This case study considers procurement and commercial strategy as part of collaborative planning, management and delivery of the Thameslink London Bridge Area Partnership works.
In December 2017 Jacobs were commissioned to undertake a review of the collaborative aspects of the planning, management and delivery of the Thameslink London Bridge Area Partnership works in Key Output 2 in order to produce a legacy document that will inform and inspire subsequent programmes of work.
To gather the required information, a series of seven workshops were held during January 2018 with a cross-section of key staff, both past and present, from all partner organisations. Workshop discussions were captured and reviewed and a number of recurring themes identified.
The full report can be read here
- Sir Roy McNulty’s ‘Rail Value for Money’ study, published in May 2011, identified greater collaboration between organisations in the industry as one of the means for delivering greater value for passengers and tax payers.
- Due to contract award timing, Bermondsey Dive Under (BDU) was built by Skanska as a separate civils structure and not managed as an integrated part of the programme.
Early development of Delivery Strategy
During the early part of GRIP 3 the concept of a delivery strategy was developed which in turn drove the creation of the three separate works packages (track, signalling and station). All three contracts started on the same day, with the same pre-construction phase and the same pre-construction phase outputs.
Partnering model selected over Joint Venture or Alliance
In KO1 the JV structure had proven cumbersome (with NR negotiating with two partners) and led to slow and cumbersome decision-making. In order to successfully adhere to the programme, a model was required for KO2 that would facilitate prompt decision-making. NR had to own it and drive the programme itself.
KO2 needed strong leadership and behavioural requirements and so NR decided it would accept a higher level of risk in certain areas than had previously been the case on other projects in order to support a more collaborative approach. These areas included: track access, possession management, systems integration and overall approvals. With NR in the Programme Manager role it was decided that there was insufficient benefit in adopting an alliance model. Instead NR drew up its own contract which was a blend of ICE Target Cost and ECC Option X12 to give a set of provisions consistent for all three Partners (Clause 90). Partnering level and risk and reward arrangements would be consistent across all three contracts. If the partnering arrangements failed, contracts were set up in such a way that the programme could continue with NR reverting to the role of a more traditional client, whereas an alliance would have to collapse entirely.
NR adopted leadership role
The fundamental leadership dynamic was to come from NR who wished to retain the leadership role but wanted a formal collaborative environment and approach on KO2. NR also firmly believed that it possessed significant management and leadership capabilities to assume this role.
Adopted a positive approach towards incentivisation
NR adopted a positive approach towards incentivisation. Previous experience had shown that being more confrontational in this area has negative overall impacts. In order to discourage protective behaviours, NR endeavoured to be realistic with regards to risk transfer and committed to pay all costs, but specified that as contractors’ costs increased so fees would decrease.
NR wanted a simple transparent system for incentivisation of Partners that would give all three partner organisations the opportunity to succeed if they worked together. If one failed all would fail. NR could adjust and write back bonus payments at any point in the future for a number of reasons: safety/environment, 3rd party disruption, train operator disruption, overall operational performance. Bonus payments to Partners were discretionary and geared to the successful completion of stages. The value of each bonus was linked to the importance of the stage and applied equally to all Partners.
With regard to contractors, a Contractor Profit Payment was put in place whereby 50% of their profit was put at risk around performance of the stage. If at any point a contractor failed they could, however, catch up to programme and recover all lost bonuses. There was some reluctance around the use of disincentives as it was felt it would sour relationships.
Ultimately, LBAP used a target cost model together with a mechanism to turn off pain fairly quickly, thus discouraging contractors from adopting adversarial behaviours. As a result, contractors’ balance sheets were less exposed, facilitating the opportunity to create a more open and collaborative working environment between Partners.
Efforts made to ease issues with multiple specialists operating in a confined space
The station, track and signalling specialist contractors were all going to be working within very close proximity. For this to succeed, a mechanism was required by which they would actively co-operate. NR considered procurement options including single source, but wanted specialists for each role. It was clearly not possible to get sufficient space between contractors to allow them to operate independently and so the adoption of a collaborative approach offered a solution.
Collaborative capability assessed during procurement
The procurement of contractors focussed primarily upon technical capability but did include an assessment of organisational maturity and collaborative capability which attracted a weighting of 16%.
Full supplier buy-in to model, programme and costs
NR actively sought out the experience of other infrastructure clients (Highways England, British Airports Authority and National Grid) around ECI and incentivisation. They held workshop sessions with a range of major contractors to seek their views on ECI and their experience of incentivisation with other clients and industry sectors.
Significant time was spent working with senior management in the supply chain to get buy-in. Good relations and rapport were developed as they bought into the concept. By the time NR went to get approval to deliver KO2 they had full supplier buy in to the contract, programme and costs. The target price contract model had been discussed in detail by all Partners and agreed in advance.
Mature re-assessment of budgets and approach to ‘Re-Authorisation’
It is understood that at the outset there was an under-estimation of cost and risks. LBAP’s collaborative arrangements enabled a more mature approach to the re-assessment of budgets and risk allowances by each element of the programme and each supplier/contractor. NR engaged the contractors in this opportunity, enabling them to come forward openly and honestly to identify the full costs required to deliver the programme. The job was then completely re-forecasted.
In turn, this enabled NR to return to DfT for a single re-authorisation exercise rather than going back repeatedly, as had been the case on some earlier NR projects.
Contractors felt this reflected a new positive attitude and approach on the part of NR and believe it to have been radically different and beneficial to programme delivery. In their view, NR was behaving as a more mature client than seen on other rail projects. Contractors felt empowered to provide NR with the full picture whilst protecting the schedule.
During this same period, a number of processes and procedures were re-written in collaboration with Partners. The existing NR directives offered only general principles, so effort was put into enhancing and tailoring these to suit the particular requirements for this complex project.
Effective and open change process
The documented change process included an open forum with all delivery Partners involved, thus avoiding any hidden agenda. Change Boards met on a regular basis and were well attended. This successful approach to managing change mean that “contracts were left in the bottom drawer and stayed there.” Change is discussed in more detail in Theme 5 – Collaborative Forums.
Risks placed where they could best be managed – ‘Risk Pots’
This was a difficult project to deliver and so bigger risk items were retained by NR and the remaining risks were placed where they could best be managed and left in the ‘risk pot’ of the appropriate contractor.
Although this approach is fairly standard for target cost it was unusual for NR, whose approach had tended in the past to be more adversarial. NR realised at the outset that taking an adversarial approach would not work and avoided it, even when they knew costs were escalating. NR and contractors applied risk management properly, with funds moved around as appropriate.
“Schedule is King”
There was a recognition that programme delays would significantly damage NR’s reputation, particularly given the high profile of this particular project and the level of stakeholder interest in it. Access restrictions meant that missing a single milestone could lead to one year’s delay and significant additional costs. The view was taken that the overall cost of additional funding to stay on programme was lower and preferable to the reputational damage that would otherwise occur. Therefore, a conscious decision was taken to develop a model where, in effect, keeping to schedule became more important than cost.
Contract administration could be improved further
Collaboration requires open and honest discussions around performance. It would appear that, at the outset, NR was culturally not mature enough in this area with some project management staff reluctant to ‘rock the boat’ by serving a notice on a supplier. There was, therefore, an acceptance that some contract administration by NR has not been as good as it might have been.
Enabling works contractor should be better integrated into the programme
The Enabling Works Contractor was the least integrated and this caused issues. Information integration was a key issue. This will recur on all projects. Need a way to incentivise/maximise performance to help others later. Improve handover process definition before start. E.g. including requirements about entry of information into BIM.
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