Conclusions and Recommendations
1. The project incurred extra costs of some
£10 million, plus a delay of five years or more.
The Department too readily assumed that the winning bidder would
be able to meet the exceptionally demanding specification for
this state-of-the-art scientific facility. Public sector clients
should always satisfy themselves that contractors have the technical
and financial capacity to handle the degree of project risk which
they undertake to bear.
2. The long delay in completing the project
obliged leading UK scientists to pursue their research in seriously
outmoded facilities.
Through improvisation and ingenuity, they were able to continue
their work, but it must be regretted that they were placed in
this position by shortcomings in the Department's procurement
strategy for the new facilities.
3. The Department received only ten expressions
of interest in response to its initial advertisement of the procurement,
and two of the four bidders short-listed for the contract withdrew
shortly thereafter.
As a consequence, the Department had only limited scope to use
competition to encourage Laser to improve its design. Before short-listing
bidders, departments need to gauge the strength of the interest
in their projects and reformulate projects if there is not sufficient
interest to provide strong competition in the procurement.
4. The bid submitted by one of the two remaining
bidders was weakened by the Department's concerns that the bidder's
proposals for exploiting surplus land might not be acceptable
to the planning authority.
Departments should satisfy themselves that bidders can meet the
principal requirements of the project before considering the potential
benefits from secondary opportunities.
5. Although it had concerns about the bidders'
design, the Department expected the financial consequences of
failure to discipline the prospective contractor into taking corrective
action. If departments
have concerns about bidders' designs, they need to satisfy themselves
that bidders have addressed these concerns before placing contracts.
For particularly challenging projects, departments should require
bidders to demonstrate that their designs will work before the
award of contract, for example by constructing prototypes of their
designs. The highly technical nature of this project means that
the Department should have consulted the scientists affected more
closely.
6. Following contract award, the Department
became aware that John Laing Construction Ltd modified its design
without first confirming that the result would meet the Department's
objectives. The Department
was reluctant to insist on changes for fear of taking on responsibility
for the design. Departments should require bidders and contractors
to notify them of significant changes of design, and demonstrate
that amended designs will continue to meet the required specification.
7. The Department retained use of the existing
facilities at the NPL while the new buildings were being constructed.
As a result, the NPL was able to continue its scientific work
despite the delays in construction, and the Department was not
under pressure to compromise on quality requirements in order
to gain use of the new buildings quickly. Departments should plan
standby arrangements so that if there are delays to projects they
can maintain business continuity without compromising their requirements.
8. The project lenders did not exercise their
step-in rights to save the project because they did not want to
take on the responsibility of solving the problems with the design.
Treasury guidance recommends the provision of such rights to provide
an opportunity for lenders to revive projects whilst avoiding
the disruption of termination. Departments should be aware that
project lenders are unlikely to exercise their step-in rights
unless they consider it in their interests to do so.
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