the efficiency improvements
delivered in most other industries. This has a negative effect on the international
competitiveness of the UK and uses resources that could be better utilised elsewhere
in the economy. In NHSScotland this means using available capital and revenue
resources more effectively, delivering better outcomes and making best use of client
side skills and capacity.

2. The new approach talks about partnering. What does this mean?

Partnering is about better working relationships with contractors and suppliers to
deliver better outcomes for all concerned. For the NHS in Scotland it will mean
identifying and working with a selected group of supply chains for a period. It requires
genuine commitment from all levels of all the organisations involved, including the
client, and a clear understanding by all parties of what is expected. This approach has
already proved successful for the NHS in England (ProCure 21), Wales (Designed for
Life) and in Northern Ireland (Performance Related Partnering - PRP).



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3. What are the benefits of establishing long-term frameworks of integrated
supply chain partners?

The benefits are that the supply chains better understand the needs of the clients, and
can offer continuous quality improvements in exchange for stronger working
relationships. Partnering reduces the adversarial attitudes that make projects more
difficult to deliver and get right. Partnering arrangements reduce waste (process and
product), promote quality and with lessons learnt on one project being applied to
another.

A process of continuous improvement will be established based on a set of key
performance indicators that are important to the needs of the NHS in Scotland.

4. What are the key performance indicators commonly chosen?

These can differ between sectors but reduction in capital/life cycle costs, reduction in
defects, improved predictability of costs and programme, reduction in project duration,
improvement in client satisfaction and reductions in the number of site accidents tend
to be important for all clients. For the NHS in Scotland the issue of sustainability will
also be a prominent factor.

5. Are there any short-term benefits?

Once the Principal Supply Chain Partners are selected, the need to follow costly and
time consuming EU procurement processes for each separate scheme is removed.
For a typical hospital project, 3-6 months could be saved on the programme together
with many of the associated costs.

6. What other benefits are likely to accrue to the Service through the
introduction of integrated supply chain partners?

The early involvement of an integrated supply chain supporting the local NHS Board
will ensure that the design development work is far more robust than tends to be the
case with the current system. This should improve the quality of decision-making and
control risks in a better managed environment.

7. What are integrated supply chains?

In the healthcare field an integrated team brings together the architect, mechanical
and electrical engineers, structural engineer, quantity surveyor, main contractor, major
sub contractors and health planners as Principal Supply Chain Members and is lead
by a Principal Supply Chain Partner as the “contracting” partner to the framework
agreement. The partnership is also likely to establish relationships with other specialist
subcontractors and suppliers.

8. On what basis are Principal Supply Chain Partners appointed to the
framework?

Principal Supply Chain Partners are appointed on the basis of economically most
advantageous not lowest price. Principal Supply Chain Partners will be required to
demonstrate that they have the capacity, skills and experience to work in a
collaborative way.

9. How long do the frameworks last?

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The frameworks will last 4 years with an option to extend up to another 2 years.

10. What happens if the Principal Supply Chain Partner fails to perform?

Failure to demonstrate continuous improvement against key performance indicators
will lead to the partner being removed from the framework.

11. How does the local NHS Board select the Principal Supply Chain Partner?

The appointment is based on key criteria established by the NHS Board and a
proposed process is currently being finalised. Guidance will be provided by Health
Facilities Scotland to support Boards with this responsibility.

12. How can we demonstrate value for money?

Selection to the framework and the individual projects is through competition. This
includes cost and also a broad range of other factors such as expertise, resource
capability, track record, ability to work flexibly and innovate and the quality of the
Principal Supply Chain Partner’s integrated processes and control systems. Partners
will also need to demonstrate their commitment to the partnering ethos. It is through
the analysis and evaluation of these factors and the ongoing control and monitoring of
the Principal Supply Chain Partners that
value for money can be demonstrated. The UK and Scottish Government support and
promote this approach, as do HM Treasury and the Office of Government Commerce
(OGC).

13. I’ve heard about Procure21 used in the NHS in England and Designed for
Life in Wales. Is this the same thing?

The Procure21 and Designed for Life models have been developed for the NHS in
England and Wales respectively and respond to particular requirements in respect of
geography, project pipeline and market capability. The construction turnover and
market conditions in England and Wales are different to Scotland and consequently
there are particular differences that will be inherent in the final model, associated
processes and number of supply chain partners.

14. Can we use the experience gained through the introduction of Procure21
and Designed for Life to help us develop our model?

