‘Constructing the Gold Standard’ describes an integrated and collaborative approach to the procurement, contracting and management of frameworks and framework alliances. The government has undertaken to implement all its recommendations.  

In 2021 Professor David Mosey CBE was asked by Cabinet Office to carry out an Independent Review of Public Sector Construction Frameworks. The Gold Standard was endorsed in the September 2022 update of the ‘Construction Playbook’.  

"Over 2,000 public sector construction frameworks are currently active, some of which deliver improved value and enable excellent project outcomes while others are less ambitious and less successful. Constructing the Gold Standard sets out 24 recommendations to help clients identify what questions they should ask when creating and implementing construction frameworks and framework alliances, what answers they should expect and how they can make informed decisions.”

_‍The use of Digital Parallel Payment Accounts (“DiPPAs”) can help implement the recommendations from Constructing Excellence's 'Gold Standard' report.

Relevant Recommendations

Recommendation 1

Use the Gold Standard features of frameworks, framework contracts and action plans to measure Construction Playbook implementation on a ‘comply or explain’ basis (page 12)

Current wording on p71 of the Construction Playbook:

‘Project bank accounts. A ring-fenced bank account from which payments are made directly and simultaneously to all members of a supply chain. As per Cabinet Office payment policy, PBAs are not always suitable, but should be used unless there are compelling reasons not to.’

Digital Parallel Payment Accounts (DiPPAs) qualify as PBAs.

p74 of the Construction Playbook states

‘A critical success factor for the effective completion and transition of a project or programme is the sharing of high quality and robust data between parties during the project lifecycle and into operation.’

DiPPAs provide high quality and robust data on payment times, business sizes (proportion of payments to SMEs), social value (supplier locations), payment audit trails etc.

Recommendation 7

Capture improved value by identifying SME strengths and use Supply Chain Collaboration systems to maximise social value (page 39)

DiPPAs provide data on supply chain company locations. The data can be used to help calculate the Local Economic Multiplier effect of the project.

DiPPAs provide high quality and robust data on supply chain business sizes, helping prove compliance with the requirements for public projects to support SMEs.

DiPPAs provide certain and prompt payment guarantees, minimising financial stress and its well documented associated mental health impacts.

Recommendation 9

Use preprocurement framework consultation to explore emerging technologies and innovations and to identify opportunities in the market (page 43)

The Construction Playbook describes how longer-term contracts should enable

‘project and programme teams to identify potential opportunities and limitations in the market, take advantage of emerging technologies and innovations, and consider what actions would increase competition and improve market health’ (p.10). It recommends the benefits of ‘looking beyond individual contracts and suppliers’ and ‘designing commercial strategies and contracts that promote healthy markets over the short, medium and long term’ (p.14).

DiPPAs are an emerging technology and a much needed innovation. Parallel payment encourages more resilient business models from construction suppliers, which promotes healthy markets.

Recommendation 12

Create a whole life golden thread of asset information using BIM and other digital technologies integrated under a framework alliance contract (page 55)

There should be a natural fit between digital technologies and the framework systems governing MMC, ESI and Supply Chain Collaboration. Framework contracts can describe how digital technologies are enabled and supported 

DiPPAs provide a critical missing element of the digital golden thread by providing an incontrovertible audit trail of payment amounts and authorisations.

Recommendation 18

Allocate risks based on framework market engagement and use joint framework systems for early risk mitigation and efficient responses to risk events (page 75)

DiPPAs provide significant mitigation from the risk of supply chain insolvencies on a project.

Recommendation 19

Create transparent pricing mechanisms for frameworks and call-offs that maximise cost certainty and ensure prompt payment (page 79)

The success of any framework cost model depends on prompt payment of suppliers under project call-off contracts and prompt payment of supply chain members under project subcontracts. Prompt payment enables suppliers and supply chain members to concentrate their efforts on the best interests of the project or programme of work and reduces unproductive time spent in devising tactics for claims. Framework providers and managers have a responsibility to monitor adherence to the Construction Playbook requirement that ‘Contracting authorities and suppliers should always pay their supply chain promptly’ (p.50).

Some of the frameworks reviewed support payment of supply chain members through the use of ‘project bank accounts’, and many include the prompt payment of supply chain members in their success measures. Some frameworks exclude retentions on the basis that frameworks provide a more effective motivator for defects rectification through the prospect of additional work. Early payment of supply chain members can also be a factor in calculating the efficiency savings that can accrue through Supply Chain Collaboration.

DiPPAs ensure prompt payment through the entire supply chain, and make reporting on it straightforward.

Recommendation 22

Establish shared and transparent framework systems through which to manage and mitigate the risks of a supplier’s financial distress (page 87)

Concerns are expressed by client review participants as to the risk of supplier insolvency which include questions as to how frameworks can help to manage this risk.

The Construction Playbook requires that:

Resolution planning information is provided by ‘suppliers of critical public works contracts’ to ‘help to ensure government is prepared for any risk to the continuity of critical public works projects posed by the insolvency of critical suppliers’ (p.12)

‘Contracting authorities and suppliers should develop open and transparent relationships to enable both sides to act quickly in the event of financial distress’ (p.60).

DiPPAs provide a simple and effective means of mitigating the risk of supplier financial distress through late or non-payment, and insulate the project and the rest of the supply chain from insolvencies and financial distress amongst other supply chain members.