Sustainable procurement in construction

This section covers how sustainability issues could be incorporated into construction works contracts.

Policy initiatives

A number of policy initiatives have been produced to help practitioners achieve their sustainability objectives. These are summarised inPart B (Section 11) of Procurement Guidance Note 06/10 ‘Construction Procurement Policy Framework’ and include:

• Equality of Opportunity and Sustainable Development in Public Sector Procurement (2008)
• Northern Ireland Sustainable Development StrategyGovernment Construction Clients Sustainability Action Plan (2012-15)
• Sustainable Construction Guidance Notes
• Integrating social considerations into contracts
• Sustainability Requirements – model contract clauses
• Implementation of Article 6 of the EU Energy Efficiency Directive
• Helping SMEs benefit from subcontracting opportunities.
• Procurement of timber and wood products.
• Environmental Management Systems
• BREEAM and CEEQUAL

Note: PGN 06/10 includes ‘links’ to more detailed information in these areas. Procurement Guidance Note 06/10 – Central Procurement Directorate (CPD)

Through the Construction Industry Forum for NI (CIFNI) the Government Construction Clients and the construction industry, as represented by the Construction Industry Group for NI (CIGNI), have jointly explored how sustainability issues could be incorporated into construction works contracts.

A CIFNI Sustainability Task Group has developed proposals to promote the Economic, Social and Environmental pillars of sustainable development through sustainable procurement in construction, these are known as ‘Proposals for Promoting Equality and Sustainable Development by Sustainable Procurement in Construction’ (Revised June 2012 ). These Proposals, additional Guidance and Model Contract Clauses can be accessed on CIFNI Sustainability Requirements 'Promoting Equality and Sustainable Development by Sustainable Procurement in Construction'

Procurement Groups/Housing Associations must include, as far as it is practicable, the CIFNI proposals into the NEC3 ‘Works Information’ for all new construction works and services contracts.

Economic Pillar

The guidance below, which is complementary with the CIFNI ‘Proposals’, relates to some elements of Economic, Social and Environmental pillars of sustainability which are considered to be of particular importance.

SMEs currently account for more than 99% (and 72% by turnover) of local businesses in NI.

Procurement Guidance Note 06/12 ‘Helping Small and Medium-sized Enterprises (SMEs) Benefit from Subcontracting Opportunities in Government Contracts’ has been produced to help clients ensure that SMEs are included in the procurement process, whether directly or as possible supply chain partners, and that main contractors operate SME friendly procedures in their supply chains. The main provisions of Procurement Guidance Note 06/12 include requirements in relation to:

Advertising (main contract and subcontract) opportunities

• PGs / Associations to advertise main contracts through OJEU, NIFHA and own websites; and local press paying particular attention to situations where a cross border interest may exist
• successful contractors are required to advertise subcontracting opportunities on their own website, and where appropriate in the local press, thereby increasing visibility of opportunities to SMEs who are potential supply chain members

Subcontract conditions and acceptance of subcontractors

• contracts should require contractors to seek acceptance of all subcontractors and PGs / Associations should satisfy themselves that key subcontractors are capable of delivering the works, goods or services
• contracts should require the contractor to provide details of the proposed conditions of sub-contract for their first tier subcontractors to the PGs / Associations prior to signing those sub-contracts; a subcontractor should only be accepted if the appointment will enable the contractor to deliver the works, goods or services in accordance with the contract and with any undertakings given by the contractor in any quality submissions made during the tendering process
• PGs / Associations should only consent to a proposal to replace or substitute a subcontractor where there are compelling reasons to do so - where a subcontractor has been assessed as part of the contractor’s team, that subcontractor should only be replaced by one of equal standing

Passing On of ‘No Worse’ Terms

Sub-contractors should not normally have more stringent terms imposed upon them than are imposed upon the main contractor. In some instances, less stringent terms may be acceptable. To ensure that ‘no worse’ terms are included in subcontracts, contracts must require:

• acceptance of subcontract terms by the Association prior to the subcontract being entered into
• copies of all first tier subcontracts to be provided to the client where required

Payment

Feedback from SMEs has shown that smaller organisations working in a supply change often experience delays in the payment of invoices. Appropriate contract conditions should be used to prevent this and ensure that equally favourable payment terms to those which the client provides for the contractor are passed on by the contractor to subcontractors.

