Supply Chain Management

© The College of Estate Management 2009
Paper 1902V1-0
Supply chain management
Contents
Learning outcomes
1. Introduction
2. CRINE Network’s SCM initiative

2.1 Supply chain optimisation
2.2 Alignment of objectives
2.3 Long-term relationships, relationship management and collaboration
2.4 Supplier suggestions and customer feedback
2.5 Planning and forecasting
2.6 Supplier involvement in design and development
2.7 Over-engineering (design) and preferential engineering
2.8 Standardisation and modularisation
2.9 Life cycle costing
2.10 Negotiating
2.11 Supplier management
2.12 Long-term agreements, alliances and contract issues
2.13 Payment
2.14 Performance
2.15 Other recommendations
3. The Egan reports

3.1 Rethinking Construction, 1998
3.2 Modernising Construction, 2001
3.3 Accelerating Change, 2002
3.4 Achieving Excellence in Construction, 2003
4. SCM in construction contracting

4.1 Moving on from Egan
4.2 The Strategic Forum for Construction
5. SCM in construction clients’ policy

5.1 Government-led best practice
5.2 Private sector engagement with SCM
5.3 The ‘Building Down Barriers’ approach to SCM
(continued)
Supply chain management Paper 1902 Page 2
6. Implementing SCM
6.1 Prequalification
6.2 Partnering
6.3 Cluster management
6.4 ‘Embedding’
7. Summary – Benefits of SCM

7.1 Reduced costs
7.2 Reduced waste
7.3 Reduced risk
7.4 Best practice and client satisfaction
7.5 The scenario example revisited
Appendix A: Supply chain prequalification questionnaire
Appendix B: Supply chain partnering agreement
Learning outcomes
After studying this paper you should be able to:
 recognise the benefits of supply chain management (SCM);
 know how SCM is implemented;
 perform the construction professional’s role in SCM.

1 Introduction
Supply chain management is not new; it has been around for many years in industries
other than construction. In Section 2 you will learn how a major study was
undertaken in the UK North Sea oil and gas industry in 1998–99 to identify the
benefits which could be derived from improved SCM. The UK construction industry
has learned from these, and SCM is a recognised function of successful business
management the world over.
SCM is the management and co-ordination of the whole supply chain from the supply
of raw materials through their procurement, transport, manufacturing, assembly,
delivery to site and installation to completion, commissioning and handing over to the
customer on time, within budget and to the quality that is expected. The aim,
however, is to exceed expectations.
To do this, the objective must be to achieve efficiency and cost-effective procurement

through reducing wasted resources at each interface of the supply chain. This is done
by developing close co-operation between all parties to the supply chain, and by them
collaborating and working together to mutually advantageous benefits; benefits of
cost, time and quality, which lead, in turn, to repeat business and opportunities for
excellence from continuous improvement. This is partnering at the various levels of
supply interchange.
Following the Latham Report (1994), the construction industry is embracing these
concepts. However, the public still has a misconception that the industry has low
productivity, low profit, and waste from a fragmented arrangement of suppliers,
merchants and subcontractors; poor quality; late delivery of projects; and defective
work that is over budget and out of control. Major projects have been reported in the
media that fuel this misconception, such as the Scottish parliament buildings and the
Wembley arena (both prominent, large, projects in the UK), that were delayed and
exceeded budget.
The construction industry, however, has improved greatly in recent years, and this
paper will explore how the effective management of supply chains can yield benefits
the world over.
Clients with programmes of multiple projects, like supermarket chains, have driven
the agenda for change. They have reduced the number of tendering contractors for
their project work, and by so doing have developed relationships with a small cluster
of firms to reduce the costs of tendering and to gain benefits from familiarisation with
working practices, quality and time standards, and the greater prospect of repeat
work. In return, contractors have been proactive in problem solving and in seeking
long-term relationships with clients.
Short-term profit by claims and an adversarial approach is no longer an option, and is

gradually being removed from the modern-day construction industry.
EXAMPLE 1: Supply chain for fabricated structural steelwork

Consulting engineers design and draw the layout of structural steel members of framed
structures, acting for a client or client contractor.
Steelwork fabrication firms tender for obtaining the steel sections, drawing fabrication
details and compiling cutting lists for each steel piece and detailing the connections, bolts,
etc.
Details are approved by the consulting engineers and steel sections are ordered from the
rolling mills.
Sections are transported from the mills to the fabrication yard.

(continued)
Workshop machinery and resources fabricate the steel members.
Steel members are cleaned and painted or galvanised, sometimes by a specialist and
involving transport to a specialist finishing facility.
Sections are loaded on to transport, typically in the sequential order that they will be
needed in erection, and are then delivered to site.
For large consignments, a police escort may be needed, and low bridges may have to be
avoided. A logistics specialist might have to plan and organise a convoy.
Offloading at the site will involve a crane, either provided by the fabricator or by the main
contractor (a crane may already be on site).
If steel members cannot be stockpiled on the site owing to a shortage of space, the
delivery trailer may have to remain at the site until the sections are lifted into their final
positions. Trailers might need to be at the site all day, and facility for the space taken by
the trailer has to be arranged – as well as the cost of the trailer, even if the tractor unit that
has brought it can leave.
It may be necessary, on very large sites, to have a nearby stockyard for short-term storage.
Often pieces of wasteland such as railway sidings have been known to be rented from
landowners for this temporary purpose.
The fabrication workforce may be provided by a subcontractor that specialises in site

erection, and this firm may rely on self-employed erector operatives from agency sources.
There will be a requirement for small tools, welding equipment, safety devices such as
harnesses, and consumables. For work at height, safety nets will be needed, and there are
specialist providers and installers of these.
From this example you can see a supply chain with many participants. One weakness
in the chain has the potential to jeopardise a successful outcome: the delivery of the
completed steelwork on site is affected by failure at any part of the chain. A supply
chain is only as good as its weakest link.
The task of the client is to use a main contractor (often now called a prime contractor)
who can manage and control the supply chain under them. They will control the
engineers and fabricators, who in turn will manage the reservation of steel sections at
the rolling mills, the transport logistics, cranage and eventually the erection. The
weather can play its part as well, but supply chains cannot control that – except that
they can plan for it.
You can see now how involved a supply chain can be, and this is just for the steel
frame to a building, and when all the participants are in the one country.
Transnational supply chains can be more challenging for supply chain managers.
Example 2 gives another possible supply chain that would throw down a challenge to
any manager.
EXAMPLE 2: Supply chain for a glazed space-frame atria roof

A specialist system designer and fabricator, based in Germany, has a design patent on a
steel hollow section space-frame structure that uses state-of-the-art computer design and
connection technology that produces structural solutions using the smallest hollow
sections and patented node connections.
The project is in Dubai, but the design engineers are in Germany.
(continued)
The design engineers have a working relationship with a CAD drafting agency in Vietnam
and, by the overnight electronic exchange of drawings, the fabrication details are
developed so that the computers in the fabrication facility in Germany can seamlessly use
the data from Vietnam to cut each steel section to length and weld the nodes at the ends of
sections.
The same electronic CAD drawings are simultaneously transmitted to a glass fabricator in
France, where the sealed double-glazed units are assembled on a production line using
techniques developed in collaboration with this particular roofing specialist.
The rubber seals that will hold the glazing in place have been developed in Italy, and the
CAD drawings will go from Vietnam directly to the factory in Italy, where the appropriate
types and lengths of rubber section will be chosen, taken from stock, packed and made
ready for despatch to the site.
The German firm has a framework of trusted steelwork and glazing installers who have
been trained to install the systems, and one of these will be chosen to carry out the site
work. They may be from a country other than the UAE.
Back in Germany, the whole operation will have been planned and tracked so that the
process is seamless and flows in accordance with the expectations built into the supply
chain.
Customer expectation will be high because the German firm will have sold its product on
the strength of its expertise and the supply chain logistics that it is proud to sell. There will
always be room for improvement, however, and there will always be some external factors
that might throw the process into disarray, such as disasters like fires at factories, shipping
mishaps and natural disasters; but these can be considered in risk analysis and mitigated as
far as is economically feasible (disasters are insured in risk mitigation).
You can now see how challenging and potentially interesting (exciting) it is to create
and manage supply chains.
The practice of SCM was pioneered as long ago as the early 1950s by Toyota in
Japan, driven by the demand for faster times to market, quicker fulfilment of orders
and lower costs. Rapid development of IT and globalisation has helped, and other
manufacturing industries have followed the same route. SCM has spread in particular
to the UK oil and gas industry.
Let us look now in some detail at how the UK offshore oil and gas industry
investigated what SCM had to offer their business. Construction has learned a great
deal from this ground-breaking investigation.
SELF-ASSESSMENT TASK 1
Identify supply chains that you have seen operating in construction and in other industries.
2 CRINE Network’s SCM initiative

The UK government initiated and supported the CRINE (Cost Reduction Initiative for
the New Era) Network’s Supply Chain Initiative involving 120 businesses in the
North Sea oil and gas industry for five months in 1998–99. These businesses included
operators (clients), contractors and suppliers, of all sizes including small and medium
enterprises (SMEs – defined by the UK government’s Department of Trade and
Industry (DTI) as having no more than 249 employees), and with assistance from the
then DTI. The DTI had predicted that the size of the industry’s expenditure on
upstream activities was £10 billion (at 1997 prices), and the CRINE initiative
addressed about 40–50% of this.
The objective was to identify what benefits were possible from improved SCM to
help the UK to increase its share of the global market. The study was pan-industry,
and had these key deliverables:
 a strategic framework that evaluated the industry’s supply chain performance

and made recommendations for improvement;
 a methodology for SCM;
 training for SCM across the industry;
 plans for collaborative projects.
In 1999 a not-for-profit organisation called LOGIC (Leading Oil and Gas Industry
Competitiveness) was formed by various companies within the UK Continental Shelf
oil and gas sector. A report of the CRINE initiative was compiled by accountants
Ernst and Young, and it is this report that we will now look at.
We will quote some of the key findings from the report’s summary of
recommendations, and below these we will consider what the construction industry
had, at the time, to learn from these.
2.1 Supply chain optimisation

‘The Contractor, and to some extent the client, needs to identify ways in which to
engage the suppliers to ensure that they are primed and able to fully contribute to
the objectives of the supply chain. This can be enabled via
 ongoing programmes of supplier development; and

 earlier involvement of providers in the project life cycle.’
(LOGIC, Summary of Recommendations, Nos 1, 2 and 3)
Optimum SCM benefits can come from involving suppliers in the objectives of a
project. Providers of goods and services might otherwise be remote from the project
and will be unable to realise what benefits they can deliver. There are tiers of
suppliers, and this is an important aspect to be considered.
By ‘tiers’ is meant the number of times that a supply is ‘handed down’ the chain. For
instance, a main building contractor may subcontract the woodwork trades in a
project. The subcontractor may in turn buy finished goods like door sets from
specialist manufacturers, and these manufacturers will buy their raw materials across
their own supply chain. The supplier of ironmongery for the doors will be unaware of
the end use of the product, so cannot relate the performance of the ironmongery with
the end product. The choice of ironmongery will have been made generically from a
catalogue of standard items.
While this choice will probably be satisfactory, the ironmongery specialists have had
no opportunity to contribute their expertise to the project, as they are too remote from
it; possible improvements in the standard product to meet specific project needs are
not possible. Optimisation of these opportunities should be identified lower down the
chain, and linkages in the tiers should be created. This is the role of the supply chain
manager.
2.2 Alignment of objectives

‘Alignment of objectives could be secured by total cost incentive-related, or life-
of-field, contracts.’ (LOGIC, Summary of Recommendations, No. 4)
A way of aligning the objectives of the project over its whole life and across the tiers
of the supply chain is needed, and this in turn requires an understanding of the
project’s goals by collaborating firms. If manufacturers can be linked to the lifetime
maintenance of the product, more economic lifetime costs (in facility management)
can be achieved. The client will benefit from having the best possible door hinges,
and there is an opportunity for the development of a product of optimum total cost
(lifetime cost).
This is a simplistic example; a more realistic one is in building engineering services,

where whole plant rooms can be designed, built and operated by the same firm. In
this way, the costs of maintenance are linked to the original design and choice of
plant and equipment. Functional and operational objectives are thus aligned.
2.3 Long-term relationships, relationship management and

collaboration
‘Clearly aligned, and mutually agreed, performance targets can be used to offset
some of the problems sometimes associated with long term agreements.’ (LOGIC,
Summary of Recommendations, No. 5)
Construction is traditionally project orientated, and contractors and design teams have
focused on the process of developing the project. However, the project has a lifetime,
and the activity of early participants in the design and build process can affect the
total outcome many years ahead.
Contractors and suppliers had been selected primarily for their technical merit, prices,
past performance and lead times offered. The principal drivers were price and
responsiveness with regard to capital works only.
Least-valued criteria were found to be trust, continuous improvement and the

potential for long-term relationships. Some clients believed that existing long-term
contracts had indeed deteriorated over time and had lost their effectiveness as a result.
Relationships were perceived as being the primary responsibility of a purchasing

department, and the report suggested that the end users of a project ought to be the
managers of the performance targets of the project’s long-term outcomes.
2.4 Supplier suggestions and customer feedback

