Monthly Archives: July 2013

The new Complex Projects Contract

PW20 CIOB-CPC

Launched on 23 April, the Complex Projects Contract 2013 (CPC2013) focuses on managing time to ensure projects are delivered to specification on budget and without delays. Unlike existing contracts, which target failure by requiring financial compensation for late completion, CPC2013 provides the procedures to enable parties to manage time, cost and risk events in a modern and proactive fashion. It is also the first standard form contract to cater for Building Information Modelling (BIM) and the future of collaborative design.

Speaking about the contract, Keith Pickavance, a Past President of the CIOB and lead author of CPC2013 said: “This is a modern day contract designed for the data age. It underlines and meets the need for a collaborative and competent approach to how risks are managed utilising transparent systems of data. It can be used with, or without, Building Information Modelling and has been drafted to work in any country and legal jurisdiction around the world. The causes and consequences of delay are the single most common reason for uncontrolled loss and cost escalation in complex building and engineering projects”.

Unlike many forms of contract, CPC2013 doesn’t favour one party over another and is disencumbered by any vested interests. The contract is designed for projects of high value or complexity such as major real estate, engineering and infrastructure projects, with an experience client focused on achieving success. Amendments would be required to use the contract for ECPM and ‘construction management’ contracts.

Current standard forms of contract do not encourage, and in some cases actually inhibit, the competent management of time making them unsuitable for controlling the risk of time and cost escalation on complex projects. According to CIOB research, 67% of complex building projects were completed late, 49% were up to 6 months late and 18% were completed more than 6 months late. Time management experts can pinpoint the causes for these through careful analysis but by then it’s usually too late; the damage has been done and the parties are left counting the costs of late completion (or worse).

Effective tools
Taking a different approach, CPC2013 is designed to substantially manage, reduce and avoid time and cost risks contemporaneously though collaboration and transparent and effective tools.

Whilst the quality of the programme is paramount, the key lies in understanding that it is not enough simply to hold the parties to fixed points in an agreed programme for the works. With this in mind, CPC2013 concentrates on ensuring that sufficient information is communicated to manage time effectively and deal with variances from program regardless of the cause. It requires detailed record keeping of actual process against the schedule, including resource utilisation and productivity to help project participants understand and manage time risks as early as possible.

Quality assurance processes govern the preparation and maintenance of a dynamic programme (called the working schedule) and there are direct links between claims for extensions of time and the working schedule and the contractor’s specified methods of working. The parties must deal with the approval or rejection of the contractor’s submissions early on rather than leave these unresolved and, consequently, potential breeding grounds for later disputes are minimised. A project time manager, with a duty to act fairly and reasonably, helps advise on, and oversee, these processes.

BIM ready
CPC2013 is the first construction contract to be ready for Building Information Modelling (BIM), the modern digital standard for collaborative design. Maintaining this 21st century feel, communications between the parties are addressed through email, file transfer protocols and a common data environment.

Elsewhere in the contract, provisions cover deleterious and hazardous materials and the involvement of an expert aids the mitigation and quick resolution of disputes during the works. CPC2013 also caters for construction both on a design and build and a works-only basis, and can be used overseas as well as in the United Kingdom.

Einstein once said that it was not possible to change the world without changing our thinking. There’s little doubt CPC2013 may ruffle a few feathers, but its bold approach to time management is one which must be taken if contracts are to be routinely completed on time and on budget.

This is not the first time the CIOB has been involved in developing forms of contract. Back in 1871 the Institute with RIBA published the very first standard form of construction contract.

The contract is part of the CIOB’s agenda to establish a culture of effectively managing time in complex projects. In 2011 the Institute published the ‘CIOB Guide to Good Practice in the Management of Time in Complex Projects’ which was followed by the CIOB Project Time Management Certicication in 2012 (For more on these topics see: http://www.mosaicprojects.com.au/Training-CIOB-TM_Credential.html).
For more on the CPC2013 Contract see: http://www.mosaicprojects.com.au/Training-CIOB-CPC2013.html

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Real Project Governance!??

Far too many texts on project governance focus on project processes and project based decision making whilst pretending project governance is some-how separate from governing the organisation. The recent failure of the West Coast Rail Franchise Competition managed by the UK Department of Transport should totally destroy this myth.

West-Coast

Governance is an organisational process that sets defines the framework within which management operates, defines accountabilities and authority levels and requires effective assurance that the management system is operating efficiently within the framework as designed. The catastrophic failure of the West Coast rail tendering process has cost the UK tax payer some £50 million and has further damaged the already battered reputation of the Department of Transport. Failures in the procurement process to award the franchise, allowed by poor governance processes have cascaded right through to the top of the organisation and on to its ultimate owners, the UK tax payers.