Contract conditions should contain payment terms of not more than 30 days, both for the contractor from the client, and for subcontractors by the contractor. In construction contracts consideration should also be given to passing these conditions to lower tier supply chain subcontractors.

The Department encourages PGs / Associations to align themselves with the NI Executive’s policy on prompt payment which aims to pay at least 90% of valid invoices within 10 working days. This practice helps cash flow and, although it is not a contractual obligation, clients should encourage contractors to implement similar prompt payment practice to subcontractors and to foster it within their supply chains through voluntary agreements (see Section 4.2 in PGN 06/12).

Associations and contractors should sign up to, and comply with, the ‘Code of Practice for Government Construction Clients and their Supply Chains’, which includes the Model ‘Fair Payment’ Charter. This will encourage contractors and their subcontractors to pass on the benefits of prompt payment through their supply chain. The Model ‘Fair Payment’ Charter records the commitment to:

• pay subcontractors and suppliers on time, within terms agreed at the outset of the contract
• encourage good practice to be passed on by subcontractors through their own supply chains
• give subcontractors and suppliers the opportunity to raise poor payment practices with the Construction Industry Group NI or the Government Construction Clients Group

A ‘Project Bank Account’ is a trust bank account held jointly by the employer and the main contractor. Funds are paid into the account and are then available to any relevant party, whether it is the contractor, consultant, subcontractor or supplier. Using ‘Project Bank Accounts’ means that there is:

• no potential for money to be unreasonably delayed by one of the parties to improve its own cash flow or benefit from interest gains
• obvious transparency by all parties
• higher degree of security in the event of contractor insolvency
• greater visibility for the employer in relation to payments various parties are making / receiving

‘Project Bank Accounts’ may incur a small cost and are generally used in larger projects with a reasonable number of subcontractors. It is common practice that only larger subcontractors are included in the arrangement. (Standard contract clauses are available for inclusion in NEC3 construction contracts and may be accessed on the NEC website. – See latest PGN 06/12 (Section 4.4) and PGN 03/14.

Note: Currently the use of Project Bank Accounts by PGs / Associations is not a mandatory requirement of this Guide.

Reporting (payments to sub-contractors)

The Contractor shall provide a report on payments made to subcontractors at each project meeting using the ‘Contractor’s Subcontract Acceptance and Payment Report’ included in the Works Information.

The Association’s Project Manager or Contract Administrator shall ensure that:

• the association, main contractor and subcontractors sign the ‘Fair Payment Charter’
• payment to subcontractors is a standing item on the agenda at project meetings
• the main contractor provides the ‘Contractor’s Subcontract Acceptance and Payment Report’
• periodic checks are made directly with subcontractors on the payment performance of the main contractor

Procurement of Fairtrade Products

PGN 02/06 sets out a number of factors to be taken into account to ensure that the requirements for Fairtrade are consistent with NI Public Procurement Policy and EU Public Procurement Directives.

In applying this guidance PGs / Associations should:

• make it clear in tender documentation that Fairtrade products will be welcomed amongst the products being supplied
• work with a supplier post contract award on a voluntary basis to increase the number of Fairtrade products being supplied
• use Fairtrade tea and coffee for staff and hospitality

You can find the following Procurement Guidance Notes on the CPD website:

• PGN 02/06 ‘Procurement of Fairtrade Products’
• PGN 04/14 ‘Integrating Sustainable Development into the Procurement of Food and Catering Services’

Social Pillar

Social considerations can only be lawfully applied as Award criteria where they are linked to the subject matter of the contract. Given that the subject matter of most works contracts will be the construction of a building or civil engineering infrastructure, it is unlikely that such a link could be established.

Social objectives can however be effectively delivered through the use of contract performance clauses. Contract performance clauses set out how the contract should be performed. Social considerations may be included in the contract performance clauses providing they:

• are linked to performance of the contract
• are referred to in the Contract Notice
• comply with EU law

Contract performance clauses are obligations which must be accepted by the successful tenderer and which relate to the performance of the contract. It is therefore sufficient in principle for tenderers, when submitting their bids, to undertake to comply with such conditions, if the contract is awarded to them.