‘It is recommended that the oil and gas industry follow the lead of other industries
and actively seek their provider input into their processes. Simple measures such
as appointing a focal point for feedback would be beneficial.’ (LOGIC, Summary
of Recommendations, No. 6)
It had been normal practice in the automobile manufacturing industries to seek

suggestions from providers of goods and services, customers and workers, based on
the Japanese principles of ‘Kaizen’.
Kaizen is the practice of continuous improvement, in small increments, at all levels,

for the long term.
Everyone has a role, from top management to operatives:
 Top management must allocate the resources and establish the strategy,
systems, procedures and organisational structures necessary for Kaizen to
work.
 Middle managers are responsible for implementing Kaizen. They must
monitor performance of the continuous improvement programme, and ensure
that employees are trained in the use of the necessary management tools.
 Supervisors are responsible for applying Kaizen. They maintain the rate of
suggestions, coach, and improve communications at the workplace.
 Operatives must make suggestions, learn new skills, use the management tools,
and generally participate in continuous improvement activities – individually
and in teams.
Incentives are used to encourage the process: awarding team benefits (such as a social
event), individual recognition, financial reward and even promotion.
There was a lack of systematic approach to obtaining customers’ suggestions, and the
report recommended that the oil and gas industry should follow the lead of other
industries (such as the automobile industry) in seeking vendor input into processes. It
was suggested that a simple point of contact in an organisation, that customers could
contact, would be beneficial.
The feedback from customers needs to be qualitative and quantitative. As well as

knowing the quality performance perceptions, there needs to be a measure of the
quantity of the satisfaction. A scoring system is needed, and in an example case study
in Section 5 below you will see how this is implemented in SCM by key
performance indicators (KPIs).
2.5 Planning and forecasting

In response to inadequate planning, ‘more robust planning, coupled with active
risk management, and involving early input by appropriate organisations, is one
mechanism which can be used to offset planning related risks.’ (LOGIC,
Summary of Recommendations, No. 10)
The report highlighted the need for global planning and forecasting to predict the
demand for oil and gas industry services. Eighty per cent of survey respondents rated
working together to predict future demand as a medium-to-high business priority and
83% thought that medium-to-high benefit was possible from public availability of
development plans, which all considered relatively easy to implement.
For the construction industry, the UK government initiated and facilitated a major
study that culminated in the Latham Report, Constructing the Team (Latham 1994).
This led to public agency involvement in a programme called ‘Constructing
Excellence’ as a vehicle for research and facilitation in delivering innovation, best
practice and productivity. SCM has been promoted by the Constructing Excellence
campaign, which will be discussed later in this paper.
2.6 Supplier involvement in design and development

‘The industry should introduce a more formal communications process for
transferring information along the supply chain. Early involvement was regularly
mentioned as having major potential benefits.’ (LOGIC, Summary of
Recommendations, No. 12)
The survey report pointed out that design is performed before a provider of services
(a building contractor in the context of the construction industry) is known, which
precludes involvement of the provider in the design and planning processes.
It was recognised that the lead times for providers to respond when they receive the
designs is compressed because of the time required to become familiar with the
design details.
2.7 Over-engineering (design) and preferential engineering

‘Awareness of the excessive and wasteful costs of over-engineering must be raised
within the customer organisations …’ (LOGIC, Summary of Recommendations,
No. 13)
There was acceptance that over-engineering is endemic across the oil and gas industry
and costs both time and money. One supplier cited a minimum of 10% of the cost of
its service being due to customers over-engineering their requirements.
The report called for an awareness of the extent of waste by customer organisations,
as it is they who are paying the price. Non-critical areas of design were obvious
immediate targets for improvement. Designers were tasked with formulating targets
for percentage reductions in existing specifications, and for making their designs ‘fit
for purpose’. You will come across this expression time and time again in the context
of construction.
2.8 Standardisation and modularisation

‘The industry should introduce greater standardisation … Greater
modularisation of systems is an extension of this philosophy.’ (LOGIC,
Summary of Recommendations, Nos 14 and 15)
It was found that designers tended to specify prescriptively, so providers found it

difficult to hold an inventory of products. Instead, each design needed particular
products to be purchased, and there was reduced scope for economies of scale.
From a maintenance perspective, there was often difficulty in obtaining spares, non-
interchangeability and more dependence on specialist expertise as a result of the lack
of standardsation.
The alternative to prescriptive specification is functional specification, whereby the

function that the design must serve is given. The provider (contractor) is then able to
select the product that satisfies the function. This is akin to design and build, where
the contractor interprets the specification and has the freedom to match his own
supply chain products to the functions expressed in the design. The customer (client)
benefits from the best possible price, while obtaining fitness for purpose. Another
phrase for functional specification is generic specification.
When design is non-critical, it is most appropriate for contractors to have their own
choice of products. For example, there is no advantage in a designer specifying a type
of common or engineering brick to go underground and be unseen (i.e. non-critical),
when the choice can be left to the contractor after generic specification of the national
standards for the brick. Non-prescriptive specifying allows the contractor to seek out
the best available products that the firm’s supply chain can provide at the time, using
their market intelligence, buying skills and leverage.
However, for repeat projects, there can be benefits in designers creating partnerships
with product manufacturers to obtain product development that will pay dividends
throughout the lifetime of a project in terms of greater durability, less maintenance
and fewer replacement intervals.
The balance needs to be evaluated between involving specific product manufacturers

and specifying generically, and the optimum choice is an amalgam of factors. Waste
always needs to be reduced at all stages of a project’s life; this leads to the next
recommendation in the CRINE report.
2.9 Life cycle costing

‘The industry would benefit considerably by consistently adopting a whole life
cycle approach to design, specification and selection.’ (LOGIC, Summary of
The need for a focus on the total costs throughout a project’s life was recognised.
Design should not merely reflect the capital costs of creating the built asset, but must
also be reflective of the revenue costs of running it throughout its entire lifetime.
It was found that, in the oil and gas industry, operators (clients) were usually taking
operating expenditure (Opex) into account when signing off the project design, but
were having difficulty in balancing the capital expenditure (Capex) and Opex. One
operator estimated that wastage due to lack of life cycle costing accounted for 10% of
its operating costs.
2.10 Negotiating
‘By moving away from the reliance on competitive tendering as the basis for
negotiation, and by selecting a reduced number of providers by competence it is
suggested that a firmer base for negotiation is achieved.’ (LOGIC, Summary of
The report emphasised that tendering can be wasteful. While it produces the ‘best
price on the day’, it may not have regard for the true cost. Tenderers who are
desperate for work will deliberately underprice work to win it, and gamble that they
might be able to recover the cost and make a profit. Such firms pursue a policy of
premium rate variation pricing to recover costs during work execution. This
engenders a claims culture from which clients feel at risk. Clients deserve to know a
definite total cost, and not to be under threat of claims.
It was pointed out in the report that other industries – especially those that
manufactured components – had developed purchasing policies based on open book
methods. This overcomes any client perceptions that prices are over-egged and avoids
unnecessary damage to possible long-term relationships between clients and
contractors.
2.11 Supplier management

Some of the larger client organisations were identified as having poor intelligence
about their supplier bases. One survey participant reported over 6,000 providers of
goods and services, and that these could be reduced by as much as 60%.
Survey responses showed that there was a widespread lack of performance

monitoring in the supply chain. It was concluded that best practice guidelines ‘should
be applied more consistently across the whole industry’ (LOGIC, Summary of
Recommendations, No. 19).
2.12 Long-term agreements, alliances and contract issues

‘Long Term Contractual Relationships are generally seen in a positive light.
Studies of outsourcing arrangements suggest that periods in the range three to five
years are optimal from the perspective of maintaining competitive balance within
the relationship. Appropriate clauses such as year-on-year performance target
improvements …, open-book costing, coupled with buyer knowledge of market
developments have been found to be sufficient to maintain competitive pressure
when coupled with clear alignment of objectives.’ (LOGIC, Summary of
The report suggested that a route for improvement would be the establishment of
trading alliances, and that longer-term relationships would be beneficial.
Longer-term relationships remove the need for frequent retendering (which the report
suggested accounted for up to 10% of cost), and some 80% of survey respondents
thought that this could:
 allow predictable cash flow

 allow workload to be managed more effectively
 help streamline work processes
 provide for greater continuity of workforces
 allow synergy and relationships to be developed
 enhance the ability to perform research and development.
One firm reported a saving of 12% as a result of introducing longer-term

relationships, and a possible 15% is suggested in the report when longer-term
relationships are cascaded down the supply chain.
However, some clients expressed concerns about:
 lack of competition
 being locked into agreements
 a lack of mechanisms to share the benefits.
One client thought that it was paying a premium of up to 5% against the market
conditions at that time.
The report acknowledged that framework agreements are a useful tool in the
implementation of long-term relationships. An outline contractual framework is
established, with these typically agreed terms:
 coverage scope defined

 pricing basis agreed
 year-on-year improvement targets
 expected volumes of work – short, medium and long term.
The process of obtaining prices is substantially shorter than if competitive tendering

were to be involved, as there is a standardised approach.
Following the CRINE report, the oil and gas industry adopted standardised contracts,
and these have been seen as a significant step in the right direction.
Companies surveyed for the report, however, felt that they were being asked to
carry an increasing proportion of risk. To offset this, risks and warranty
requirements were being simply cascaded down the supply chain, often to a point
where the ability to carry the risk was not there. The report recommended that ‘an
industry agreed framework for fair risk allocation may be appropriate’ (LOGIC,
Summary of Recommendations, No. 22).
The report recognised that incentive mechanisms had a role in SCM, as a number of
respondents to the survey expressed their belief that benefits would be achieved by
cascading appropriate incentive schemes down the supply chain.
The concept of ‘win-win’ has become the overriding aim of SCM, but objectives
must be aligned from one tier of the supply chain to the next. Different partners will
see different objectives as their winning goal. Clients want to have secured the best
total cost (life cycle cost), while at the same time they are often constrained by budget
allocations that may be split along the life cycle (i.e. Capex and Opex). Contractors
want to sustain their businesses in terms of workload, with minimal peaks and
troughs, and increase their profit margins. This contradicts the typical ‘win’ for a
salesperson, who knows that reward comes from volume of business gained rather
than its profitability. Sales targets and bonuses are short term (month-to-month), and
salespeople are usually not around when the work has been finished to take a share of
the profits from it.
2.13 Payment
‘Greater visibility of on-time payment performance, coupled with wider
acceptance of interest recovery principles, is called for.’ (LOGIC, Summary of
 Ninety-three per cent of survey respondents said that improving payment

performance was a priority.
 Clients identified themselves as generally good payers (80%).
 Contractors and suppliers were not good payers down the supply chain – only
15–20% were considered good payers.
SMEs identified late payment as a significant issue to them, with payments of 30–45
days beyond the agreed terms not uncommon. This causes unnecessary cost of
financing each month from a reduced cash flow.
2.14 Performance
‘There needs to be a realignment of objectives between customer and provider to
a) reduce the reliance and focus on inspection b) increase the responsibility and
accountability of the vendor to ensure the appropriate level of right-first-time
quality and importantly c) ensure that quality objectives and risks are shared up
front.’ (LOGIC, Summary of Recommendations, No. 27)
The survey found that at SME level, cost cutting following pressure on prices had led
to a dependency on the use of unproven suppliers, and this in turn had resulted in the
use of lower quality products. The objectives of the client had become diluted as they
were cascaded down the supply chain.
On-time delivery had only had a 90% success rate, and clients were in the habit of
consciously limiting lead times at the front of programmes, to allow time for overrun
at the end.
A process of monitoring performance was needed:
‘The need to improve performance should be combined with the need to introduce
an improved performance measurement process against which customer
objectives can be measured.’ (LOGIC, Summary of Recommendations, No. 28)
The recommendation in the report was that a system of measurement in respect of

customer service levels ought to provide:
 enough data to produce meaningful trends

 timely data to allow rapid response and corrective action.
2.15 Other recommendations

There were other recommendations, which included inventory management,
empowerment, high turnover of people, multi-functional team operations, commercial
skills, communications and IT, data storage and copying (relating to seismic data),
capitalisation of past projects, exchange of technical ideas, electronic information
sharing, common industry data repository and sources of innovation.
The report was comprehensive and gave the oil and gas industry much to think about.
Consider the supply chain practices where you work and evaluate how CRINE
recommendations might benefit (or have already benefited) the processes practised.
3 The Egan reports

3.1 Rethinking Construction, 1998
In the same year as CRINE, a taskforce of UK construction industry customer
organisations, including the government’s housing agency the Housing Corporation,
supermarket operators Tesco, motor manufacturer Nissan UK and leisure operator
Whitbread, published the findings of a study of client needs. Under the chairmanship
of Sir John Egan, the taskforce produced its report entitled Rethinking Construction
(Egan 1998).
Egan’s taskforce had similar findings to the CRINE initiative, in that the UK
construction industry suffered because of:
 adversarial relationships between members of the supply chain

 litigation as a result of adversarial attitudes defects in construction work
 delays to completions
 cost overruns.
Change was identified as essential, and the major clients in the industry were tasked
with setting an agenda to create the necessary changes.
Supply chain expertise was seen as a key driver for change.
Targets were set, and the industry has achieved much in the years since the report.
These are some of the notable improvements:
 improved construction methods after research and development, including off-

site manufacture (known as modern methods of construction);
 tools of SCM to overcome fragmentation, such as partnering and framework
agreements (Joint Contracts Tribunal (JCT) 2007);
 knowledge transfer from other industries into construction industry SCM, such
as performance measurement by benchmarking, value management, team
working, just-in-time delivery and total quality management;
 elimination of waste – everything that does not add value: including
unnecessary processes, repetition and surpluses, duplication of effort and waste
in raw materials – by considering better use of limited resources in the design
(co-ordination of design with manufactured product sizes, for example).
Collectively, this is termed ‘lean thinking’.
Partnering is advocated to improve performance by agreeing mutual objectives,

devising ways of resolving disputes, and committing to continuous improvement,
measuring progress and, importantly, sharing the gains.
Driving innovation and sustaining incremental and sustained improvement in

performance in the supply chain are crucial to project success. Partnering, however,
relies on open relationships and commitment.
3.2 Modernising Construction, 2001

