Achieving value for money in capital build projects Thisbookisthefirsttobringtogetheracademicandpractitionerviewsofvalue for money (Vf). VfM has been used to assess whether or not an organisation has obtainedthe maximum benefit withinthe resourcesavailable toit.A con- ceptusedbythepublicsectortoassessthebenefitsofmajorbuiltenvironment projects, it has become a major tenet of public private partnerships, capital projectinfrastructureandcivilengineeringmegaprojects. This book presents and discusses the various debates surrounding the concept of value for money. It provides an international perspective on VfM by drawing on the existing and fast developing body of principles and practices for capital build projects. Readers will gain a level of understanding of the issues involved, the challenges, opportunities and the support mechanisms and protocols required for implementation of VfM in capital building development. Ultimately, the book presents a protocol that has been developed to track and monitor the VfM of a capital project from day 1, an Equilibrium Test- ing Mechanism (ETM) developed by the authors. This testing mechanism allows each of the parties to a project to monitor its VfM position at any given stage of a project from the beginning to the end of the build stage and beyond as necessary. This book is both a useful reference for researchers and a practical guide for the construction and engineering industry. Angela Vodden is a practising solicitor within her own firm but pre- dominantly represents public sector clients, specialising in the strategic pro- curement and legal negotiations of high value public sector infrastructure and development projects. Champika Liyanage is Associate Professor in Facilities Management in the School of Engineering, University of Central Lancashire, UK. Akintola Akintoye is a Chartered Surveyor and a Chartered Builder. He is Professor of Construction Economics and Management and Dean of School of Built Environment and Engineering in the Leeds Beckett University, UK. Spon Research publishesa stream of advanced books for builtenvironment researchersand professionals from one of the world’s leading publishers. The ISSN for the Spon Research programme is ISSN 1940-7653 and the ISSN for the Spon Research E-book programme is ISSN 1940-8005 Published: Soil Consolidation Analysis 978-0-415-67502-4 J.H. Yin, G. Zhu OHS Electronic Management Systems for Construction 978-0-415-55371-1 I. Kamardeen FRP-Strengthened Metallic Structures 978-0-415-46821-3 X. L. Zhao Valuing People in Construction 978-1-138-20821-6 F. Emuze and J. Smallwood Preventing Workplace Incidents in Construction: Data Mining and Analytics Applications 978-1-138-08745-3 Imriyas Kamardeen Construction Health and Safety in Developing Countries 978-1-138-31707-9 Patrick Manu, Fidelis Emuze, Tarcisio Saurin and Bonaventura H. W. Hadikusumo Achieving Value for Money in Capital Build Projects 978-0-8153-6119-0 Angela Vodden, Champika Liyanage & Akintola Akintoye Risk Management in Engineering and Construction: Tools and Techniques 978-0-415-48017-8 Stephen Ogunlana & Prasanta Dey Achieving value for money in capital build projects Angela Vodden, Champika Liyanage and Akintola Akintoye Firstpublished2019 byRoutledge 2ParkSquare,MiltonPark,Abingdon,OxonOX144RN andbyRoutledge 52VanderbiltAvenue,NewYork,NY10017 RoutledgeisanimprintoftheTaylor&FrancisGroup,aninformabusiness ©2020AngelaVodden,ChampikaLiyanageandAkintolaAkintoye TherightofAngelaVodden,ChampikaLiyanageandAkintolaAkintoye tobeidentifiedasauthorsofthisworkhasbeenassertedbythemin accordancewithsections77and78oftheCopyright,DesignsandPatents Act1988. Allrightsreserved.Nopartofthisbookmaybereprintedorreproduced orutilisedinanyformorbyanyelectronic,mechanical,orothermeans, nowknownorhereafterinvented,includingphotocopyingandrecording, orinanyinformationstorageorretrievalsystem,withoutpermissionin writingfromthepublishers. Trademarknotice:Productorcorporatenamesmaybetrademarksor registeredtrademarks,andareusedonlyforidentificationandexplanation withoutintenttoinfringe. BritishLibraryCataloguinginPublicationData AcataloguerecordforthisbookisavailablefromtheBritishLibrary LibraryofCongressCataloging-in-PublicationData Acatalogrecordhasbeenrequestedforthisbook ISBN:978-0-8153-6119-0(hbk) ISBN:978-1-351-11694-7(ebk) TypesetinGoudy byTaylor&FrancisBooks Contents List of illustrations vi Preface vii 1 The historic development of value for money within the UK, China, Australia, South Africa and India 1 2 Tracking VfM: concept, definition, benchmark, tracking and testing 43 3 Stakeholder roles, responsibilities, expectations, aims, incentives and drivers 59 4 Identification of the value for money stages 77 5 The need for the VfM tracking mechanism 97 6 Value for money protocol, bid document and contract drafting: Final word 119 Index 125 Illustrations Figures 2.1 A timeline of VfM tests 45 5.1 Senior debt funder 112 5.2 Senior debt funder 113 5.3 Equity funder 113 5.4 Construction contractor 114 5.5 FM contractor 115 5.6 The beneficiary group 115 5.7 Local government 116 5.8 Central government 117 5.9 Comparison of all stakeholder groups 117 6.1 Central government 123 Tables 3.1 Key drivers or incentives of each stakeholder group involvement 63 4.1 Identification of stakeholder group VfM value and fluctuations at each key stage 91 5.1 Identification of stakeholder VfM tracking values 100 Preface We are delighted to introduce this unique text, which debates not only how and why the concept of value for money (VfM) became so important within a public sector arena, but also how its interpretation has different meanings for different people, industries and societies. Indeed, it is seen throughout the decades that