Model Contract Clauses for Construction

Following a review by the Strategic Investment Board (SIB) of the use of social clauses by the NICS, including the CIFNI model, the Executive’s Procurement Board has agreed to introduce a new ‘Buy Social Construction Model’ from April 2016.

DfC has introduced the ‘Buy Social Approach’ in targeting recruitment and training in social housing procurement contracts above £2m for construction.’

The following requirements should be included in building contracts valued at £2m and above and civil engineering contracts valued at £4m and above, or in lower-value contracts where the procurement team agrees.

The Procurement Board has adopted a revised model for the delivery of social clauses called “Buy Social2”. Details of the model can be found on the Buy Social website or by contacting the Buy Social team via the advice service at info@buysocialni.org. It will be essential to continually monitor.

More detail on the ‘Buy Social’ approach can be found on the Buy Social website.

Housing Associations who are currently in the process of drawing up contracts for new social housing developments should contact the Northern Ireland Federation of Housing Associations (NIFHA), or info@buysocialni.org, who will be happy to work with you to develop buy social clauses or assist in the reframing of existing contracts.

Once a project has been awarded contact should be made with the Buy social team to register the project onto the monitoring portal or email info@buysocialni.org.

The Procurement Board discussed the Buy Social Services Model at its meetings on 13 January and 24 February 2017 and following further discussion with a number of Departments the model is now agreed. The model should now be considered in services contracts with an anticipated value of £500,000 per annum or more. For more information on Buy Social in services contracts please contact info@buysocialni.org.

Health, safety and welfare

In relation to the health, safety and welfare of the unemployed, apprentices, students and trainees the CIFNI’s Buy Social guidance includes the following model clauses:

• the Contractor provides that persons recruited or otherwise visiting the site in relation to the Targeted Recruitment and Training Requirements has, or is supported to, obtain the necessary health and safety accreditation and appropriate personal protective equipment
• the Contractor cooperates with suppliers and other agencies to inform the supplier’s/agencies’ Health and Safety Risk Assessments
• the Contractor provides all New Entrant Trainees, Work Experience participants and others visiting the Site in relation to Targeted Recruitment and Training and Work Experience with :
  - health and safety training in accordance with legislation and Buildsafe-NI
  - personal protective cover
  - insurance cover which
  (i) includes cover for people aged 16 and over; and
  (ii) staff from employment and training organisations; and
  - all other contractual and legislative requirements.

Security clearance

The contractor arranges security clearance for all New Entrant Trainees and unpaid Work Experience/training participants to the same standard as all other personnel involved in the contract in accordance with the Works Information.

Buildsafe-NI

The CIFNI Proposals also promote best practice in Health and Safety by requiring the prequalification process and contracts to comply with the requirements of Buildsafe-NI Action Plan 2011.

The Buildsafe NI initiative was launched in April 2003 as a five-year safety initiative for the construction industry under the auspices of the Construction Industry Forum for Northern Ireland (CIFNI). The initiative was taken forward by a steering group comprising representatives from CIFNI and the Health and Safety Executive NI (HSENI). In supporting the initiative, the Government Construction Clients Group (GCCG) proposed the use of the procurement process to promote the importance of health and safety performance in NI.

There continues to be broad commitment by all stakeholders to improve health and safety in the construction industry. In 2011 GCCG developed a ‘Buildsafe-NI Action Plan’. This action plan paid cognisance to the introduction of the Construction (Design and Management) Regulations (NI) 2007 and the development of a standard process for the assessment of contractors’ Health and Safety competency. The plan also aimed to further enhance performance improvements in the following areas:

• evaluation of supply chain health and safety capability
• certification of health and safety management systems
• training
• monitoring and reporting

The Association, working with its Project Manager or contract administrator, shall ensure that the NEC3 ‘Works Information’ for the contract includes a requirement that the contractor and his supply chain comply with all the requirements of the Buildsafe-NI Action Plan 2011. Further information and the recording of health and safety performance may be accessed on Buildsafe-NI.