A report, Modernising Construction, published by the UK government’s National
Audit Office in 2001. This examines the progress made by the government in
promoting innovation and good practice. It concludes that there is no excuse for
government clients and the industry to fail to take advantage of readily available
solutions, and recommends the selection of contractors by value (as opposed to cost),
better relationships in supply chains, and integration of supply chains.
3.3 Accelerating Change, 2002

Egan produced a follow-up report, Accelerating Change, which addressed the barriers
that had been encountered. A culture of continuous improvement was required.
This report identifies key drivers which will help to transform the construction
industry in terms of its efficiency and in improvements in quality.
The UK government suggested the creation of a new body, the Strategic Forum for
Construction, chaired by Sir John Egan and with a membership made up of exisiting
organisations from all areas of the construction industry, including the British
Property Federation, Construction Confederation, the Department of Trade and
Industry and Major Contractors Group.
The Accelerating Change report was published by the Forum.
3.4 Achieving Excellence in Construction, 2003

In 2003, the UK government’s Office of Government Commerce (OGC) published a
procurement guidance note entitled Achieving Excellence in Construction. The
guidance aligned with the OGC process of using Gateway Reviews and a Successful
Delivery Toolkit™.
The guidance was issued after the Chief Secretary to the Treasury of the UK
government wanted to improve the performance of government departments as clients
of the construction industry.
The OGC Gateway™ process examines programmes and projects at key decision
points in their lifecycle. Reviews are undertaken by independent ‘peer’ practitioners
from outside the programme/project, using their expertise to assess the likelihood of
successful delivery based on progress made up to the gateway reached. Gateways are
these:
TABLE 1
Gateway Title of review
0 Strategic assessment
1 Business justification
2 Delivery strategy
3 Investment decision
4 Readiness for service
5 Operations review and benefits realisation
To assist with the reviews, there is an online Successful Delivery Toolkit™. This aids
navigation of the OGC resources on the OGC website (www.ogc.gov.uk).
Draw conclusions from use of modern methods of construction, that you have experienced
in projects, as to the contributions these have made to KPI performance.
4 SCM in construction contracting

4.1 Moving on from Egan
It was recognised after the Egan reports that construction companies that had
successfully implemented SCM were reporting these benefits:
 simplification in processes
 cost savings
 efficiencies in project delivery
 reductions in exposure to risk
 improved predictability of workload
 economies of scale.
These benefits were the subject of a seminar on SCM held by the Major Projects
Association (MPA) in London in June 2002. The seminar report stated that ‘a well-
managed supply chain offers a range of benefits, from simplification and risk
reduction to significant cost savings’ (MPA 2002).
It went on:
‘Supply-chain management takes a radical approach to procurement, with the aim

of setting up long-term relationships with suppliers, so that leaner, value-added
and more efficient ways of working can be developed. Suppliers are encouraged to
adopt similar “managed” relationships with their suppliers, and so on – ideally –
down the tiers of supply.’
4.2 The Strategic Forum for Construction

The Strategic Forum for Construction has a simple mission: ‘To integrate the supply
chain’. Its vision is that: ‘As members of the integrated supply chain we are
committed to working together in a collaborative style to ensure the delivery of high
quality cost effective facilities, products, services and environment, designed to fully
meet the needs of our clients.’
The following is an extract from the SFC website, which introduces their toolkit
(Chainlink) to supply chain integration in construction:
‘In the few years since Egan put his name to Rethinking Construction the business
world has undergone a revolution. The advent of the internet means that changes
that once took years now take months, while the commercial imperative of
collaborative relationship building has become universally recognised throughout
commerce and industry. If anything, with respect to the latter, construction lags
well behind the pre-eminent sectors in this field. In industries such as
microelectronics, chemicals and motor vehicles, the concepts of leveraged and
incentivised relationships have been the norm for many years.
‘Not that there hasn’t been a lot of attention devoted to collaborative working in
construction. Ever since Latham’s Constructing the Team (1994) there has been a
growing appreciation of the business case for integrating suppliers, customers and
partners into a seamless supply chain. The advantages can be dramatic in terms of
reduced time, costs, defects and conflict and increased quality, client satisfaction
and profit.
‘With the accumulated wisdom of several years, the construction industry has now
reached the stage where it is in a position to take more decisive steps towards
achieving genuine integration throughout the construction supply chain. This is
achievable through the widespread adoption and adaptation of what have now
become established best practice principles, coupled with a cultural readiness to
change and continuously improve through the continual appliance and re-
appliance of operational feedback. Such an informed “ready, fire, aim” strategy
has the potential to generate a real momentum for change at all operational levels.
‘This Chainlink section of the Strategic Forum Toolkit presents hands-on

guidance on how best practice in integration can be applied at different levels of
the supply chain’ (SFC 2003).
The Chainlink toolkit, which can be found at

www.constructingexcellence.org.uk/tools/sfctoolkit, has these modules:
Module 1: Customer/supplier procurement integration

This covers the basic procurement and supply activities of any customer/supplier
relationship in the supply chain.
Module 2: Manufacturer/subcontractor partnering arrangements

This module addresses the need for closer working relationships between
manufacturers and subcontractors, with an emphasis on formalised agreements. A
specimen partnering agreement is given, and this is reproduced in Appendix B of this
study paper.
Module 3: Integration with intermediaries (merchant/stockist/distributor)

The added value that can accrue from the inclusion of intermediaries as part of fully
integrated supply chains is explained in this module. The focus is on both ‘upstream’
supply chain relationships between intermediaries and manufacturers, and
‘downstream’ relationships between intermediaries and construction procurement
teams.
Module 4: Horizontal partnering

The benefits to be gained from closer working relationships between companies
operating at the same stage of the supply chain are dealt with in this module.
The Constructing Excellence website has a section ‘Partnering and Supply Chain
Management’ at
www.constructingexcellence.org.uk/resources/themes/external/management.jsp
Partnering is not a form of contract, but a way of structuring business relationships.
Module 5: SME integration

This module sets out the key areas where SMEs can enter, develop and maintain a
position as members of properly integrated supply chains, and so ensure that they
continue to compete successfully for business.
Resources
The toolkit has a repository of reference documents that can be used.
Evaluate the extent to which the business relationships in projects that you have
experience of are integrated. Assess what more integration might be possible, and what
benefits could result.
5 SCM in construction clients’ policy

5.1 Government-led best practice
There have been two important ministerial-level reports as a follow-up to the Egan
reports. They made recommendations to implement SCM in government spending in
the marketplace.
 Government: Supporter and Customer? by the Better Regulation Task Force

and Small Business Council (BRTF and SBC 2003).
The recommendations to government departments were that in procurement,

value for money should be ensured by:
 asking prime contractors to demonstrate their track record in achieving

value for money through effective use of their supply chain – including
use of SMEs;
 ensuring that prime contractors pay subcontractors on time, and that,
when paying progress payments to prime contractors, the payments
flow down through the supply chain;
 making subcontracting opportunities more transparent to SMEs by
government departments and government-funded agencies listing
details of prime contractors and contracts on their websites.
 The Kelly Report – Increasing Competition and Improving Long-Term

Capacity Planning in the Government Market Place (OGC 2003) –
investigated further steps that could be taken to increase competition and
encourage better long-term capacity planning in markets where the
government has significant purchasing power.
One of the recommendations was that: ‘The OGC should research the wider
applicability of Achieving Excellence [the Egan report] principles on the
make-up and management of the supply chain and draw on this and other
experience to articulate and embed best practice guidance in supply chain
management’ (OGC 2003: Recommendation (x)).
In 2005, the OGC published Supply Chain Management in Public Sector

Procurement: A Guide (OGC 2005).
This was influential in the National Health Service (NHS) in establishing a national
framework agreement (ProCure21) for publically funded hospital buildings with
principal supply chain partners (PSCPs). This can be used by any local NHS Hospital
Trust without the need for local tendering. It is, therefore, possible for Trusts to
engage with a prime contractor very early in the procurement process. The NHS
administers a centralised build cost model to determine the price for a project, and the
process of continuous improvement is centrally managed.
CASE STUDY: ProCure21

ProCure21 offers a partnering method of construction under the New Engineering
Contract (NEC) Contract Option 2, and, once a final design is agreed, the contracting
parties (the Trust and the PSCP) agree a guaranteed maximum price (GMP) as the basis of
the contract price. Any increase in out-turn cost above the GMP that is not attributable to
client changes will be borne by the PSCP. If the out-turn is below the GMP (and it is
expected that it will be), then the savings are shared with the client 50–50.
ProCure21 claims that by working through the framework, PSCPs will benefit from:
 a fair profit;
 the chance of a long-term relationship with a client based on the delivery of good
work – over 80% of Trusts with more than one scheme have used the same PSCP
for all their schemes;
 reduced tendering time and cost;
 the chance of consistent workload;
 the ability to share knowledge, to continuously improve and to work more
efficiently.
Because ProCure21 supply chain contractors have been selected following procedures
under European Union competition protocols, individual contracts are not required to be
advertised in accordance with the EU rules of procurement. This gives an estimated six
months’ time saving per contract.
Analysis of ProCure21 schemes has shown that shorter than usual construction periods are
possible owing to the contractors’ being familiar with the processes and standards of the
hospital-building programme – seven weeks for schemes between £1m and £5m; 17
weeks between £5m and £15m.
Table 1 shows some of the KPIs, and the range of results over five years since the
programme started in 2004:
TABLE 2
Construction time: % completed on time or early 84–97%
Construction budget: % completed within budget 93–100%
Safety: % achieving zero incident rate 71–86%
Client satisfaction of product: % score of 8/10 or more 84–87%
Client satisfaction of service: % score of 8/10 or more 78–83%
Defects at handover: % score of 8/10 or more 77–84%
Source: www.nhs-procure21.gov.uk/content/performance.asp [Accessed 25 September
2009].
5.2 Private sector engagement with SCM

The Chartered Institute of Purchasing & Supply (CIPS) exists to promote best
purchasing and supply management in all respects, and its members believe that the
development and promotion of best practice in the construction industry is in the
interests of clients and the industry as a whole. The Institute was joined by the British
Property Federation (BPF) to form the Construction Clients’ Purchasing Group
(CCPG).
CIPS has created a Construction Clients’ Policy (CIPS undated), which recommends
clients to:
 prepare a ‘business case’ for any construction project;

 that the business case should identify the lifetime expected and that the use of
‘whole-life costing’ will demonstrate that the added value exceeds the costs;
 develop skills for measuring how their projects perform.
Key detailed recommendations to clients are:
 Take time to produce excellent briefs – only then can optimum designs be
developed, resulting in improved fitness for purpose and greatest lifetime
value.
 Take care in assembling the client team of design professionals, to include the
necessary skills and experience for the particular project, and promote a non-
adversarial approach among the design team and the supply chain.
 Use the more modern and less-adversarial forms of contract such as the NEC
and up-to-date JCT contracts that encourage risk allocation. Benefits will be
fewer contractual disputes, which are costly.
 Calculate professional fees on the basis of the value of services provided rather
than simply as a percentage of total construction cost.
 Business ethics should be transparent and fair, and suppliers at all levels of the
supply chain should be paid within the agreed periods. Cash flow is the life
blood of supply chains.
 Suppliers should be selected through a competitive process, not on a ‘lowest
price is best’ basis, but on the basis of value for money (VfM). Quality, service
levels and other factors should be used along with price. Clients should look
for supply chain partners who can deliver ‘right first time’.
 Risks should be allocated to those parties best able to manage them and to the
extent that they are able to carry the risk. Reduced exposure to commercial risk
will provide for greater certainty of cost, time and quality.
 Clients and their professional team should audit the construction supply chain
from a social responsibility perspective. This includes: human rights; health,
safety and welfare; working conditions; equal opportunities; training and
personal development; and global issues such as the use of child labour
(possibly in certain product manufacturing factories). Better work
environments produce happy workers who in turn produce better work.
Defects cost money and lost time.
 The use of sustainable materials and the reduction of waste (in raw materials
and in processes) leading to both a better environment and VfM.
In essence, CIPS recommends that professional purchasing and supply management

input should be involved from the outset of any construction project. Also, that being
an attractive client will increase the competitiveness of the offers down the supply
chain.
5.3 The ‘Building Down Barriers’ approach to SCM