Governance should not be focused on replicating and validating every management decision, the role of good governance is to firstly ensuring the right framework in in place to offer management the optimum environment to make the best decisions possible in the given circumstances and then to make sure rigorous assurance processes are in place to detect emerging risks and issues early (and to ensure something is done proactively to redress the situation). Achieving this requires an open and accountable culture within the organisation

The root causes of the ‘West Coast’ failure were the subjugation of good project management and change governance practices to the immediate, short-term target of going through the motions of the procurement processes. But only the report by the UK National Audit Office (NAO) has properly recognised the primacy of business change management over the process of procurement. The NAO found that the refranchising of InterCity West Coast was a major endeavour, with considerable complexity and uncertainty and a range of overlapping issues, but the process was conducted as a simple ‘business as usual’ procurement.

The starting point for good governance is ensuring a viable strategy is in place supported by an effective strategic plan that is achievable, resourced and properly funded. One cause of the £50 million loss was the failure to spend £50 thousand on expert financial advice due to ‘cost cutting’ decisions taken by the organisation. In a well governed organisation, decisions to cut costs should automatically trigger a review of the strategic plan and a re-assessment of risks. Assuming costs can be cut, access to resources denied and everything will carry on as normal is just plain stupid. The price of this piece of stupidity = £50 million.

Implementing a new strategy (the West Coast Rail Franchise was the first of a new type of long-term 15 year franchise) is always an organisational change. Good governance recognises the importance of effective change management with a focus on implementing the change in a way that will minimise the inevitable inconvenience, damage, hurt and resistance and at the same time maximise the long term realised benefits. The change profile starts before the project is commissioned and continues through to the point the new way of ‘doing business’ is embedded in the organisation and is seen as ‘business as usual’. A senior executive (SRO) should be personally responsible for the whole life of the initiative. Another failing on the West Coast tender was the division of responsibility between two senior managers with a major gap between the first manager ceasing and the second manager taking up responsibility for the procurement.

Within the change initiative there may be one or more projects initiated to develop the products, processes or services required to allow the change to be implemented. If there is more than one project the most effective way of delivering the actual work of creating the new artefacts is to establish a program. Within a program, each project should have one clear objective and clearly defined success criteria.

The other aspect of change is the tactical elements associated with technical change management, reorganising the workings of the parent organisation to allow the ‘new artefacts’ to be implemented efficiently. Both of these fundamental building blocks of success were largely ignored by the Department of Transport.

Then within each project, there is the need to conduct procurements efficiently and properly. Given its size and complexity, the actual conduct of the West Coast Rail Franchise competitive tender could easily have been established as a project with the primary output from the project being an awarded contract; unfortunately this was not the case.

Three other reports into the catastrophe have focused on the procurement process, starting with the Department’s internal review; unfortunate;y it’s easier to look at technical failings rather than the systemic failures, particularly when the review is initiated by the senior executives who were ultimately responsible for the systemic governance failings that created the problem.

The Association for Project Management Governance SIG has conducted a workshop looking at this failure. A summary of the outcomes from that workshop were:

Identified problems:

  • Procurement constrained by artificial dates rather than what was really needed for effective change management and development of a ‘fit for purpose’ business model
  • Did not identify what constituted a successful outcome, requirements shifted throughout
  • Lack of portfolio leadership/strategy direction, unclear project, programme, portfolio structure – Vision unclear
  • Lack of clear roles/responsibilities SRO role was confused – unclear accountabilities
  • Lessons from previous endeavours not researched or learned and warnings signs ignored
  • Procurement process not subjected to project management governance and disciplines but PM delivery competence was relatively immature
  • Organisational responsibility lacking; SRO and DfT team did not have the expertise to: set the agenda, management risk make timely decisions, or resolve issues
  • Over-reliance on internal audit process (no substitute for good governance and management) audit – conducted after the event
  • Board Members did not own the project / portfolio
  • Due Diligence not in place to make informed decisions
  • Audit of governance raised some significant issues but these were overlooked.
  • The needs of four major stakeholder groups were not reconciled: Passengers, Government, Train Operators and National Rail
    The longer term of the franchise drastically increased the sensitivity of the financial model to various assumptions (c.f. chaos theory)

Recommendations:

  • Greater clarity of objectives
  • Stronger governance of project management and strong single SRO role
  • Clear/consistent leadership and clarify roles/responsibilities
  • Better and earlier use of external challenge and verification – not just assurance
  • Deploy good PM governance and management AS WELL as independent assurance, include training and appropriate use of external expertise
  • Assurance activities need to be early, frequent, strong and sceptical
  • Educate and train all project management ‘players’ in their role – not just project managers, but sponsors, functional; managers, suppliers, etc.
  • Have a structured lessons learned session at project kick-off – bring in those experienced from elsewhere to share lessons with new team

Conclusion
Project governance requires some special knowledge and skills, particularly at the lower levels of the organisation, but ultimately it is an integral part of governance and should be subject to the same disciplines and board/executive oversight. Good governance is ultimately about the effective stewardship of the resources available to the organisation to benefit the organisation’s stakeholders.