PROCUREMENT AND SUPPLY CHAIN
determinant. But now we see examples where it’s not the biggest element of the tender evaluation, and even if it is, it’s not just the lowest price that wins. That kind of discussion is completely different to even three years ago.”
Since December 2012, the organisation has been awarding 5% of tender points based on suppliers’ ability to meet Network Rail’s sustainability criteria, but it is increasingly focusing on issues like diversity, inclusion and legacy too. “Communities put up with a lot while we do what we do,” Kirby said. “If they’ve got Network Rail in town for six months, with road diversions and all sorts of things, working with them has to be right thing to do.”
Network Rail IP South announced the four contractors it has chosen across four enhancements, buildings and civils frameworks for CP5 for Anglia, Kent, Sussex and Wessex on 17 December. It based 25% of the evaluation criteria on collaboration, and 15% specifically on safety issues, it is reported.
McLoughlin said he has been taking a steer from things like the Social Value Act, which does not specifically apply to Network Rail, but has the right kind of aims, he said.
The percentage value given to price itself varies by the type of contract, rather than being a fixed value, but Kirby and McLoughlin said there had been examples where the lowest-cost bidder has not won a tender because of these other factors.
Kirby said: “Occasionally we’ll get a contract coming up for award where we’re going for an option where we’re going to spend a few million or even ten million pounds more than the lowest-cost option. Of course, tendered costs are one thing, but what we care about is safe delivery of projects in the most efficient way, so what we tender and what we end up paying aren’t necessarily the same thing.”
Network Rail IP has not been implementing new models and procedures haphazardly – it has been taking advice and learning lessons from other major clients and procurers,
including the Highways
Agency, Transport for London, BAA, the power supply industry,
utilities
and others. Kirby and McLoughlin have also been speaking to trade and professional associations within
and the Rail Contractors Association (RICA), without the rail
industry, including the Railway Industry Association (RIA),
Industry Civil
Engineering Contractors Association (CECA), and the Chartered Institute of Purchasing and Supply (CIPS).
McLoughlin said:
“They’re
really happy to talk to us, and we’re
happy to listen. We’re not doing this in a random way.”
Early involvement
A major aspect of the new strategy is ensuring suppliers and contractors have a much clearer view, and earlier, of the work pipeline and tenders to come. Major partners
have already been walked through what’s coming to market.
McLoughlin explained: “Suppliers want an informed, intelligent and strong buyer. We’re issuing our intentions and our directions and the way we’re going to procure work for the whole of CP5. Any supplier can now target their business model relative to ours for the next five years.”
But linked to this is Network Rail’s ambition to have fewer but closer relationships with key tier 1 suppliers, and to work more via major frameworks.
Explaining the rationale behind this, Kirby said: “We’re committing for long
it’s brownfield and [often] specialised, like signalling. To get into a relationship that’s longer term where we’re looking to invest and so are they in people and skills – you don’t get that through competitive tendering of individual jobs. You’ve got to give long-term commitment, and by definition you end up with fewer partners than with an open market assessment of each bid.
“It’s about a long-term relationship to give better delivery now and in the future, rather than just getting the lowest cost now. To do that collaboratively, you end up with a smaller group of suppliers.”
But he said he was “very confident” that only the tier 1s with the right capabilities will win out. “You can’t ‘buy the work’ in this model, because cost is a very small part of it, you can only win it by demonstrating you’re going to step up and that the actual people who are going to run the job pass the criteria.
This table shows the variety of methods being used to engage the supply market. (Source: NR IP National Supply Chain Strategy CP5, May 2013)
“Within all the frame- works we’ll allocate work based on performance, and that’s much broader than cost – quality, safety, handback consistency. So if they don’t perform they won’t win as much work.”
periods. Most of the frameworks we’re letting give a committed workload, rather than a zero-value commitment. We’re looking for [suppliers] to invest in training, in people, in innovation to improve delivery.
“Most of what we do is very complicated;
“We’re rewarding good practice. They’re all out to run businesses, they’ve got to deliver to their shareholders, and repeat business is what they want. Within all the frameworks we’ll allocate work based on performance, and that’s much broader than cost – quality, safety, handback consistency. So if they don’t perform they won’t win as much work.”
Dead wood?
Kirby blamed the lack of a long-term view in the industry for much of the inefficiency and waste found in, for example, the McNulty review – and said suppliers who lost major bids were sometimes staying in the industry “in the hope of winning something in a year or two’s time”, which drives increased costs.
“Bringing it forward brings certainty either way Continued overleaf >
rail technology magazine Dec/Jan 14 | 47
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