Prior to Egan (2002), in 1999, the Defence Estate Organisation in the UK
(responsible for all the properties held by the armed forces, such as military
establishments, airfields, army camps, etc.) and the government’s Department of the
Environment, Transport and Regions (DETR), together with two prime contractors,
AMEC Construction and John Laing Construction, jointly supported the publication
of a document entitled Prime Contractor Handbook of Supply Chain Management
(Holti et al. 1999).
The document explains Building Down Barriers as a process ‘based around the idea
of a single player, the Prime Contractor, taking full responsibility for delivery of a
building or facility that meets a client’s needs’ (Holti et al. 1999: 8).
It calls on best practice in through-life costing, SCM, value engineering to deliver

functionality, and in risk management to ‘achieve significant efficiency of the
completed building’ (Holti et al. 1999: 2).
The benefits are described as ‘buildings that are cheaper in both initial capital and
long-term running costs, that provide a reasonably accurate forecast of the annual
maintenance and energy costs, and that facilitate maximum effectiveness for the
activities housed within them. For the construction industry, the benefits are a radical
reduction in waste and inefficiency, improved profitability, non-adversarial supply
chain relationships, greater certainty of repeat orders and delighted Clients’ (Holti et
al. 1999: 4).
Critically analyse various aspects of performance you have experienced in projects, and
list improvements that would delight clients if they were to be implemented.
6 Implementing SCM
Businesses, whether they are client organisations or contractors/suppliers, will have
supply chain managers/facilitators, and a construction professional is likely to be the
key person at the head of the SCM process. This construction professional will have a
vital role to play in the promotion and success of SCM.
Organisations will have a database of contractors, consultants and suppliers; these are
their preferred partners in business. They will have been used many times and will
have proven themselves worthy of being in the supply chain of that organisation’s
successful business. But, how are firms selected in the first place?
A process of prequalification takes place, often managed by a construction

professional who invites potential supply chain partners to complete the forms, and
then manages the assessment process. We will look at the process in some detail now.
6.1 Prequalification
The Strategic Forum for Construction has a generic prequalification questionnaire, to
be used by organisations to give a ‘rational, structured and auditable process for the
selection of long-term collaborative supply chain partners’.
This questionnaire is reproduced in Appendix A.
The questionnaire is drafted with the intention that it is used for selecting
subcontractors to a contracting organisation, but it can be amended to suit the
selection of consultants, suppliers and others.
The selection is based on a scoring matrix which is weighted according to the

selecting organisation’s importance of criteria used.
The first part of the questionnaire asks for details of company status, ownership and
company registrations.
There are then a series of questions called ‘Gateway Questions’.
 Professional conduct – Any misconduct such as criminal convictions,

insolvency, etc. in the past are likely to disqualify the applicant, and need to be
brought out early in the selection process.
 Financial information – Commercial risk is attached to a supply chain

partner’s financial health, so it is normal to ask for three years of audited
accounts to be submitted. The accounts are always out of date (accounts are
not completed until up to 12 months after the trading year has closed), so
caution is needed in assessing a firm’s current trading situation and its
financial health. The construction professional ought not to assess the
information received without support from an accountant, and having gathered
the details they should be passed to an accountant for expert financial
assessment.
 Previous contract works and references – Three references are requested,
and the construction professional is likely to be the person to call upon the
referees for their opinion about the applicant. In doing this, a telephone call or
a written questionnaire can be used (or a combination of both). For audit
purposes, a written record of the taking of references is necessary, so when
calls are made a written record must be taken and held on file. A call can often
provide more information than if a referee is called upon to put their opinions
in writing; an unfavourable reference is more likely to be forthcoming by word
of mouth than in writing. A construction professional will, from experience,
have the intuition to know what questions to best ask.
 Insurances – There may be minimum limits of cover set by the client/prime
contractor of the supply chain, and these limits might need to be cascaded
down the tiers of the chain. However, as the tiers become remote from the first
tier organisation it would be unreasonable to expect the same cover. For
instance, a groundworks subcontractor cannot be expected to have the same
cover as an international contractor that is employing it. A construction
professional cannot be expected to be an expert in insurance policies, so when
the documentary evidence has been presented it needs to be passed to a broker
for expert opinion. In international supply chains it is even more important for
expert opinion to be given, as policies will be under different legal
jurisdictions from those of the host firm’s country, and may be in a foreign
language. Legal opinion and a translator may also be necessary.
 Health and safety – The whole supply chain needs to be capable and have a
good track record of this. If there have been prosecutions for infringements,
systems for health and safety have failed in the past. The prime contractor will
want to uphold an exemplary record for commercial reasons, and the supply
chain must have the same ambitions. The prime contractor’s health and safety
manager may want to investigate a supply chain partner’s historic record of its
past performance in some detail, and the SCM lead should allow for this
important consideration to be made.
 Statutory policies – In any country, and internationally, there will be policies
that businesses are required to have, and evidence of these must be provided
for assessment and copying into the supply chain database.
 Collaboration/supply chain integration experience – It is important to
ascertain how much experience a prospective partner has of working with
others. Its experience of benchmarking, KPIs and other SCM techniques will
be beneficial. These aspects ought to feature prominently in questionnaires to
referees.
 Technical capacity – The supply chain partner will need to display an
understanding of and capacity for the management systems and processes in
which they will be expected to join the prime contractor. These will include
compatible IT systems, best practice training and back-to-back business
mechanisms such as payment systems.
 Client compatibility – Clients and prime contractors have policies that they
expect their supply chain partners to share in with them. One example is the
French-based contractor, VINCI, which has the following priority
commitments as part of its sustainability programme, and which it builds into
its supply chain:
 to achieve zero accidents;
 to fulfil its commitments to social responsibility, civic engagement,
customer relations, supplier relations, environmental responsibility,
research and development and innovation policies;
 to quantify greenhouse gas emissions;
 to implement its eco-efficiency programme;
 to strive for technological excellence.
(VINCI 2007)
The prime contractor will expect members of the supply chain to integrate their
systems with those of the prime organisation. The linking of computer applications in
an integrated form will, for instance, enable immediate transfer of project information
such as CAD drawings, and online invoicing and payment certification. The
construction professional will benefit from integrated and streamlined applications for
payment and computerised payment systems that are integral with the supply chain
protocols.
CASE STUDY: Taylor Wimpey UK Ltd

Prospective suppliers to the supply chain of this contractor in the UK need to register their
interest by using an online platform called SOLVE.
SOLVE is an online prequalification tool that eliminates the need to provide paper
evidence – although random audits are undertaken, when these are requested. Once
registered online, a supplier can update information at any time. Vetting is carried out
online, and there is an audit trail of all amendments.
Reminders are issued when certain critical information becomes out of date, such as
insurances at renewal.
Source: www.taylorwimpey.com/Home/UKSupplyChain/ProspectiveSuppliers [Accessed

1 September 2009.]
6.2 Partnering
Once a supply chain has been created, the integration of the various members is
formally dealt with in a framework/partnering agreement. The Strategic Forum for
Construction’s sample agreement is reproduced in Appendix B.
By entering into an agreement, the supply chain partners are agreeing to seek mutual
benefits from collaboration, innovation, continuous improvement, waste reduction,
improvements in quality and timely delivery, efficient resourcing, and all the other
management benefits that joint working can produce.
Measurement of the benefits is carried out with KPIs. Cost reduction targets might be
agreed and then measured by KPIs, and the construction professional will be involved
in the management of cost reduction exercises with supply chain partners. Techniques
such as turnover-related discounting with suppliers might be targeted as a way of
reducing costs, and the construction professional will agree the terms and basis of
calculating these with suppliers. An example would be the scope for discount on
annualised quantities of products/work packages placed with a partner. Manufacturers
of commodities such as bricks, plasterboard and ironmongery are accustomed to
negotiating discounts on volume buying, and the construction professional will be
involved in these negotiations.
The supply chain partners will want to manage and reduce risk. The construction
professional will become engaged in pricing the mitigation strategies that are
discussed and entered into risk registers. Commercial options for risk mitigation will
inevitably have cost consequences, and the construction professional will be called
upon to value risk and to contribute to the decisions made to best deal with the
options.
Risk that cannot be mitigated (known as residual risk) will be shared or insured.
Parties that take risk must be rewarded for their willingness to do so, and the
construction professional will negotiate the gains resulting from such allocation of
risk. Risk that is too great to be taken by a party must be insured, of course, and the
construction professional may well become involved in seeking quotations from
insurers. Duplication of risk-taking will need to be identified, as this will become a
waste if not detected. Again, the construction professional is the person best qualified
to do this.
Parties will engage in team building, review and value management workshops, and
the construction professional may act as facilitator for these, especially when the
targets for improvement are largely value related.
CASE STUDY: JCT Framework Agreement

The Joint Contracts Tribunal in the UK has published a framework agreement that can be
used by clients in both the private and public sectors – and in respect of public client use
satisfies the needs of the UK government’s The Public Contracts Regulations 2006 which
implemented the EC Consolidated Directive 2004/18/EC.
The parties are termed the ‘employer’ and the ‘service provider’.
The agreement is intended to be used when the employer has a substantial volume of work
over a period of time. Work is ‘called off’ from the framework, which has these key
objectives:
 zero health and safety incidents

 team working and consideration for others
 greater predictability of out-turn cost and programme
 improvements in quality, productivity and value for money
 improvements in environmental performance and sustainability, and reductions in
environmental impact
 first time right with zero defects
 the avoidance of disputes
 employer satisfaction with product and service
 enhancement of service provider’s reputation and commercial opportunities.
(Continued)
Operational provisions in the agreement relate to:
 organisational structures and decision making

 collaborative working
 sharing of information and know-how
 communications protocols
 confidentiality
 risk assessment and allocation
 value engineering
 change control procedures
 early warning
 team problem solving
 performance measurement.
The JCT anticipates frameworks to be between two and five years long, although the
Regulations limit this to four years.
6.3 Cluster management

It is not possible for a prime contractor to directly manage all tiers in the supply
chain, so reliance must be made on key supply chain partners to cascade the
partnering objectives down the chain, through clusters.
Examples of typical clusters are:
 groundworks – excavation, drainage and concrete foundations combined;

 superstructure – steelwork or concrete frames, including upper floors
associated with each;
 envelope/enclosures – walls/roof, either singularly or combined, to reach a
weather-tight stage in the build process;
 services engineering – mechanical, electrical, sanitary, rainwater disposal,
lightning protection, lifts and elevators, etc. combined;
 fitting out – floor, wall and ceiling finishings, fitting out and decorating
combined;
 external works – access roads, parking, landscaping (hard and soft), enclosure
(fencing/walls), etc.
Subsidiary supply chains will have cluster members reporting to a cluster leader that
is a main supply chain partner. The task of a cluster is to design and deliver an
integrated part or element of a building.
A prime contractor will create clusters for different types of project that the business
specialises in. Clusters for school buildings will be different from those for bridge
building, for example, although some of the cluster – but not all – might also be
suitable for hospitals.
The construction professional is likely to become involved in packaging the

appropriate clusters. This task is to create clusters where there is no risk of aspects of
a project being missed. For instance, builder’s work in connection with engineering
services will need to be packaged with the scope of the services if there is no ‘general
contractor’. Members of the engineering cluster would need to identify their
requirements and provide for employment of their own general builder within their
integrated cluster.
Clusters will focus on their own aspects of continuous improvement, and present
these to the prime contractor’s supply team management. In respect of services
engineering, members of a cluster might be involved in, for example, new methods
such as modularisation, assembly off site, standardisation in design and greater use of
IT.
Clusters must also be geographically grouped. The members of a cluster must have
the same geographic capability in order to be compatible with each other. A
mechanical engineering firm that works throughout all regions of a country could not
be joined in a cluster that had an electrical engineering firm that merely worked in
just one region of the country. They need to be ‘territorially compatible’.
Similarly, clusters must have the same capability for size of project. Participants must
be ‘capability compatible’. The marrying of cluster members is vitally important.
6.4 ‘Embedding’
When prime contractors first have an opportunity to express an interest in quoting for
a project, they will call upon their supply chain framework partners to participate in
the early processes.
Supply chain partners will become ‘embedded’ into the processes at the earliest
opportunity.
By putting together a project team at an early stage, the appropriate skills are
harnessed to investigate and deliver solutions that give cost effectiveness, quality and
sustainability. Integration aids communication, transfer, and use of resources with the
most relevant knowledge to influence the decision making that will result in success.
Construction professionals will be involved in cost planning, design option appraisals

and other typical pre-contract work that they are qualified to perform.
Critically comment on the aspects of packaging and embedding that you have been
involved with. What would improve the outcomes?
7 Summary – Benefits of SCM

7.1 Reduced costs
By using a reduced number of prime contractors, subcontractors and suppliers,
through a quality selection process and a basis of pricing such as schedules of rates
and contract percentages, long-term savings are possible from best practice working
methods that are embedded in the processes of contracting.
Centralised purchasing maximises turnover-related discounts, and there is a co-

ordinated approach to procurement.
7.2 Reduced waste

A culture of people working together, in organisations that value the benefits which
result from closer collaboration, is rewarding to them as individuals and economically
rewarding to their businesses. Wasted resources can be removed from processes, as
teams are integrated and share their knowledge to best effect.
Close business relationships are the result.
7.3 Reduced risk

As SCM team members have a vested interest in projects being successful, innovation
and best practice will be sought to give ‘commercial advantage’ in bids for work.
Risk will be identified as part of the processes used, and mitigated by management.
The risk of disputes within teams will be reduced, and costly dispute resolution saved.
Better quality will result in fewer defects and reduce the risk of having to rectify these
at a higher cost than if the work had been ‘right first time’.
7.4 Best practice and client satisfaction

SCM team members will benefit from repeat working together. They will learn from
each other and the cross-fertilisation of ideas will enhance the offering in terms of
best practice.
Client satisfaction will result in repeat orders, and businesses will spend less on their
sales teams ‘fishing’ for work. Management time can focus on improving the work,
rather than on marketing (although growth of the business will always be necessary to
satisfy shareholders). Businesses that take best practice procurement seriously will
have a chief innovation officer on their main board of directors.
There is more certainty of payment under fair practices, and the risks attached to cash
flow for running the business are lessened as a result.
7.5 The scenario example revisited

