Diversity — vive la différence

11 November 2010

If you are competing for public sector work it’s likely that you will have to demonstrate a serious commitment to diversity, says Harish Bhayani

If you are involved in bidding for major contracts, or managing supply chains, recruitment or training, chances are you will be seeing greater requirements for addressing diversity and community needs in your work. Prominent bodies making specific requirements include Transport for London, the Olympic Delivery Authority and Crossrail. Many local authorities and other public sector bodies are also adding these requirements.

Our clients in the construction sector, which include Balfour Beatty, Skanska, Vinci, Durkan Group, Mott MacDonald and Parsons Brinckerhoff, regard this as a serious subject. They are bidding for major contracts, and who wins them could be determined by who is better able to meet these requirements.

Public sector bodies are being spurred on by legislation, which was further strengthened when the Equality Act 2010 started to come into force from October.

The Act aims to establish a new single equality duty on public authorities, consolidating the existing public duties on race, disability and gender, and extending them to cover age, sexual orientation, religion or belief, pregnancy and maternity, and gender reassignment. The duty talks about requiring public bodies to “consider the needs of diverse groups in the community when designing and delivering public services” and also applies to private bodies exercising public functions.

As before, the new duty re-asserts that public authorities must have “due regard” to: eliminate unlawful discrimination; advance equality of opportunity; foster good relations in exercising their business.

The last point is currently interpreted by the Equality & Human Rights Commission to mean that public sector organisations will have to be more actively engaged in this role than was necessary under the previous “duty to promote”. Note also that all this applies to private bodies exercising public functions, which might include construction sector companies.

These organisations are increasingly looking for a commitment to equality and diversity from their supply chain and the inclusion of local communities and their needs. The latter may mean, for example, recruiting staff from the local community or creating training opportunities for people from the local area.

So how does all this affect companies in the construction sector? The following are examples of typical requirements, taken from PRM’s own work with construction companies:

• In formal bid submissions, either at PQQ or main tender stage, the client may ask tenderers to describe their current diversity strategies and policies, both internally and in their own supply chains, and general plans for the future and the contract specifically. They may request descriptions of how tenderers will recruit local people and offer apprenticeships or jobs to long-term jobless people during contract mobilisation and beyond. The requirement on the amount and type of the local recruitment element can be linked to the anticipated contract value.

• Engaging your own supply chain on diversity. We worked with one company to help it and all members of its strategic alliance partnership — about a dozen Tier 1 suppliers — to develop their respective diversity strategies.

• Designing and delivering diversity awareness training for all personnel on a contract, from senior management to site personnel, including subcontractor personnel, for a joint venture contract.

• Developing internal policies on diversity and community engagement on contracts.

• Working with local employment agencies and voluntary organisations to identify, recruit and develop employees from under-represented or disadvantaged groups, such as the long-term unemployed or under-21s.

Organisations that can best respond to such demands can create a significant competitive advantage for themselves. Not only will they help deliver better results in their tendering, but these activities are good business practice in themselves. So how can your organisation best position itself for maximum competitive advantage?

The first step is to put yourself in your customers’ shoes and ask: what are their expectations with respect to diversity in their supply chain and in particular, your organisation and your supply chain? Similarly, what are their needs for the local communities they serve? This is a relatively new field for everyone, so there is significant opportunity to collaborate and develop mutually satisfying approaches.

Be proactive not reactive. Treat this as an opportunity to create a competitive advantage, not as a compliance exercise. Co-ordinate your sales, marketing, procurement, recruitment and training. Find out where each function is with these issues and agree where they need to be. Finally, work together to engage with your customers and suppliers

Regard suppliers as an extension of your employed workforce, which is what they are. What should you be doing about their diversity as well as your employees?

Actively seek out the many specialist service providers who can help you to recruit from diverse and local communities. Often they cost you nothing as they are funded to provide this service.

The most successful and sustainable approaches will not be those that specify quotas, but those that closely engage with internal and external stakeholders.

Harish Bhayani FRSA is principal of PRM Diversity Consultants

Back to basics: Letters of intent

Letters of intent are commonplace in construction and are used to allow works to start prior to the terms of a formal contract being finalised. Letters of intent normally express an intention to enter into a contract in the future. However, there is often confusion as to whether they take effect as a non-binding promise to enter into a contract at a later stage, or whether the letter of intent itself is a binding contract.

If a letter of intent does not contain the essential prerequisites to bring about a contractual relationship, such as certainty as to the price, scope and duration of the works, it will simply amount to a non-binding statement of future intent. In this situation the contractor would at best only be entitled to payment of a reasonable sum for work done and the employer would not be able to bring a claim for breach of contract or delays.

On the other hand, if a letter of intent sets out the essential requirements for a contract to be formed, in essence certainty as to the terms upon which the works under the letter of intent are to be performed, a legally binding contract will exist with contractual obligations for both parties. However, given the nature of letters of intent, the obligations are likely to be limited and will not cover all of the issues that may arise and that would normally be covered in a fully negotiated contract.

Letters of intent should be drafted in such a way that they create contractual obligations, so the fundamental terms should be clearly set out, as well as an acknowledgement between parties that it is a binding contract. Repeated renewals of letters of intent should be avoided and the ultimate contract concluded as soon as possible.

Nik Haria is head of construction at law firm Sprecher Grier Halberstam

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