Yes. The NHS in England has invested huge sums of money in developing tools to
support Procure21 and these have been further developed in Wales for Designed for
Life. Many of these tools are equally applicable to the model to be introduced in
Scotland. The Department of Health and Welsh Health Estates have provided
invaluable support and advice during the early stages of the work undertaken in
Scotland and are prepared to continue to offer their support as the project develops.
Health Facilities Scotland sits on a national group that meets regularly to ensure that
wider lessons learned are shared for the benefit of all.

15. Have other procurement models been reviewed?

Yes. Health Estates in Northern Ireland has developed a model known as
Performance Related Partnering. The early results from the PRP model appear to be
very good and the model has been reviewed. The model does, however, require

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significant central support at a level beyond that which can be realistically delivered in
Scotland without a major growth in resources at Health Facilities Scotland.. The
Frameworks Scotland Development Team did not believe that such a development
was a realistic option. We will however continue to liaise with our colleagues in NI
Health Estates and apply any lessons learnt.

Health Facilities Scotland has also liaised with other public sector bodies involved in
partnering projects and has also taken advice from advisors who have been involved
in both public and private sector framework and partnering contract initiatives.

16. How many Principal Supply Chain Partners are required for the NHS in
Scotland?

It is anticipated that three to five PSCPs will be required to service the whole of
Scotland. This is currently undergoing review in conjunction with the tender and tender
evaluation process and it is likely that a final decision will be made within one month
prior to award of contracts.

17. How will the Principal Supply Chain Partners be managed?

The framework under which the Principal Supply Chain Partners will operate will be
managed by Health Facilities Scotland through the framework agreements.

18. What organisations will be responsible for managing individual projects?

NHS Boards will manage individual projects, PSCPs and PSCs as they do currently.
The PSC frameworks will allow Boards to appoint suitably experienced and qualified
consultants to assist them with their projects.

19. What organisations will undertake the roles of Investment Decision Maker,
Project Owner and Project Director?

These responsibilities will not change from the current position. NHS Boards will fulfill
these roles.

20. How will the new arrangements affect the Scottish Capital Investment
Manual?

The Scottish Government Health Directorate is currently working on revising its
Business Case processes and the SCIM will also be revised accordingly. The new
guidance will also need to be consistent with the move away from traditional
procurement to that based on the management of principal supply chain partnerships
where applicable. As a minimum the SCIM will reflect the early appointment of a
PSCP prior to OBC approval.

21. Will Business Cases still be necessary?

Yes. The new delivery model will improve certain aspects of the Business Case
process but is not intended to replace it. Business Cases should be centred on all
aspects of service planning and delivery issues and not simply have an estates focus.
The new procurement model helps with the development and implementation of the
estate solutions to these service planning issues. The broader issues with the
Business Case process will need to continue to be driven forward by the NHS working
in partnership with a range of stakeholders and across various procurement routes.

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22. What type of scheme will be delivered through the new model?

It is anticipated that a broad range of projects will be delivered through the
frameworks, but with a particular focus on acute sector refurbishment projects.

23. How will the system cope with changes to the brief by the Client and the
typical upward cost pressures?

The greater emphasis on more detailed work earlier in the process is necessary to
establish a target cost and this requirement will make any Client changes after this
point more transparent. The nature of the contractual arrangement and the partnering
relationship will however incentivise the Client and Principal Supply Chain Partner to
work together to minimise the effect of such changes which stands in stark contrast to
the traditional approach.

24. Will Architecture and Design Scotland be involved in this process?

Yes. The proposal will complement the current partnership between the Scottish
Government Health Directorates and Architecture and Design Scotland in promoting
Design Champions at NHS Board level to enhance design quality and standards
throughout the procurement process.

25. What affect will the EU regulations have on these proposals?

The model can be accommodated within the EU regulatory framework.

26. Will the framework be mandatory for all NHS Boards?

Maintaining sufficient work flow for each Principal Supply Chain Partner is very
important and this could be difficult without the full support of all Boards. Whilst the
Scottish Government has not set a mandatory threshold for use of Frameworks
Scotland the presumption is that for projects within its scope, Frameworks Scotland
will be the preferred procurement route. Where an NHSScotland body proposes to use
another procurement route for public capital works within the scope of the Framework,
a Business Case must substantiate the basis for doing so. Such cases should be
referred to the SGHD Private Finance and Capital Unit prior to the award of contract
regardless of whether the value of the project is within the NHSSCotland body’s
delegated limit.. In addition every PSCP must make themselves available to service
projects for all NHS Boards in Scotland.