Let us now revisit the project scenario given in Example 2 in the Introduction, and
apply the SCM techniques that have been discussed.
The German firm that designs the specialist system of atria roofs has a cluster of
CAD drafting specialists to which it outsources its work. There are four firms in this
cluster, in Vietnam and India, where these services are becoming a speciality service
the world over. Each cluster firm has a service level agreement (SLA) that sets out the
performance criteria to be maintained. Typically, SLAs detail the response times for
carrying out work, the turnaround times for drawings to be prepared, the outputs in
terms of the standards of work, and a procedure for rectification of problems.
Importantly, the cluster firms will have worked together to develop the exact outputs
required by the client in the manufacturing processes following on from the
preparation of drawings.
CAD digitisation will be to a common format and in the number of layers required.
Meetings will have been held to agree the exact requirements and a system of
monitoring and review, to achieve continuous improvement, will be in place within
the cluster firms. A basis of charging is agreed across the cluster, and a mechanism
for uplifts in line with local inflation is agreed.
Agreed customised materials lists will be possible from the drawings; these will be
accessible by electronic transfer into the fabrication factories in Italy and Germany.
The manufacturer of rubber seals in Italy will be the only manufacturer for the
system, following an exclusivity partnering agreement based on research and
development into the product. The rubber seals cannot be sold to any other system
producer, in return for which there is an agreement on business volumes, and a
pricing mechanism that reflects the minimum amount of stock that must be held at
any time so that orders can be met without manufacturing delay. Because this is the
only supply chain partner for this commodity, an understanding is reached on dates
when the factory closes for holidays and maintenance, so that project delivery is not
affected.
Glass fabrication can be carried out by one of a cluster of factories in countries

around the world owned by a French company. The parent company acts as the lead
member of the cluster, and trains the various outlying factories in the exact
requirements of the client’s product. The most advantageously located factory will
meet the order, and the logistics of delivery to the site will be optimised by the
shortest possible transportation route.
The steelwork fabrication facility in Germany is owned by the system designer, so the
processes here are under direct quality control. However, outsourced labour may be
called upon at peak times to supplement the permanent workforce, and there will be a
framework agreement with a cluster of personnel recruitment agencies to provide
temporary fabrication engineers on an as-needs basis.
Site assembly and erection includes the glazing, and there is a cluster of firms around
the world that carry this out as subcontractors. They are chosen for their proximity to
the site, their availability at the time and their past performance KPIs. A guaranteed
maximum price is agreed with the successful firm, and a performance-related share of
profits is made if delivery is within target time and cost. The contractor must pay for
any delay it causes to the host main contractor on the site.
Materials are supplied, on time, free of charge to the fabricator, and the German
system manufacturer takes responsibility for the logistics and management of delivery
integration. The erector provides cranage and all site facilities not supplied by the
main contractor on the site; this will include welfare and health and safety facilities.
On completion, any defects will be the responsibility of the erector, and will be
measured as a KPI in the partnering agreement that governs the cluster.
All supply chain subcontractors and suppliers will have access to a project-specific
integrated intranet from which the drawings, programmes and schedules can be
accessed and used. A process map will be in operation to assist management, and
essential staged gateways will be monitored so that project delivery is always on
target for satisfactory completion.
Payments to partners will flow automatically from the online completion of gateways,
with automatic BACS money transfer into designated local company bank accounts.
CASE STUDY: Building engineering services

An article in Building Services Journal (Fletcher 2004) reported the head of construction
at NHS Estates, Peter Woolliscroft, as saying this about innovation in the supply chain:
‘I am looking for the building services industry to take that leap of faith into
modularisation, into standardisation of their plant and equipment into making an
industry into a profession. Consultants know that most hospitals are similar. It’s very
rare to have a unique set of circumstances in a hospital environment, it doesn’t work
that way. So why do they design things over and over again? Why do architects design
toilets over and over again?’
He viewed suppliers as being vital to the SCM process.
‘We have to recognise that the real innovation comes from the specialist suppliers not
the designers. The designers are becoming more conceptual, leaving the precise detail
to those that make the products to fit the bill. If it were possible (which it isn’t, but
may be one day) to standardise a range of products required in hospital buildings,
manufacturers would have confidence to produce them. These products would
absolutely meet the needs of the service rather than being the compromise that we
often have now. That would be a real step forward.’
Peter Woolliscroft’s ideas for the output of the NHS ProCure21 partnering approach
include lean thinking:
‘We are looking for lean construction and modularised solutions which require plant
and equipment to be assembled off-site defect free, fully guaranteed. We want this
delivered to site with quick fix connections onto the minimum amount of
infrastructure to make it up. Couple with that some easy and rapid withdrawal of that
plant as and when replacement is required or increased capacity. This would involve
the planners, architects and the building services consultants.
‘Lean thinking on every aspect of what we do is the key. If there was a great big chunk
we could take out, someone would have seen it by now. Small cost savings may not
add up to a hill of beans, but if you have a lot of hills, that adds up to a mountain.’
The article was entitled ‘Healthy criticism’, and it certainly sums up the role that SCM has
to play.
Summarise the healthy criticism that you have to contribute to the cause of SCM.
REFERENCES
Better Regulation Task Force (BRTF) and Small Business Council (SBC) (2003)
Government: Supporter and Customer? Available to download at
www.ogc.gov.uk/documents/smeprocurement.pdf [Accessed 25 September 2009].
Cain C T (2003) Building Down Barriers: A Guide to Construction Best Practice,

London: Spon Press. ISBN-13: 978-0415289658.
Chartered Institute of Purchasing and Supply (undated) ‘Construction Clients’

Policy’. Available to download at
www.cips.org/documents/Construction_Clients_Policy.pdf [Accessed 2 September
2009].
Egan J (1998) Rethinking Construction, London: Department of Trade and Industry.

ISBN-13: 978-1851120949. Available at www.architecture.com [Accessed 2
September 2009].
Egan J (2002) Accelerating Change, London: Rethinking Construction. Available at

www.strategicforum.org.uk [Accessed 2 September 2009].
Fletcher K (2004) ‘Healthy criticism’, Building Services Journal.
Holti R, Nicolini D and Smalley M (2000) Prime Contractor Handbook of Supply

Chain Management, London: CIRIA. ISBN-13: 978-0860175469. Sections 1 and 2
available to download at www.mod.uk [Accessed 2 September 2009].
Latham M (1994) Constructing the Team, London: HMSO. ISBN-13: 978-

0117529946.
Leading Oil and Gas Industry Competitiveness (LOGIC): Supply Chain Management.
Available at www.logic-oil.com/supply/book4/findings.html [Accessed 27 August
2009].
Major Projects Association (2002) ‘Supply-chain management: An MPA seminar

held at the Royal College of Pathologists, London on 21 June 2002’. Available to
download at www.majorprojects.org [Accessed 2 September 2009].
National Audit Office (2001) Modernising Construction, London: The Stationery

Office. Available to download at www.nao.org.uk [Accessed 2 September 2009].
National Audit Office (2005) Improving Public Services through Better Construction,
London: The Stationery Office. Available to download at www.nao.org.uk [Accessed
2 September 2009].
Office of Government Commerce (OGC) (2003) ‘Increasing competition and

improving long-term capacity planning in the government market place (‘Kelly
Report’). Available to download at
www.ogc.gov.uk/construction_the_kelly_report.asp [Accessed 2 September 2009].
Office of Government Commerce (OGC) (2005) ‘Supply chain management in public

sector procurement: A guide’. Available to download at
www.ogc.gov.uk/documents/scm_final_june05.pdf [Accessed 2 September 2009].
Strategic Forum for Construction (SFC) (2003) ‘Introduction to supply chain

integration: Chainlink’,
www.strategicforum.org.uk/sfctoolkit2/cl_workbooks/cl_workbooks0.html [Accessed
28 August 2009].
VINCI (2007) Annual Report. Available to download at:

www.vinci.plc.uk/Downloads/Accounts/VinciPLC-RA2007.pdf [Accessed 1
September 2009].
FURTHER READING
International Organization for Standardization (2009) ‘ISO 9001:2000 – What does it
mean in the supply chain?’ Available at www.iso.org. [Accessed 3 September 2009].
Joint Contracts Tribunal (JCT) (2007) Framework Agreement, Andover: Sweet &
Maxwell. ISBN-13: 978-0418851609.
Pryke S (ed.) (2009) Construction Supply Chain Management, Oxford: Wiley-

Blackwell. ISBN-13: 978-1405158442.
Strategic Forum for Construction (SFC) (2005) ‘Improving construction logistics’.

Available to download at www.strategicforum.org.uk [Accessed 3 September 2009].
Strategic Forum for Construction (SFC) (2007) ‘Profiting from integration’.

Available to download at www.strategicforum.org.uk [Accessed 3 September 2009].
Supply Chain Pre-Qualification Questionnaire
APPENDIX A
SUPPLY CHAIN PRE-QUALIFICATION QUESTIONNAIRE

Reproduced with permission of The Strategic Forum for Construction
[Statement of Intent]
Mission
“To Integrate The Supply Chain”
Vision
“As members of the Integrated Supply Chain we are

committed to working together in a collaborative
style to ensure the delivery of high quality cost
effect facilities, products, services and
environment, designed to fully meet the needs of
our clients”
Page 1 Jun 03
The principles underlying this Agreement are the Parties {insert Partner one
name and [insert Partner two name]) desire to work together in an integrated
and collaborative manner through a supply chain.
Our aims are to: -
1. Define and reflect the values and goals of our client

2. Deliver measurable added value
3. Deliver projects to appropriate quality, time and budget. Whilst reflecting
best value.
4. Create excellence in Supply Chain Partnering
5. Adopt best practice techniques and encourage innovation.
6. Create a supply chain based on honesty, trust and respect for each other.
7. Create a culture of mutual benefit both financially and of continuous
improvement for the businesses and the workforces.
8. Resolve all issues at the lowest level and in a timely manner.
9. Provide a safe, challenging, enjoyable working environment that
enhances all our goals and delivers defect free solutions time after time.
10. Share knowledge
11. Compete through superior underlying value.
These aims will be achieved by: -

1. Teamwork, mutual trust and respect
2. Focusing on each stakeholders needs
3. Open, honest and effective communication.
4. Respect for health and safety and the environment.
5. Formulate and strive for continuous self improvement through
the medium of measurable KPI’s
6. Training and personal development of the workforce in the
skills and techniques required to successfully implement this
vision.
Page 2 Jun 03
REFERENCES
In support of your declaration that you company has a satisfactory track record, please
indicate below details of three references in respect of recent contracts of a similar nature to
the project currently under consideration. Include any that resulted in a conviction for a
violation of Health and Safety or Environmental Legislation.
Reference 1 Reference 2 Reference 3

Contact Name
Address
Postcode
Tel No.
Fax No.
Contract Details
Client Name
Type / Value
Address
Page 3 Jun 03
1.0 COMPANY DETAILS

1.1 Company Name: ..………………………………………………………………….……
Address: …………………………………………………………………………………
…………………………………………… H/O: Yes No If No supply H.O etc.
Contact Name: …………………………… Position ……………………….………….
Tel No.: ………………………………….. Fax No.: ………………………………….
Email: …………………………..…… Web ………………………………….

site:
Managing Director:………………………………………………………………………
Other Directors: …………………………………………………………………………
Other key contacts:………………………………………………………………………
Country of Registration …………………. Co. Reg. No. ……………..………………
Construction Industry Scheme: Holder of - CIS4 / CIS5 / CIS6 (delete as applicable)
V.A.T. Registration No…………………… Date of Incorporation: ……………………
Principal Business Activity: ……………………………………………………….
1.2 Name of Parent Company, (if applicable) ……………………………………………….
Address ………………………………………………………………………………….
Country of Registration …………………. Co. Reg. No. ……………………………
Other companies: ………………………………….……………….……………….……
1.3 Name of Ultimate Holding Company (if applicable) …………………………………
Address ………………………………………………………………………………….
Country of Registration …………………. Co. Reg. No. ……………………………
2.0 (A) GATEWAY QUESTIONS

2.1 PROFESSIONAL CONDUCT
a) Have any of the officers been bankrupt or involved in any

company, which had been liquidated or gone into receivership? Yes No
b) Has any Director/Partner been convicted of a criminal offence?

relating to the conduct of the company? Yes No
c) Has your company ever had a contract terminated or had your

employment determined under the terms of contract? Yes No
Page 4 Jun 03
d) Do you have any tax liability due and outstanding to Customs &
Excise or Inland Revenue Yes No
e) Has any Director/Partner been convicted of misrepresentation?

in the last 5 years Yes No
If your answer to any of the above questions is yes, please attach full details including the
date of any of the events referred to above.
Section 2.0 Overall has the Supplier achieved a PASS OR FAIL
NOTE: A failure at Section 2.0 is an automatic disqualification from this selection

process
3.0 FINANCIAL INFORMATION
3.1 TRADING ACCOUNTS (To be completed in £k)

CURRENT
LAST 3 YEARS YEAR NEXT 2 YEARS
YEAR 20…… 20…… 20…… 20……. 20…… 20…….
COMPANY
TURNOVER £ £ £ £ £ £
DETAILS
ACHIEVED ACHIEVED ACHIEVED FORECAST FORECAST FORECAST
PROFIT/ £ £ £ £ £ £
LOSS
WORK £ £ £
SECURED
ACHIEVED ACHIEVED ACHIEVED
UNSECURED £ £ £
CAPACITY
FORECAST FORECAST FORECAST
PARENT CO. £ £ £ £ £ £
TURNOVER
DETAILS ACHIEVED ACHIEVED ACHIEVED FORECAST FORECAST FORECAST
PROFIT/ £ £ £ £ £ £
LOSS
ULTIMATE £ £ £ £ £ £
HOLDING CO.
TURNOVER ACHIEVED ACHIEVED ACHIEVED FORECAST FORECAST FORECAST
DETAILS
PROFIT/ £ £ £ £ £ £
LOSS
3.2 AUDITED ACCOUNTS

Please provide copies of your audited accounts for the last three years.
3.3 BANK DETAILS

