Procurement innovation on major programme helps build brighter future for students in Peru

The first Thursday in November is International Project Management Day. In Peru, an innovative collaboration is building a brighter future for the country’s young people. We look at how the government is working with independent global real estate and construction consultancy Gleeds, and project and programme management consultancy Mace to improve the country's schools.

The Peruvian government’s Bicentennial Schools programme is modernising and revitalising the country’s education infrastructure. This ambitious programme involves the demolition and construction of 75 schools to create new, state-of-the-art facilities for over 118,000 students. Gleeds and Mace are playing a pivotal role in the programme.

One of the unique measures being pioneered on the programme is the use of New Engineering Contracts (NEC contracts). The use of these contracts is long-established for major infrastructure programmes in the UK, but not typically used by the Peruvian state. First developed in 1993, NEC contracts were designed to replace typical construction contracts with the aim of preventing costly disputes that can arise from traditional 'adversarial' contracts.

According to Peru’s Ministry of Education, the education infrastructure gap amounts to around 35 billion pounds. Therefore, collaborative, solution driven approaches to procurement and contract management is seen as fundamental for successful delivery of government special investment programmes in Peru. Hence, standard forms of contract such as the NEC were selected.

The client – Proyecto Especial de Inversion Publica – Escuelas Bicentenario (PEIP-EB) – has used NEC4 Engineering and Construction Contracts for the first time in Peru, creating the client’s delivery assurance partner Koulu, a consortium of Finnish and UK companies, supported by a government-to-government agreement between the UK and Peru.

Frances Palmer ChPP, Associate Director – Project Management at Gleeds and Knowledge Transfer Lead/Contract Manager in Koulu (pictured), explained the reason for using NEC contracts on the programme and the benefits of doing so: “Unfortunately there has historically been a lack of adequate project execution vehicles within Peru that provide the correct structure to deliver large scale infrastructure on a national scale. The delivery of national infrastructure through government-to-government special investment vehicles allow the Peruvian government to contract outside of the state contracting law, therefore offering a different execution model to those in the past.

“Within these new ways of working, foreign governments (such as the UK in the case of the Bicentennial Schools programme) alongside other governments such as Finland, provide technical assistance, implementing international best practice across the PMO (Project Management Office) portfolio over the life cycle of these programmes. Here, the fundamental principles of project management have been applied, creating a baseline for key areas such as schedule, cost, change and risk management that previously would not have been part of the execution plan.

“The NEC contract has formed a fundamental part in regulating the contractual relationship between the state and contractor, creating a more transparent, fair and collaborative environment to deliver high quality projects, quickly. Certain clauses within the NEC contract facilitate clear communication between all parties, ensuring that issues are identified early on with a focus on finding solutions through regular meetings and early identification of risks and issues. Indeed, one of the main clauses frequently sited within the contract is “‘in a spirit of mutual trust and co-operation”.

 

The Bicentennial Schools programme in numbers:

• 2021 – programme commenced
• 2022 – procurement launched
• 75 schools being built or rebuilt
• 118,000 students and 5,100 teaching staff will benefit

 

Delivering benefits

The new schools feature innovative designs that reduces climate impact while ensuring efficiency in their day-to-day use and reducing maintenance costs.

The use of NEC contracts to control this process has brought numerous benefits. Work has been able to commence quickly. Contractors have been selected through an open, fair and transparent procurement process, which has increased the confidence and interest of national and international contractors in tenders. Furthermore, the average duration of Koulu’s agile procurement was four-and-a-half months from Memorandum of Understanding until tender award, which is a record for the Peruvian market, and allowed the client to achieve their ambitious timeframe.

Matthew Fitch, Deputy Programme Director for Mace and Programme Management Lead in Koulu, described why the procurement process was effective in creating confidence in the market, saying: “Koulu acts as the Procurement Agent on behalf of the Peruvian government, leading the procurement stage from initial market engagement, through prequalification, tendering and evaluation with a final recommendation report issued to PEIP-EB for their final approval. Our focus is always on ensuring that we have a clear set of instructions and evaluation criteria (giving confidence to the market that it is a level playing field), that the process is completely transparent (by providing bespoke feedback to those who are successful and those who aren’t) while keeping sensitive information confidential and ensuring all communications are traceable through our online portal.

“This is all helped by the very nature of the government-to-government agreements, as we are able to present a procurement strategy that takes best practice from across the world and doesn’t only need to align to local procurement regulations (which can be very cumbersome), providing we duly substantiate any decision  or deviation made.”

The results for the programme have included:

• Full value of works procured in four-and-a-half months, instead of what would normally take years;
• An average of 4.6 contractors/consortiums presenting an offer, far more than would typically be expected if following a standard government procurement process
• No formal objections to the final results

Knowledge-sharing and upskilling local workers has also been an important part of the programme. Frances explained: “As part of the assistance provided by Koulu, subject management experts have designed and implemented formal training and social learning to PEIP-EB and their stakeholders – hence upskilling the Peruvian workforce, which in turn allows for future delivery of similar programmes by those living and working in Peru. This reduces reliance of foreign state intervention, allowing for sustained economic growth.”

“The success of establishing the use of NEC contracts in Peru can be seen through the recent announcement of a new partnership between the NEC and Peru’s Ministry of Economy and Finance (MEF), which will see the NEC suite of contracts become the country’s preferred contract framework for infrastructure projects. The NEC contract will be formally translated into Spanish including all contracts, user guides and training programmes. This is a significant achievement.

“When talking about the success of this agreement the British Ambassador to Peru, Gavin Cook OBE specifically referenced the importance of this agreement in enabling more transparent and efficient procurement that would help boost investment in the country.”

 

Overcoming barriers to change

Despite the success, there have been challenges around the introduction of NEC contracts and new procurement methods into an already complex market. These range from a lack of local understanding about the NEC contract suite, to a lack of experience applying them, to people simply being reluctant to adopt a new way of working. These have been overcome by Koulu’s subject matter experts providing training to Peru’s stakeholders.

Frances said: “It is true that adult learning can be complex, with a resistance for change and learning new ways of working. However, with the correct support from leaders within the construction industry and a structured and planned approach to delivery, the desired outcomes can certainly be achieved.

“High staff turnover within some of the projects has also meant there are continually people entering and leaving the workforce that impacts general capability to deliver projects effectively, and influences the overall maturity of the special investment bodies. This is an important aspect to address, with the importance of cultural factors that influence barriers to learning, collaborative working and retention being fundamental in the upskilling of employees and creating a sustainable and dynamic workforce.”

 

Advice for project professionals considering NEC contracts

“First of all, one size doesn’t fit all,” advises Frances. “It might be that the local procurement and project management process in a particular country is working, and therefore the old saying of ‘if it is not broken, don’t fix it’ applies. However, the flexibility of the suite of NEC Contracts makes it highly likely that benefits can be gained from using them. It’s also important to recognise that contracts are a tool, not an end in themselves.

“One must not forget about the importance of collaboration, interaction and partnership working, utilising soft skills to achieve environments where people feel respected and heard, and the importance this has on project success. NEC contracts support this with collaboration and mutual trust being at the forefront of the clauses, but it is the people that create the environment where this can truly be achieved.”

You can learn more about the Bicentennial Schools programme here.