27. Are management overheads greater with the proposed model?

No. The model does however shift resources to the front end of the project where the
greatest benefit can be achieved at the lowest cost.

A detailed cost model makes all direct resource costs overhead and profit transparent.

28. Will Scottish Government need to change to support the new model?

Principal supply chain partnering arrangements need turnover to provide the incentive
for continuous development and ongoing investment in the relationship. It is important
that NHS Boards and the Scottish Government streamlines its approval processes to
ensure, as far as is possible, that the NHS capital programme flows steadily through

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the system. The new delivery model will help this process but only if there is some
clarity and general agreement on the service planning drivers underpinning the
business cases.

29. What about HUB and Scottish Futures Trust initiatives?

Frameworks Scotland is aimed at improving the performance of public capital funded
projects and with a focus on acute sector projects. The Scottish Government is
currently working on new procurement models to replace previous private finance
delivery solutions with the default PPP model now being the Non Profit Distributing
Model. PSCP’s can be appointed to develop projects up to the point of procuring a
PPP solution on a management consultancy basis. The hub initiative is being taken
forward as a strategic partnership across the public sector to develop and procure
community based premises. The hub initiative will be rolled out over the next couple of
years. Until NHS Boards are participating in hub, Frameworks Scotland can be used
for community based premises development. HUB and the Scottish Futures Trust will
be complimentary to one another and to Frameworks Scotland over the short, medium
and long term.

30. The PSCPs are likely to be contractors. Isn’t this just glorified design and
build?

No. It is a far superior process because it involves all the relevant suppliers as well as
the designers working as an integrated team to develop design solutions, and the
costs associated with that design, in conjunction with the client and service providers.

31. Who is involved in setting up the frameworks?

Health Facilities Scotland

Health Facilities Scotland will act as the Framework Manager and is responsible for
the day-to-day organizational support for the PQQ and tender stages in addition to
setting up the management framework for the delivery phase of the initiative. Peter
Haggarty is the Project Director and also sits on the Procurement Task Group and
Project Board. Peter is supported by an in-house team which also includes
professional advisors.

The Project Board

The Project Board is chaired by Mike Baxter, Head of the Scottish Government Health
Directorates Private Finance and Capital Unit. The Board includes key representatives
from NHS Boards across Scotland and Health Facilities Scotland.

The Procurement Task Group

The Procurement Task Group is chaired by David Browning, General Manager of
Property and Support Services at NHS Lanarkshire. The Group includes key
representatives from NHS Boards across Scotland, Health Facilities Scotland and
professional advisors.




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Annex 2

Introduction

The procurement process for the Frameworks Scotland initiative was formally
launched in January 2008 following Scottish Government approval of the Project
Initiation Document and associated budget proposal on the 21st December 2007.

NHSScotland proposes to appoint a number of Principal Supply Chain Partners
(PSCPs) to undertake Capital Projects on behalf of NHS Boards and Special Health
Boards throughout Scotland. The framework will be a strategic and flexible partnering
approach to procurement of publicly funded construction work and will complement
other procurement initiatives in development such as HUB. The PSCP must therefore
clearly demonstrate their willingness and capability to undertake capital projects in all
areas of Scotland.

The PSCP may be engaged to undertake a variety of duties including service
strategies, estate strategies, business planning, developing the brief, design
development and construction works. In addition to the construction phase of a
project, the PSCP can be appointed at various stages in the capital project planning
process from the Initial Agreement stage, Outline Business Case stage or up to the
Full Business Case stage. Ideally the PSCP is appointed early in the process,
typically between IA and OBC approval.

A framework for professional services will also sit alongside the main PSCP
framework to allow the NHS Boards to appoint technical advisors. This will help fulfil
the roles of Project Manager, Supervisor and Cost Advisors (all required under the
proposed NEC form of Contract), CDM Co-ordinators and Healthcare Planners.

Health Facilities Scotland (HFS) is the framework manager and has been responsible
for the development of the frameworks to date through the pre-tender stages, tender
and will also support the implementation of the initiative. HFS will provide the following
support:

           Project advice from Capital Projects Advisors
           Overall management of the PSCP framework
           Management of the PSC framework for Project Managers, Supervisors, Cost
            Advisors, CDM Co-ordinators, and Healthcare Planners
           Dedicated central team to administer the programme
           Performance Management of the PSCPs
           MOTs and Audits for PSCPs and PSCs
           Impartial Advice
           Guidance tools
           VAT recovery advice

The relevant OJEU notices were posted in March 2008. Tender documentation was
issued for both PSCPs and PSCs in early June. All tenders were returned on 31July
2008 with evaluations due to be complete by late September with a recommendation
to the Project Board on 6th October.