Please provide a Letter of Confirmation allowing us to approach your Principal Banker for a
reference and provide the details hereunder.
Page 5 Jun 03
Bank Name …………………………………………………………………………..
Address……………………………………………………………….…………………
Contact Name ……………………………. Tel No. …………………….……………
3.4 PAYMENT INFORMATION
3.4.1 Please confirm the following:
(a) Payment terms: ………………………………………..
(b) Credit limit: ………………………………………..
(c) Name of credit controller: ………………………………………..
3.5 WORKLOAD DISTRIBUTION
3.5.1 Please provide the required information within the table hereunder:-
DESCRIPTION DESIGN MANUFACTURE INSTALLATION TOTAL
Number of Contracts
currently in progress
Percentage of Contract
works normally:
(a) Dealt with in house
(b) Sub-let
Total 100% 100% 100% 100%
Number of directly
employed operatives
3.5.2 Value of Contracts undertaken (£K): Minimum £…………………..
Maximum £……………….….
3.5.3 Typical/Average Value of Contracts Undertaken (£K): £ …………………..
Section 3.0 Overall has the Supplier achieved a PASS OR FAIL
Page 6 Jun 03
4.0 PREVIOUS CONTRACT WORKS AND REFERENCES
4.1 Please provide details of three contracts completed by you during the past 5 years. They
should involve projects relevant in experience and expertise and demonstrate the quality of
and level of service that you would provide. If possible include projects where Supply Chain
Management techniques have been successfully implemented.
PROJECTS
1 2 3
Project Name
Location
Description of the Project
Contract Value (£k)
Completion Date
Your Clients Name
Contact Name
Contact Telephone No.
4.1.2 Provide names of projects undertaken for [Insert company name] in the past five years
stating contact names:
……………………………………………………………………………………………
……………………………………………………………………………………………………………
……………………………………………………………………………………………………………
……………………………………………………………………………………………………………
……………………………………………………………………………………………………………
……………………………………………………………………………………………………………
……………
Please confirm that you have no objection to us seeking references from the above
Objection: Yes/No.
4.1.3 For any of the above projects detail any delays that arose to your contract works and the
action you took to minimise these.
4.1.4 Please provide brief details of how you co-ordinated any design work you undertook with that
of the other parties involved.
4.1.5 Indicate how you liased with [Insert company name] to establish the optimum design solution
for the client.
Section 4.0 Has the Supplier achieved a PASS OR FAIL
Page 7 Jun 03
5.0 INSURANCES
5.1 Please confirm which of the following insurances you currently hold and any limits that apply.
Employer’s Liability Yes/No Limit £ …… Exp Date …….
Public Liability Yes/No Limit £ …… Exp Date …….
Contract All Risk/Works

Insurance Yes/No Limit £ …… Exp Date …….
Professional Indemnity Yes/No Limit £ …… Exp Date …….
Product Liability Yes/No Limit £ …… Exp Date …….
Others (please state) ………………… Limit £ …… Exp Date …….
6.0 HEALTH & SAFETY
6.1 Please complete the Declaration of Competence below
6.2 Provide details of your Safety Advisor or Consultant.
Name: …………………... Contact: ………………………. Tel No.: ………………
6.3 Please provide details of Health & Safety training given to your Managers, Supervisors and
Operatives:
……………………………………………………………………………………………
……………………………………………………………………………………………
……………………………………………………………………………………………
Page 8 Jun 03
DECLARATION OF COMPETENCE
This is to confirm that: Type of work undertaken (specify)
Company ………………………………..…… ….……………………………………….………

Address. ………………………………..……. ……………………………………….…..……..
.…………………………………………..….… ………..……………………..………..…..…….
Postcode. ………………………….….….….. ………………..…..………………………..……
Tel No.. ………………………………..…….. Is competent to discharge its contractual
obligations and duties under The Health and
Fax No ……..….…………………..…….…… Safety at Work etc Act 1974 and subordinate
legislation
.
To support this declaration we confirm Have an understanding of the

that we: requirements to comply with the Project
(Tick boxes as appropriate) Health and Safety Plan.
Have a comprehensive health and Have an understanding of Health and

safety policy, which details the company’s Safety File, are aware of the information it
organisation and principal health and must contain, and the general duty to co-
safety arrangements. operate with the Planning Supervisor and
Principal Contractor.
Indicate date of last revision: __/ __ /__
Attach details of any convictions in
Have a satisfactory track record, respect of Health, Safety or Environmental
which is relevant to the general violations in the last 3 years. Tick if ‘Yes’
requirements for the specific project or insert ‘nil’ if there were none.
under consideration. Indicate on page
three of this form three references who Your company/organisation may be required
can support this statement. to produce evidence in support of its
Declaration of Competence and the signatory
Have a health & safety management below should have the required authority.
system. Do you ensure the availability
during the project of competent advice, This declaration forms part of the Contract
training & supervision as required of staff Conditions. Your performance will be
engaged in work? continually assessed during the contract.
Failure to achieve the correct standard will
Have sufficient awareness and result in your company being withdrawn from
understanding of relevant health and our list of approved contractors.
safety legislation, Approved Codes of
Practice and guidance notes. Signed……………………………………………
……….
Are familiar with the health and safety
control hierarchy, the pre-tender Health Position…………………………………………
and Safety Plan and are competent to …………
undertake an assessment of risk arising (Director)
out of design, construction, repair and
maintenance work, and have allocated Date ___/ ___/ ___
sufficient resources to eliminate, control
and reduce risks at work. Your tender For and on behalf of
documentation will be checked to support
this statement. …………………………………..…….
Page 9 Jun 03
FOR INTERNAL USE ONLY

Declaration checked against tender Details of any convictions attached or a
documents? Yes/No* statement included sating that there
Yes/No*
Indicate which reference (s) obtained? Was satisfactory reference obtained?
1 / 2 / 3* Yes/No*
Name of Referee(s) Date reference obtained ? ----- /----- /-----
Date Competence Approved ? ----- /----- /-

Competence Approved? Yes/No* ----
Name of person making approval: Signature: Position:
* Please delete where not applicable.
Page 10 Jun 03
The following Questions in this section must be answered before we can approve your company’s competence to work within our supply chain :
SCORING MATRIX
Points Quality Threshold Score
Available Threshold Reached Award
ed
Q1 Type of work employed to carry out: A1
Q2 How long has your company been A2 <5yrs = 0

doing this type of work? >5yrs = 5
>10yrs = 10
Q3 Do you employ your own staff to A3 All sublet = 0

carry out the work or do you sub- Both = 5
contract out? All own = 10
Q4 Do you employ your own safety A4 None = 0

advisors or do you employ a safety Consultant = 5
consultant ? Own = 10
Q5 Give details on how the safety A5 No System = 0

organisation operates in your System = 5
company? System to
18001 = 10
Q6 What is the average number of A6 Year Year Year

employees for last three years ? date
Management =
Operatives =
SCORING MATRIX
Available Threshold Reached Awarded
Q7 How many Reportable accidents (As per RIDDOR) have your company had in the Related to
last three years? National
Average
A7
For Own Employees: Date Number of Reportable Accidents No: of Fatalities

Year > Av = 0
Year Av = 5
Year < Av = 10
For Sub-Contractors Date Number of Reportable Accidents No: of Fatalities

Employees:
Year > Av = 0
Year Av = 5
Year < Av = 10
For Members of the Date Number of Reportable Accidents No: of Fatalities

Public:
Year > Av = 0
Year Av = 5
Year < Av = 10
Q8 Please give details of accidents A8 (please indicate if the details of the

indicated in question 7 accidents are attached to this form)
Page 12 Jun 03
SCORING MATRIX
Available Threshold Reached Awarded
Q9 How many Prosecutions, Prohibition or Improvement Notices has your company
received in the last three years?
A9.
Date (State Number of Number of Number of Number of
year only) Health & Safety Prohibition Improvement Environmental
Prosecutions Notices Notices Prosecutions
Year > Av = 0
Year Av = 5
Year < Av = 10
(Please give brief description of offences if any)
Q10 Please attach the latest Health & Safety A10 (Please indicate if the Health & None = 0
Policy for your company. Safety Policy is attached). Av = 5
Good = 10
Q11 Please attach a recent Method A11 (Please indicate if a Method None = 0
Statement prepared by your company. statement is attached) Av = 5
Good = 10
Q12 Please attach a recent Risk Assessment A12 (Please indicate if an Risk None = 0
prepared by your company. (Please note Assessment is attached) Av = 5
contractor with design responsibility to Good = 10
provide a Design Risk Assessment).
Q13 Has your company received any Health A13 (Please give details) None = 0
and Safety awards during the last three <5=0
years. > 5 = 10
Y/N

Page 13 Jun 03
7.0 STATUTORY/SOCIAL INCLUSION POLICIES
7.1 Do you have an equal opportunities policy Yes No
7.2 Do you have a disabled persons policy Yes No
7.3 Do you have an environmental policy Yes No
8.0 COLLABORATION/SUPPLY CHAIN INTEGRATION
8.1 Please give details of how you foster good relationships with your supply chain in a
collaborative working environment. What benefits has this provided?
……………………………………………………………………………………………………………
……………………………………………………………………………………………………………
……………………………………………………………………………………………………………
…………………………………………………………………
8.2 What is your company’s policy/philosophy with regards to integrated Supply Chain
Management?
……………………………………………………………………………………………………………
……………………………………………………………………………………………………………
……………………………………………………………………………………………………………
………………………………………………………………….
8.3 Please provide evidence of existing framework or partnering agreements.
8.4 Please provide evidence of your experience and use of the following supply chain
techniques:
a) Open book transparent tendering and costing
b) Benchmarking
c) KPI’s
d) Continuous improvement
e) Any other SCM techniques
8.5 Do you carry out any training in SCM principles and techniques? Yes No
8.6 How do you manage risk? Give details of any formal procedures that you have in place or
propose to implement……………………………………………………………………………..
……………………………………………………………………………………………………………………
……………………………………………………………………………………………………
8.7 Are you prepared to enter into a collaborative relationship based upon the principles set out in
our Partnering Agreement? Yes No
8.8 What is your understanding of pain/gain share ………………………………………………..
Page 14 Jun 03
…………………………………………………………………………………………………………….
8.9 Are you prepared to commit to a pre agreed share? Yes No
8.10 Can your company demonstrate an operating participation in a reform organisation that actively
promotes supply chain integration eg COMPASS
Yes No
8.11. (manufacturers only) Have you achieved Chartered Member Status of COMPASS?
Yes No
(B) TECHNICAL CAPACITY
To proceed to Section (B) the Supplier must have passed all Gateway criteria
9.0 SERVICE CAPABILITIES
9.1 On which basis are you prepared to become a member of our supply chain:
Labour Only YES NO

Supply Only YES NO
Supply & Fix YES NO
Bills Of Quantities YES NO
Plan & Spec YES NO
Design, Supply & Fix YES NO
9.2 Please indicate your preferred format for enquiry communication:

Hard copy YES NO
Floppy disk YES NO
CD YES NO
Zip disk YES NO
e-mail YES NO
9.3 In-house Capabilities

State in % against each heading your in-house capability:
Product Manufacture: …… Fixing: …… Design: …… Distribution: ……
9.4 Geographical Areas & Scope Of Works:
Page 15 Jun 03
a) Please list the trades, services and products that you are interested in providing to us (only
list your core competencies):
……………………………………………………………………………………………………………………
……………………………………………………………………………………………………………………
……………………………………………………………………………………………………………………
b) Please list the geographical areas that you consider you are able to serve
effectively:………………………………………………………………………………………………
……………………………………………………………………………………………………………
……………………………………………………………………………………………………………
SCORING MATRIX
Points Quality Threshold Criteria Score Weighted
Available Threshold Reached Weighting Awarded Score
(A) (B) (A) x (B)
10.0 INFORMATION TECHNOLOGY
10.1 Do you use CAD Yes No 20
If YES what software do you use…………………………………………………………….
10.2 Do you use e-mail for written communication Yes No 20
10.3 Do you use e-mail to transfer documents Yes No 20
10.4 Do you use project management/project planning software Yes No 20
If YES what software do you use.………………………………………………………….
10.5 Have you experience of using an extranet based [Supply Chain] management system 20
Yes No
100 70 Y/N 10%

If YES who were the other parties
Page 16 Jun 03
SCORING MATRIX
(A) (B) (A) x (B)
……………………………………………………………………………………………………………
……………………………………………………………………………………………………………
11.0 RESOURCES
11.1 How many employees are there on the payroll …………
a) % management ……..
b) % supervisory ……..
c) % technical ……..
d) % manual ……..
e) % administrative ……..
11.2 How much of your turnover is sub-contracted …………
11.3 Which elements of work do you sub-contract?

……………………………………………………………………………………………………………
……………………………………………………………………………………………………………
11.4 List those Unions recognised by your organisation……………………………………….

……………………………………………………………………………………………………………
TOTAL OF SECTION 11.0 100 80 Y/N 10%
12.0 MANAGEMENT PROCESSES AND SYSTEMS
12.1 Financial Management
a) Do you monitor income/expenditure and accruals monthly Yes No 20
b) Do you produce monthly management accounts Yes No 10
c) Do you produce monthly client applications for payment Yes No 10
d) Do you produce a monthly forecast final account for clients Yes No 20
Page 17 Jun 03
SCORING MATRIX
(A) (B) (A) x (B)
e) How do you deal with variations that may lead to a client overspend: 20
……………………………………………………………………………………………………………
……………………………………………………………………………………………………………
f) Do you share savings with subcontractors/suppliers Yes No 10
g) Do you use incentives to reward sub-contractors/suppliers Yes No 10
TOTAL OF 12.1 100 80 Y/N 10%
12.2 Time Management
a) Do you “buy-in” to the clients programme Yes No 50
If YES how do you achieve this:

……………………………………………………………………………………………………………
……………………………………………………………………………………………………………
b) What systems do you employ to ensure completion on time: 50

……………………………………………………………………………………………………………
……………………………………………………………………………………………………………
c) Have you ever been levied liquidated or un-liquidated damages

Yes No
TOTAL OF 12.2 100 85 Y/N 10%
12.3 Quality Management
a) How do you ensure quality control: 40

……………………………………………………………………………………………………………
……………………………………………………………………………………………………………
Page 18 Jun 03
SCORING MATRIX
(A) (B) (A) x (B)
b) How do you encourage innovation through out the supply chain: 10
……………………………………………………………………………………………………………
……………………………………………………………………………………………………………
c) Give examples of innovation that has benefited the client: 10

……………………………………………………………………………………………………………
……………………………………………………………………………………………………………
d) Do you have documented quality procedures Yes No 20
e) Are you ISO 9000/1/2 accredited Yes No 10
f) List Professional affiliations and certifications…………………………………………… 10
TOTAL OF 12.3 100 85 Y/N 10%
12.4 Risk Management
a) Do you use risk managements techniques Yes No 25
If YES describe how you use these techniques:

……………………………………………………………………………………………………………
……………………………………………………………………………………………………………
b) Have these techniques been successful Yes No 25

If NO why did they fail:
……………………………………………………………………………………………………………
……………………………………………………………………………………………………………
c) Have you been involved in any formal dispute resolution tribunal in the last 5yrs
Yes No 50
If YES please provide details………………………………………………………………..