the meaning of VfM develops as time, economies and societies advance, not just in the UK, but also within a global arena. ItiswidelyunderstoodthattheachievementofVfMisofparamountimpor- tancewithinpublicsectorprocurementsglobally,butyetwhenwetrulyscrutinise thecontractualstructuresandstandardformdocumentsonwhichpublicsector infrastructureprojectsareundertaken,thisimportancedoesnotseemtobeevi- dent.Evenmoreshockingly,thereisnomethodorsystemimposedthroughout thecontractperiodthatrequirestheachievementornotofVfMtobetrackedor addressed.GiventheimportanceofVfM,thisshouldbeafundamentalelement ofanycontractualdocument.Thistextprovidesasolutiontothislacuna. This book has evolved from research, and consultancy works that have beenundertakenbytheauthorsinpublic–privatepartnerships,jointventure developments and infrastructure procurements, through a variety of con- tractual solutions over a period of 20 years. However, in some parts of the world public–private partnerships are a relatively new way of procuring infrastructure and associated services, through which they have to share risk and deliver value for money solutions. VfM has been used to assess whether or not an organisation has obtained the maximum benefit (in terms of economy, efficiency, effectiveness) from the goods and services it both acquires and provides, within the resources available to it. This is has particularly been used by the public sector in many parts of the world to access the benefits driveable from major built environment projects including civil engineering and building projects, In particular, this has become a major tenet of public–private partnerships capital project infrastructure and civil engineering megaprojects. The contractual requirements for infrastructure development do not need to be a trigger that results in termination, if each party approaches the main goal, albeit for different reasons, with the same collaborative ethos. In essence, there is no reason why each party to a project cannot achieve a viii Preface “win–win” value for money solution as originally envisaged by Sir Michael Latham in his report “Constructing the Team”. In this book, we have illustrated an approach informed by our own research and experience of working with a diversity of parties involved in public–private partnership projects how a VfM agenda can be achieved. The book as a simple aim. It is written primarily to help and provide all stake- holders involved in an infrastructure procurement to understand the salient issues involved in achievement of VfM in projects, with an element of the historical needs for this. This book makes no attempt to cover all aspects of issues involved in infrastructure procurement. Our aim in this book is essentially to make the process of achieving VfM in project setup transpar- ent, and easily achievable for the stakeholders from both the public and private sectors. It offers insight necessary to engage with VfM processes effectively and develop efficiency in doing so. ThebookprovidesafullandcoherentexplanationoftheconceptofVfMand how that should be viewed among a number of participant groups within the builtenvironment.ThisisuniqueasmoreoftenthannottheconceptofVfMis onlyconsideredimportantfromapublicsectorviewpoint,yeteverycritichasa VfMviewpointbecauseofitssubjectivity.Thechaptersinthebookhavebeen craftedinastylisticwaywithmanydistinguishedfeatures,someofwhichare: 1 A discussion and critique of value for money from a diversity of inter- ested parties and from many countries where value for money has been incorporated into the public sector policy for the procurement of goods and services (Chapter 1). 2 A review the current subjective nature VfM and lack certainty of defi- nitionandthefactthereisnoproactiverequirementforanystakeholder engaged within a project to track VfM and a systematic failure to implement a mechanism to track, test and ultimately confirm whether VfM is being achieved (Chapter 2). 3 A critical discussion of the stakeholder’s roles, responsibilities, expecta- tions, aims, incentives, and drivers, in the way value for money is achieved and the impact on project objects and relevance to public sector procurement policies (Chapter 3). 4 AdiscussionofpinchpointsinVFMidentification,implementationand achievements at various key stages of project development, with the overallaimofunderstandingwheretheVfMpointsmightariseandhow they can be tracked (Chapter 4). 5 Development of a VfM tracking mechanism within projects, on an ongoingbasis,toidentify whetherprojectswereeitherachievingVfMor not, with the expectation that the reasons could be identified at each of the key stages for this outcome from the perspective of all stakeholders involved in the project development (Chapter 5). 6 Development of VfM protocol and impact on bid documentation and contract drafting with a reflection on how VfM tracking mechanism can Preface ix beimplementedinapracticalwayandusedwithininfrastructureproject (Chapter 6). ThebookprovidesaninternationalperspectiveonVFMbydrawingonthe existing and fast developing body of principles and practices for capital build projects by bringing together academic and practitioner views of VFM. Within the overarching concept of capital build projects, the book draws on experienceofhowthisisimplementedinapublic–privatepartnershipsproject environment. Hence the book is essential reading for academics, researchers, professionals and students in the built environment. It is also a useful tool to those practitioners in the public and private sector who are involved in how infrastructure projects and development projects are structured to inform the public sector value for money agenda. Many thanks. Angela Vodden Champika Liyanage Akintola Akintoye