The award of contracts is due to be announced at the HFS “Facilities at the heart of
Healthcare” conference on 4 and 5 November 2008.

1. Evaluation Process
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Following the PQQ evaluation process in May and June, Tenders were issued on the
20th June and following the tender returns at the end of July there has been an
intensive evaluation period which has included the range of activities summarised
below:

PSCP:
Site visits -                         16 separate visits - 14/08/08 - 25/08/08
HQ visits -                            8 separate visits - 07/08/08 - 21/08/08
Financial evaluations -               Completed by 12/09/08
Legals (ongoing review of comments) - First review completed by 29/08/08 – Final
                                      comments being evaluated
Task Day -                            All 8no. PSCPs - 12/08/08 - 13/08/08
Interviews -                          09/09/08 - 10/09/08
Reference checks -                    Complete 19/09/08

PSC:
Interviews - 43 no. total                                         25/08/08 - 04/09/08
CDM Co-ordinator -         11 no.
Project Manager -           9 no.
Supervisor -                4 no.
Cost Advisor -            11 no.
Healthcare Planner -        8 no.
Financial evaluations (ongoing) -                                 Completed by 10/09/08
Legals -                                                          Completed by 05/09/08 - Final comments
                                                                  being evaluated
Reference checks -                                                Complete 17/09/08

Approximate resource committed for the above activities during this period: 40 people
from HFS, NHS Boards and advisors

2. Training

Training has already commenced and a range of training events tailored for the roll out
of Frameworks Scotland has been arranged. Details of the initial training events are
included in this pack for reference.

Standard training courses will include general awareness, Project Director training,
and support for the Project Manager, Cost Advisor and Supervisor roles which are
specific requirements of the template contract – NEC 3 Option C.

Training for NHS Boards is an important and integral part of this new form of project
procurement and as such more specific training events and presentations may have to
be organised to suit specific board and project requirements.

Training presentations will also be made available for reference on the Health facilities
Scotland web site.

3. Communication

A formal communication plan has been developed for the first phase of the framework
“roll out”. Copies of this are included in this pack for reference.



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The Health Facilities Scotland web site is being developed to include an area for
Frameworks Scotland. Regular updates on the initiative will be communicated through
the site and controlled access to guidance, templates and other reference material will
be made available to relevant stakeholders.

4. Guidance

The Frameworks Scotland guide is currently in development and will be generally
available in the near future.

The Guide is intended for all those involved in the procurement of Frameworks
Scotland schemes, namely;
    NHS Clients
    Professional Advisors – including PSCs
    Principal Supply Chain Partners (PSCPs)
    Primary Supply Chain Members (PSCMs)

NHS Clients new to Frameworks Scotland will find the guide of particular use in
gaining
an idea of;
    What Frameworks Scotland is and its advantages
    What the differences are to traditional tender procurement
    Key Stages
    What is expected of them

The guide sets out clearly for all
    Frameworks Scotland Principles
    Frameworks Scotland process in detail
    Activities required at each stage and who’s responsible for them
    Details of tools and techniques which can be used




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Annex 3

Advantages and disadvantages of adopting a framework model (similar to WHE,
P21 and Frameworks Scotland) – view of Stuart Kings, Docte Consulting:

Advantages:                                                       Disadvantages:
Free VAT recovery process                                         Need to have a good decision making
                                                                  process in place from the outset
Greater certainty of cost                                         Requires timely decision making
Greater certainty of time                                         Requires appropriate resource prior
                                                                  to agreement of the Target Price
Improved H&S statistics (KPI’s on                                 Requires focused risk management
P21 back this up)
Buildability from the supply chain         Open book requires audit
Added value in the design process:
sustainability, clinical objectives better
addressed
Offers fast track alternatives to meet
time constraints
Reduced cost & time of the selection
process
Joint programming with the PSCP &
supply chain
Open book/ VFM
50% gain share during construction
Pre-agreed competitively tendered
rates/ fee %’s
WLC issues addressed
Managed at macro level under the
framework
2 year defects liability period
Joint risk management
Collaborative working
Shared best practice


In summary, the only disadvantages (if they can be called that) are the need to have
good project management procedures in place.

The benefits of this proven business model far outstrip the disadvantages.




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