…………………………………………………………………………………………………………….
Page 19 Jun 03
SCORING MATRIX
(A) (B) (A) x (B)
TOTAL 12.4 100 80 Y/N 10% 87 8.7
13.0 Benchmarking Performance
13.1 Do you use KPI’s to monitor your performance Yes No 30
If YES what KPI’s do you use:

……………………………………………………………………………………………………………
……………………………………………………………………………………………………………
13.2 Do you use KPI’s to monitor sub-contractors/suppliers Yes No 30
13.3 How are these used to improve future performance: 40

……………………………………………………………………………………………………………
……………………………………………………………………………………………………………
TOTAL 13.0 100 70 Y/N 20%
14.0 Bonds and Warranties
Please confirm that you are prepared to provide:-
(a) A Default Bond / Performance Bond 25
(b) An Ultimate Parent Company Guarantee 25
(c) Collateral Warranties in favour of the Employer and other 25

parties who have an interest in projects i.e. Purchaser
(d) Latent Defects Warranty (Including ‘Subrogation Waiver’) 25
TOTAL 14.0 100 75 Y/N 20%
Page 20 Jun 03
SCORING MATRIX
(A) (B) (A) x (B)
TOTAL 800 Y/N 100%
HAS THE SUPPLIER MET THE MINIMUM SELECTION REQUIREMENTS YES NO
Page 21 Jun 03
DATE: ………………………………………………
APPRAISERS:
……………………………………………………………………………………………………………
NAME: ……………………………………………………………………………………………………………
Signed: ……………………………………………………………………………………………………………
NAME: ……………………………………………………………………………………………………………
Signed: ……………………………………………………………………………………………………………
NAME:
………………………………………………………………………………………………….
Signed:
…………………………………………………………………………………………………
5.0 DECLARATION
15.1 We confirm that the above is a true record and are willing and prepared to provide a Bone
Fide Tender should we be selected for the final Tender List.
Name: Signature:
Position:
Date:
Page 22 Jun 03
Supply Chain Partnering Agreement
APPENDIX B
SUPPLY CHAIN PARTNERING AGREEMENT
Reproduced with permission from The Strategic Forum for Construction
[Partner one (1)]
Partnering Agreement
with
[Partner two (2)]
1 of 24
[Statement of Intent]
Mission
“To Integrate The Supply Chain”
Vision
“As members of the Integrated Supply Chain we

are committed to working together in a
collaborative style to ensure the delivery of high
quality cost effect facilities, products, services and
environment, designed to fully meet the needs of
our clients”
2 of 24
The principles underlying this Agreement are that the Parties {insert Partner one name and [insert
Partner two name]) desire to work together in an integrated and collaborative manner through a
supply chain.
Our aims are to: -
1. Define and reflect the values and goals of our client

2. Deliver measurable added value
3. Deliver projects to appropriate quality, time and budget. Whilst reflecting best value.
4. Create excellence in Supply Chain Partnering
5. Adopt best practice techniques and encourage innovation.
6. Create a supply chain based on honesty, trust and respect for each other.
7. Create a culture of mutual benefit both financially and of continuous improvement for
the businesses and the workforces.
8. Resolve all issues at the lowest level and in a timely manner.
9. Provide a safe, challenging, enjoyable working environment that enhances all our
goals and delivers defect free solutions time after time.
10. Share knowledge
11. Compete through superior underlying value.
These aims will be achieved by: -

1. Teamwork, mutual trust and respect
2. Focusing on each stakeholders needs
3. Open, honest and effective communication.
4. Respect for health and safety and the environment.
5. Formulate and strive for continuous self improvement through the medium of
measurable KPI’s
6. Training and personal development of the workforce in the skills and techniques
required to successfully implement this vision.
3 of 24
FORM OF AGREEMENT
This agreement is made on the ………….. day

of …………. 2002
Between
[Insert name, address etc., of “Partner One”, the contracting party]

(Herein after called “Partner one”) of the one part
And
[Insert name, address etc., of “Partner Two”, the contracted partner]

(Herein after called “Partner Two”) of the other part.
“Partner One” and “Partner Two” are committed to working together, both individually and
collectively we are committed to the aims and objectives of this Agreement.
SIGNED SIGNED
Print Name Print Name
Position Position
For [insert Partner For [insert Partner
One’s name] Two’s name]
Date Date
4 of 24
CONTENTS
SECTION 1: - DEFINITIONS AND GENERAL PROVISIONS .........................................................................6
1.0 Definitions 6
2.0 Scope 7
3.0 Duration 7
4.0 Project Specific Orders 8
5.0 Confidentiality 8
6.0 Announcements 8
7.0 Copyright and Intellectual Property (“IP”) 9
8.0 Assignment 9
9.0 Costs and expenses 9
10.0 Insurances and Indemnities 9
11.0 Notices 9
SECTION 2: - TENDERING AND ORDERS ..................................................................................................10
12.0 Commissioning of works, services and the like 10
13.0 Integrated Supply Chain 10
14.0 Pricing and Price Variation Procedure 10
15.0 Risk & Reward 10
SECTION 3: - ENVIRONMENT, HEALTH & SAFETY, QUALITY ASSURANCE...........................................10
16.0 Environment 11
17.0 Health & Safety 11
18.0 Quality Assurance 11
SECTION 4: - MONITORING AND REVIEW .................................................................................................12
19.0 Reviews 12
20.0 Key Personnel : Company Structure Chart / Responsibilities 12
21.0 Team Building 12
22.0 Continuous Performance Improvement and KPIs 12
SECTION 5: - DISPUTES AND TERMINATION ............................................................................................13
23.0 Problem Resolution 13
24.0 Termination 13
25.0 Rights of Third Parties Act 13
26.0 Invalidity 13
27.0 Applicable Law 14
SECTION 6: - APPENDICES.........................................................................................................................15
5 of 24
SECTION 1: - DEFINITIONS AND GENERAL PROVISIONS

1.0 Definitions
Agreement The framework agreement between [insert Partner One’s name] and
[insert Partner Two’s name]
Agreement Period The period defined in Clause 3.1.1
Employer Companies, organisations and the like with whom [insert Partner One’s
name] have entered/desires to enter into Principal Contracts.
Environmental [Insert Partner One’s name] registered Environmental Management
Management System System current at the date of the Agreement or any revision thereto
Final Payment Shall have the meaning as defined in Project Specific Orders raised under
this Agreement
KPI Key Performance Indicators. A series of targets to measure performance

of the Parties.
Principal Contract A contract entered into or to be entered into between [insert Partner
One’s name] and an Employer
Parties [Insert Partner Two’s name] and [insert Partner One’s name]
Partner [Insert Partner Two’s name]
Partner’s Supply Companies, organisations and the like that supply goods and/or service
Chain and/or execute works for the Partner under this Agreement and/or any
Project Specific Order
Project Specific Order The term Project Specific Order refers to orders and/or contracts placed
for:
The execution of works
Supply of goods
Supply of services
Project Specific Orders are placed by [insert Partner One’s name] in
favour of the [insert Partner Two’s name] and are based upon the
agreed terms and conditions in Appendix 1 attached hereto.
[Insert name, address etc., of “Partner One”, the contracting party]
[Insert Partner
One’s name] .
Supply Chain Members as identified in Appendix 7 and/or members identified in a

Member Project Specific Order
Works The works and services as described in any project enquiry, tender or
Project Specific Order by [insert Partner One’s name] and any changes
made thereto
In this agreement words in the singular shall include the plural and the plural shall include the
singular except where the context requires otherwise.
6 of 24
2.0 Scope
2.1 To establish an agreement between [insert Partner One’s name] and [insert
Partner Two’s name] for
[Insert Project / Contract description]
2.2 Parties agree to act fairly towards each other in a spirit of trust, co-operation and
transparency in the performance of this Agreement and Project Specific Orders.
2.3 In the spirit of partnering, the Parties will use reasonable endeavours to co-
operate with the intent, if the commercial circumstances are right for both parties,
to work together. Neither Party will be obliged to consider such a possibility
unless at its absolute discretion such an arrangement would be commercially
advantageous to it.
2.4 Nothing in the Agreement shall give rise to or constitute a partnership in law
(whether or not as defined under the Partnership Act 1890 or any amendment or
modification thereto) between the Parties.
2.5 Nothing in the Agreement shall constitute either Party as an agent or

representative of the other and neither Party may hold itself out as such or commit
the other to any liability, relationship or arrangement, whether or not legally
binding.
2.6 Neither Party shall have the authority to enter into any engagement or make any
representation or give any warranty on behalf of the other Party or otherwise bind
or oblige the other Party.
2.7 The geographical extent of the agreement shall be [example UK] [NB this can be
extended - consideration of Applicable Law - Clause 28 - must be addressed]
3.0 Duration
3.1 The Agreement Period
3.1.1 This Agreement will come into effect on the [insert date] and shall (unless
terminated in accordance with Clause 27 or by operation of law) operate
for bid collaborations and Project Specific Orders placed with the Partner
until [insert date]
3.1.2 The Agreement will finally terminate without further notice on the date on
which the last Final Payment is made under the terms of the Project
Specific Orders placed under this Agreement.
7 of 24
3.2 Extension to the Agreement Period
After the expiry of the initial duration period, as referred to in clause 3.1.1, the
parties will in good faith, review whether or not the duration of the Agreement will
be extended. Either party will be entitled, without liability to the other, to decide not
to extend this Agreement. If the parties decide to extend this Agreement they will
confirm in writing the length of any such extension.
3.3 Project Specific Orders
The commencement and completion dates for any Project Specific Order shall be
set out in the terms of that order.
4.0 Project Specific Orders
4.1 Works services and the like undertaken under this Agreement will be
commissioned by [insert Partner One’s name from [insert Partner Two’s name] by
means of Project Specific Orders. The specific nature of collaborative
arrangements (including pre tender collaborations) will be established on a
“Project by Project” basis.
5.0 Confidentiality
5.1 In this Clause “Information” means any information in any verbal, written or other
tangible form, regardless of carrier medium, disclosed to one party by or on behalf
of the other party under the Agreement or Project Specific Order or otherwise.
5.2 Information, which passes between our two companies shall be treated as
confidential and must not be released or disclosed to any third party save for the
purposes of obtaining legal and/or insurance advice without the express consent
in writing of the other party.
5.3 Each party
5.3.1 shall not use any of that Information otherwise than for the purpose of the
Agreement and/or Project Specific Orders and
5.3.2 shall not copy any of that Information except to the extent necessary for
the purpose of exercising his rights of use and disclosure under the
Agreement and/or Project Specific Orders and
5.3.3 shall use best endeavours to ensure that information is only disclosed to
his employees suppliers and contractors only to the extent necessary for
the performance of the Agreement and/or Project Specific Orders and
5.3.4 shall ensure that his employees suppliers and contractors are made
aware of the Confidentiality provisions of this Agreement and/or Project
Specific Orders before they receive Information and shall procure their
agreement to be bound by the same.
5.3.5 Observe any specific confidentiality requirements imposed by Employers

and/or perspective Employers
6.0 Announcements
8 of 24
6.1 Each Party may not issue any press release, make any public announcement or
otherwise publish any information about the Agreement except with the prior
written consent of the other party.
6.2 Announcements relating to Project Specific Orders associated with this

Agreement shall be governed by the terms of the Project Specific Order
7.0 Copyright and Intellectual Property (“IP”)
7.1 Save for the provisions of clause 7.2 all IP matters will be dealt with under the
terms and conditions of the Project Specific Orders.
7.2 IP rights and copyright in design documents or other documents or recorded

information whatsoever, whether stored electronically or otherwise produced by
Partner One during collaborative arrangements/tendering under this Agreement
and/or prior to a relevant Project Specific Order shall be vested with Partner One.
Partner One may use any of his design documents for purposes other than the
performance of the Agreement provided that such use does not conflict with
confidentiality under the Agreement, his performance of the Agreement, Project
Specific Orders and/or the ownership of any Intellectual Property Rights of others.
7.3 IP rights and copyright in design documents or other documents or recorded

information whatsoever, whether stored electronically or otherwise produced by
Partner One during collaborative arrangements/tendering under this Agreement
and/or prior to a relevant Project Specific Order shall be vested with Partner One.
8.0 Assignment
Neither Party may assign, transfer, novate, sub-contract or otherwise dispose of any of its
rights and obligations under the Agreement without the prior written consent of the other
Party.
9.0 Costs and expenses
Each Party shall bear his own costs and expenses incurred in the preparation, execution and
implementation of the Agreement and any Project Specific Order.
10.0 Insurances and Indemnities
Insurance and indemnities in respect of Project Specific Orders will be addressed under the
terms and conditions of the Project Specific Orders.
11.0 Notices
Any notice to a Party under the Agreement shall be in writing signed by or on behalf of the
party giving it. Any notice sent by facsimile or electronic communication shall be confirmed in
identical terms by letter sent by prepaid first class post.
9 of 24
SECTION 2: - TENDERING AND ORDERS

