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.
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:
- 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)
- 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
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.