Reporting (Health and Safety)

The Association’s Project Manager or contract administrator shall ensure that:

• the contractor operates a health and safety management system which is certified by a third party
• subcontractors (with 5 or more workers/employees) have a health and safety management system certified by a third party before they can be accepted to work on the contract
• health and safety is a standing item at all project meetings and that sufficient time is devoted to it in order that all issues can be dealt with in appropriate detail
• the Principal Contractor (CDM 2015) provides a health and safety report at each meeting using the ‘Standard Health & Safety Report’ included in the NEC3 ‘Works Information’
• the contractor has robust processes in place to ensure that only those personnel that have appropriate evidence of health and safety training are permitted to enter the site

Note: New Construction (Design and Management) Regulations (Northern Ireland) 2016 came into operation on 1 August 2016 and have replaced CDM 2007.

Environmental Pillar

The CIFNI ‘Proposals for Promoting Equality and Sustainable Development by Sustainable Procurement in Construction’ (Revised June 2012 ) included proposals, to be included as contract requirements in NEC ‘Works Information’ for incorporating sustainability issues to construction contracts.

A CIFNI working group reviewed the proposals again in 2015 and a revised set of environmental sustainability requirements were agreed for implementation in April 2016. These are designed:

• to promote Design Quality
• to promote Environmental Management Systems and Environmental Assessments (e.g. contractors and their supply chains to achieve a BREEAM or CEEQUAL rating of “Excellent”, “Very Good”, (or equivalent,) for new build and refurbishment projects, respectively)
• to promote Resource Efficiency
  - Construction and Demolition Waste
  - Recycling and re-use of construction materials (e.g. at least 10% of the material value of the project be derived from recycled/reuse content)
• to promote the Considerate Constructors Scheme (CCS)

Further detail on the CIFNI proposals can be found on the Department of Finance website.

One of the key drivers of sustainable development is environmental assessment. Targets for the Building Research Establishment Environmental Assessment Method (BREEAM), the Civil Engineering Environmental Quality Assessment (CEEQUAL) or equivalent have been set within the ‘Sustainability Action Plan’ and are also included within the CIFNI Sustainability Task Group proposals. The equivalent assessment methods for the housing sector are:

• the Code for Sustainable Homes
• BREEAM multi-residential
• BREEAM domestic refurbishment

Note: Since 2012-13 there has been no mandatory requirement under the SHDP for new build social housing to have formal assessment under CFSHs. Subsequently in March 2015, as a result of the Housing Standards Review, the CFSHs was withdrawn by the UK Government for all new housing developments in England aside from the management of legacy cases. In light of this winding down of the CFSHs, the Department is withdrawing the supplementary multiplier with effect from 1st April 2017. For further detail see the Department’s Design standards.

Reporting - ‘Contractor’s Sustainability Project Report’

The PG / Housing Association, working with its Project Manager or contract administrator, will ensure that contracts include in the NEC3 ‘Works Information’ a requirement for the Contractor to provide a ‘Contractor’s Sustainability Project Report’, monitoring progress achieved in meeting the CIFNI proposals. The ‘Contractor’s Sustainability Project Report’ shall be in the format set out in the NEC3 ‘Works Information’.

In complying with this requirement the Contractor shall submit to the Project Manager or contract administrator the following:

• within two weeks of the starting date / contract award, a report on the delivery of sustainability requirements under the contract
• a monthly update on the delivery of sustainability requirements under the contract using the ‘Contractor’s Sustainability Project Report’
• a final ‘Sustainability Project Report by the Completion Date as evidence that the sustainability requirements set out in the NEC3 ‘Works Information’ have been met

The Association’s Project Manager or contract administrator shall include sustainability as an agenda item at each monthly project meeting and review progress based on the ‘Contractor’s Sustainability Project Report’.

A sample ‘Contractor’s Sustainability Project Report’ is included under ‘Sustainability Requirements – Guidance, Model Contract Clauses (April 2016) and Contractor’s Sustainability Report (CSR). Also see The Managed Service.