12.0 Commissioning of works, services and the like
12.1 The award of any Project Specific Order is within Partner One’s absolute
discretion.
12.2 Partner Two acknowledges that Partner One may award any Project Specific
Order to another framework partner of Partner One or any third party selected by
Partner One
12.3 Project Specific Orders shall in each case be subject to the terms and conditions
agreed as referred to in Appendix 1 unless agreed otherwise provided that it shall
incorporate such terms and conditions that are necessary to comply with the terms
and conditions of any relevant Principal Contract. [Optional clause]
13.0 Integrated Supply Chain
13.1 Partner Two (at his own cost) will provide sufficient quality resources to join the
integrated Supply Chain team bid to take an active role in the preparation and
submission of bids.
13.2 An integrated Supply Chain bid team environment will be used to foster and
encourage all participants to improve value and seek innovative solutions in order
to enhance bid proposals.
14.0 Pricing and Price Variation Procedure
14.1 Partner Two agrees to a collaborative and transparent open book approach to the
disclosure of cost information that gives Partner One access to examine the
pricing structure adopted for the execution of this Agreement and Project Specific
Orders and the Partner’s supply chain. Information disclosed may be made
available to Employers and/or their representatives.
14.2 Partner Two agrees to share with Partner One such information or data or both
about Partner Two’s Supply Chain and the award of Partner Two’s Supply Chain
contracts as Partner One may require for the purpose of assessing whether
Partner Two’s Supply Chain arrangements deliver continuous measurable
improvement against agreed Key Performance Indicators as detailed in Appendix
6 or other Key Performance Indicators mutually agreed between the parties.
15.0 Risk & Reward
15.1 The parties shall if appropriate agree on a project specific basis a risk and reward,
pain/gain regime with the purpose of providing a partnering incentive.
15.2 Incentives shall be related to the achievement of agreed targets measured against
Key Performance Indicators as described in Clause 22.
SECTION 3: - ENVIRONMENT, HEALTH & SAFETY, QUALITY ASSURANCE

The Parties recognise the importance of Environmental Management Systems, Health &
Safety and Quality Assurance to their activities and to Employers.
10 of 24
16.0 Environment
16.1 The Parties will operate Partner One’s Environmental Management Systems in so
far as it applies to their collaborative activities. The Parties will:
16.1.1 comply with relevant legislation, regulation, government guidelines, and

industry codes of practice;
16.1.2 seek to minimise environmental disturbance in their activities;
16.1.3 seek improvement in their environmental management
16.2 Detailed aspects regarding the Environmental Management System will be

implemented under the terms and conditions in Project Specific Orders
17.0 Health & Safety
17.1 The Parties will work towards the prevention of accidents and creation of a safer
working environment. Performance under the Project Specific Orders is to be
monitored, benchmarked and reviewed on a regular basis.
17.2 Detailed aspects regarding matters of Health & Safety will be implemented under
the terms and conditions in Project Specific Orders.
18.0 Quality Assurance
18.1 Parties will monitor/action Quality Assurance performance under the Project
Specific Orders on a continuing basis at both strategic and operational level.
Performance will be regularly monitored, benchmarked and jointly reviewed.
18.2 Detailed aspects regarding matters of Quality Assurance will be implemented

under the terms and conditions in Project Specific Orders.
11 of 24
SECTION 4: - MONITORING AND REVIEW

19.0 Reviews
19.1 Both Parties will appoint appropriate members to meet regularly to discuss /
review the performance by the Parties of their respective obligations under the
Agreement and any Project Specific Orders.
19.2 Reviews shall take place to:
19.2.1 monitor the effectiveness and efficiency with which the Agreement and
any Project Specific Orders are being implemented.
19.2.2 agree mutual objectives and timescales;
19.2.3 assess the overall performance of the Agreement by each Party;
19.2.4 review the business implications and risks;
19.2.5 review whether the Agreement and any Project Specific Orders are being
conducted by the Parties in the spirit of partnering.
19.3 In addition further Operational reviews may be undertaken. Draft heads of terms
for such reviews are set out in Appendix 5
20.0 Key Personnel: Company Structure Chart / Responsibilities
The Organisation charts of Partner One and Partner Two showing their respective
structures/roles is set out in Appendix 3 appended hereto.
21.0 Team Building
Workshops and topical events may to be organised to help develop a team culture that will
encourage the exchange of views, ideas and education of all concerned in the projects to
propagate best practice.
22.0 Continuous Performance Improvement and KPIs
22.1The Parties may agree a series of targets for Key Performance Indicators (KPI’s) and
performance assessed against pre agreed targets. The KPIs listed in Appendix 6 may be
used for this purpose and may be amended as required, on a project specific basis.
22.2 An assessment of the agreed targets will be carried out [state period] on a project-by-project
basis and any necessary actions will be agreed and implemented. These results will form part
of a performance review. Under the review process the Parties may agree to amend the target
levels, number and range of KPIs applied.
12 of 24
SECTION 5: - DISPUTES AND TERMINATION
23.0 Problem Resolution
23.1 Each Party shall give warning to the other when he becomes aware of any
matters that could adversely affect the execution of the Agreement by completing
and issue to the other Party or affected Parties, the Problem Resolution Form
contained in Appendix 2 of this Agreement.
23.2 Subject to either Party's right to refer any dispute under a Project Specific Order to
remedy under said terms and conditions the Parties shall work together in a spirit
of good faith mutual trust and co-operation and use all reasonable endeavours to
settle any problem or dispute or difference amicably at the lowest level within the
respective organisations.
23.3 Prior to commencing formal dispute resolution procedures contained in a Project

Specific Order, the Party’s shall document the problem or dispute or difference as
set out in 24.1 and in the first instance refer it to staff level one in the problem
resolution hierarchy set out in Appendix 3.
23.4 Each staff level has a maximum time limit in which to resolve the problem or
dispute or difference referred to it. In the event that a resolution is not agreed
within the maximum time limit the problem or dispute or difference shall be
referred to each successive level in the hierarchy.
23.5 If the problem or dispute or difference reaches the level of Director and a
resolution has not been agreed there shall be a 14-day (cooling off) period after
which it shall be referred to the Managing Director’s of the Party’s. If an agreed
resolution has not been reached the problem or dispute or difference shall be
subject to the formal dispute resolution procedures of the Project Specific Order.
24.0 Termination
24.1 The grounds for termination of any Project Specific Order shall be set out in that
Order.
25.2 This Agreement may be terminated by either party if the other is in material breach
of the Agreement (not withstanding any other term thereof).[Optional clause]
25.3 If either party fails to achieve the targets agreed in respect of annual Key
Performance Indicators the other may give 3 months notice of its intention to
terminate this Agreement
25.0 Rights of Third Parties Act
The Parties agree for the purpose of the Contracts (Rights of Third Parties) Act 1999 that
this Agreement is not intended to and does not give to any person who is not a party to
the Agreement any rights to enforce any provisions contained within it.
26.0 Invalidity
If and to the extent that any provision of the Agreement is found by any court, arbitrator,
adjudicator, mediator, expert or other competent authority to be invalid, unlawful or
unenforceable, that provision shall be deemed, to the extent that it is invalid, unlawful or
unenforceable, not to be a part of the Agreement and it shall not affect the enforceability of
the remainder of the Agreement.
13 of 24
27.0 Applicable Law
This Agreement shall be governed and construed in accordance with English Law and the
parties agree to submit to the exclusive jurisdiction of the English courts provided that any
judgement, award or order of the English courts may be enforced in any jurisdiction.
14 of 24
SECTION 6: - APPENDICES
1. Form of Project Specific Order Agreement
2. Problem Notification Form
3. Problem Resolution Hierarchy
4. Company Structure Charts:
Partner Two
Partner One
5. Operational and Project Specific Reviews
6. Key Performance Indicators
7. Supply Chain Member (s)
15 of 24
Appendix 1
Form of Project Specific Order
[Insert details of particular subcontract(s)]
16 of 24
Appendix 2
PROBLEM NOTIFICATION FORM
Staff Level One NAME: Problem No
Date: Time:
Description of Problem/Dispute/Difference
Date Resolved or Passed to Staff Level 2: Time:
Staff Level Two NAME:
Date Received: Time Received:
Staff Level Three NAME:
Date Received: Time Received:
Staff Level Four NAME:
17 of 24
Date: Time:
DESCRIPTION OF DISCUSSION AND AGREED RESOLUTION
18 of 24
Appendix 3
PROBLEM RESOLUTION HIERARCHY
SUPPLIER CLIENT
STAFF LEVEL REPRESENTATIVE TIME REPRESENTATIVE
Staff Level
Five Managing Director Client Managing
Director
Staff Level
Four Director 5 Days Client
Staff Level
Three Contracts Manager 3 Days Architect Partner
of Director
Staff Level
Two Site Manager 3 Days Project Architect
Staff Level
One Foreman 24 Hours Clerk of Works
This hierarchy should be amended as necessary to suite the requirements

of Project Specific Orders
19 of 24
Appendix 4
Company Structure Charts:
Partner One
Partner Two
20 of 24
Appendix 5
Operational Reviews
Operational reviews of projects shall take place to develop action plans to work towards
objectives and deliverables to develop and improve the partnering relationship and if
necessary set up joint teams for the purpose of implementing action plans to secure
objectives in relation to:
supplier relationships/partnering
best practice
performance
costs
sustainability and waste
end-user satisfaction
targets
strategy
training
innovation
21 of 24
Appendix 6 KEY PERFORMANCE INDICATORS
KPI's
Main criteria Sub criteria Category
Sub Contractor Specifier Lead Contractor/ Manufacturer/ Client
Project Leader Supplier (Partnered projects only)
Health and Safety
Client Satisfaction
Questionaire
Performance to
programme
Record keeping -Storage and
retrieval
Tenders on time
Information & Instruction on time
Measurement & reporting system
Resource availability
Ability to accommodate change
Manufacture & delivery on time
Payment on time
Quality
of Installation
22 of 24
of O&M Manual
of Product
Defects Culture
Of literature & documentation
Performance to budget Performance to target cost

Accurate forecast of out turn cost
Quality of periodic reporting
Whole life Costs
Out-turn cost
Productivity
Profit per employee
Output per site operative
Downtime
Utilization factor (material & labour)
Design performance
Delivery on time
Right first time
Resource availability
Ability to accommodate change
Communication with team
Profitability
Profit per employee / operative
PBIT
23 of 24
Supply Chain Techniques

Use of KPI'S
Use of incentives
Active partnerships
Transparency (open book)
Procedure for dispute /
NOTE: The parties will need to establish and agree the mechanism for recording and reporting the results of any Key Performance Indicator
24 of 24

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© The College of Estate Management 2009

Supply chain management

2. CRINE Network’s SCM initiative

3. The Egan reports

4. SCM in construction contracting

5. SCM in construction clients’ policy

7. Summary – Benefits of SCM

Appendix A: Supply chain prequalification questionnaire

Appendix B: Supply chain partnering agreement

 recognise the benefits of supply chain management (SCM);

 know how SCM is implemented;

 perform the construction professional’s role in SCM.

To do this, the objective must be to achieve efficiency and cost-effective procurement

Short-term profit by claims and an adversarial approach is no longer an option, and is

EXAMPLE 1: Supply chain for fabricated structural steelwork

Sections are transported from the mills to the fabrication yard.

Workshop machinery and resources fabricate the steel members.

The fabrication workforce may be provided by a subcontractor that specialises in site

EXAMPLE 2: Supply chain for a glazed space-frame atria roof

The project is in Dubai, but the design engineers are in Germany.

2 CRINE Network’s SCM initiative

 a strategic framework that evaluated the industry’s supply chain performance

2.1 Supply chain optimisation

 ongoing programmes of supplier development; and

(LOGIC, Summary of Recommendations, Nos 1, 2 and 3)

2.2 Alignment of objectives

This is a simplistic example; a more realistic one is in building engineering services,

2.3 Long-term relationships, relationship management and

Least-valued criteria were found to be trust, continuous improvement and the

Relationships were perceived as being the primary responsibility of a purchasing

2.4 Supplier suggestions and customer feedback

It had been normal practice in the automobile manufacturing industries to seek

Kaizen is the practice of continuous improvement, in small increments, at all levels,

Everyone has a role, from top management to operatives:

The feedback from customers needs to be qualitative and quantitative. As well as

2.5 Planning and forecasting

2.6 Supplier involvement in design and development

2.7 Over-engineering (design) and preferential engineering

2.8 Standardisation and modularisation

It was found that designers tended to specify prescriptively, so providers found it

The alternative to prescriptive specification is functional specification, whereby the

The balance needs to be evaluated between involving specific product manufacturers

2.9 Life cycle costing

2.11 Supplier management

Survey responses showed that there was a widespread lack of performance

2.12 Long-term agreements, alliances and contract issues

 allow predictable cash flow

One firm reported a saving of 12% as a result of introducing longer-term

However, some clients expressed concerns about:

 coverage scope defined

The process of obtaining prices is substantially shorter than if competitive tendering

 Ninety-three per cent of survey respondents said that improving payment

A process of monitoring performance was needed:

The recommendation in the report was that a system of measurement in respect of

 enough data to produce meaningful trends

2.15 Other recommendations

3 The Egan reports

 adversarial relationships between members of the supply chain

Supply chain expertise was seen as a key driver for change.

 improved construction methods after research and development, including off-

Partnering is advocated to improve performance by agreeing mutual objectives,

Driving innovation and sustaining incremental and sustained improvement in

3.2 Modernising Construction, 2001

3.3 Accelerating Change, 2002