Procurement and delivery
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Programme management – some key success factors
Programme management for project delivery
Capturing lessons learned
Joint ventures for project delivery
Programme management – programme governance and supply chain management
Corruption within the procurement system
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Programme management – some key success factors
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Topic: Procurement and delivery
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How can using programme management assist in delivering challenging projects?
- Case study
The eThekwini water mains replacement projects were challenging, because of the lack of service data, the need to keep water supply going in hilly terrain and the secondary socio-economic sustainability objective (to use and develop many local small contractors on the projects) providing employment for the unemployed.
A programme management approach was adopted across all the projects and contractors, with new target contract incentives and responsibility allocation.
This allowed standard delivery processes to be applied, generated some quick wins to enhance stakeholder support and enabled quicker take-up and learning of the new methods and contract arrangements.
At the same time, it streamlined project delivery and created savings and efficiencies.
So, this procurement strategy helped to ensure that the secondary socio-economic and environmental objectives were achieved through project delivery.
References:
Watermeyer, R, Larkin, D, Kee A and Thumbiran I. (2009) Delivering infrastructure at scale: eThekwini Water and Sanitation experience in a pilot project. Civil Engineering
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Asbestos cement (AC) water mains replacement programme, eThekwini Municipality, South Africa
■ As well as upgrading the existing water distribution network, eThekwini municipality wanted to generate jobs and business opportunities within local communities
■ Trenches for the >2,800km replacement mains were hand dug, maximising job creation and increasing efficiency as damage to existing services was minimised. 12,000 unskilled labourers per annum were employed on the project. In addition, other project requirements such as security guards, plant and material were sourced from local companies
■ Four large mainstream contractors worked on the project. Each of them mentored four smaller emerging sub-contractors. Thus 16 small contracting businesses received training in crucial areas of business management, such as financial planning, human resource development and sustainability to empower them to carry out the maintenance of the upgraded networks
■ Community liaison officers recruited from the community facilitate communication and build relationships between the community and project stakeholders
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Use a standard project delivery process and plan to achieve some ‘quick wins’
- Benefits of a standard project delivery process
■ It enables programme/portfolio level thinking and learning – if every project follows the same standard process, then delivery ‘patterns’ will emerge (if the right data is collected) and these patterns can be used to drive improved performance or to inform the next programme or other similar programmes
■ It will help to drive efficiency – the routine becomes familiar, appropriate ‘division of labour’ is possible and stakeholders/decision makers can have managed or planned interventions etc
■ New policies and practices can be embedded as ‘business as usual’ into project delivery. E.g. to drive consideration of quality, safety and sustainability
■ It helps to drive consistency across multiple organisations – programmes usually involve many organisations in delivery (clients, designers, multiple contractors and specialists). A standard workflow helps to drive consistency and good practice across all the parties and enables communication, training and collaboration
- Generating ‘quick wins’
For a programme to be successful, it is important to achieve visible improvements in performance early in the programme in order to build credibility, engage stakeholders and to gain their support and buy. This builds the necessary momentum required to sustain efforts over the long haul.
A good short term win has at least four characteristics:
■ It is relatively cheap and easy, and can be quickly implemented in an attempt to secure community support
■ It is visible; large numbers of people can see for themselves whether the result is real or ‘hype’
■ It is unambiguous; there can be little argument over the call
■ It is clearly related to the change effort
Quick performance improvements undermine the efforts of cynics. The more cynics and resisters, the more important are quick wins.
Further reading:
Kotter, J.P., Leading Change, HBS Press
OGC , Programmes & Projects, Policy to Delivery 2010
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Programme management for project delivery
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Topic: Procurement and delivery
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What is programme management?
- A programme is a group of related projects managed in a coordinated way to obtain benefits and control not available from managing them individually. Programmes include an element of ongoing work and may include elements or related work outside the scope of discrete projects in the programme (PMBOK, 2009)
Programme management, in the right context, and tailored to it, can deliver better outcomes on risk, quality, speed of delivery, resources, finances, stakeholders, scope and change; communication and team knowledge and learning.
Use programme management where:
■ Benefits can be gained by coordinating multiple projects, which will not be realised if the projects were managed independently
■ Projects are linked to an overall client organisational strategy
■ Projects are of a similar nature and can be linked together to obtain the advantages of repetition
■ Projects can be grouped together because of their similar supporting service deliveries and governance requirements, or common stakeholder, change management and risk profiles
■ Similar planning, procurement or implementation timelines exist (CIDB, 2010)
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A programme management approach is being used successfully in New Orleans following Hurricane Katrina.
As programme manager, MWH is managing and expediting the repair and reconstruction of police and fire stations, streets, community centres, recreation facilities, court buildings, museums, libraries, parks, underground utilities, and associated infrastructure as part of the post-Katrina rebuilding effort. This work represents an integral step in the implementation of the Citywide Strategic Recovery and Rebuilding Plan.
The Recovery Programme is currently monitoring the performance of 355 Facilities projects with an approximate value of $758 million and 287 Department of Public Works projects with a value of $626 million.
Source: MWH Project Description Sheet
Further reading:
APM Introduction to Programme Management
OGC Introduction for Programme Management
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Tailor programme management processes to the local and project needs and context
In the start-up stages, the programme management processes should be tailored to the local and project needs and context, to enable success.
Further Reading and References
1. PMBOK® Guide (2009) A Guide to the Project Management Body of Knowledge, Third Edition
2. Nguyen, N.M., (2007) The Challenges of Transferring Modern Project Management Principles and Methodologies to Developing Countries, PMI Global Congress
3. Zeitoun, Dr. A.A. (2008) Managing Projects across Multi-National Cultures, A Unique Experience, 29th Annual Project Management Institute Seminars and Symposium, California
4. IDMS Practice Guide 2: Construction procurement strategy, 2010
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Consider the local context to get the programme detail right
■ Who are the approving bodies/ organisations and what are their expectations of the approval process and timeframes required?
■ How easily is information shared among organisations; what are the timeframes for transfer of project information, or barriers to transfer?
■ What technology and systems, if any, are available to support the programme and scope management functions?
■ How long is the working day and are there any local holiday periods that need to be considered in the programme?
■ Are there any local socioeconomic, political or environmental conditions which are likely to affect scope/programme?
■ Make a realistic assessment of project manager capabilities or shortcomings – training needs for delivery organisations
■ A "top-down" approach in many developing countries may generate a need to overcome institutional problems within client organisations such as: unclear responsibility, lines of approval and accountability (Zeitoun, 2008)
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Capturing lessons learned
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Topic: Procurement and delivery
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How can we extend the value of lessons learned in project management?
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Provide a platform for sharing
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Joint ventures for project delivery
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Topic: Procurement and delivery
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Why are joint ventures entered into on construction projects?
- What is a joint venture?
Put simply, it is a strategic alliance to share risk and reward.
Why form a joint venture?
■ Similar companies may join to try to penetrate markets they wouldn't or couldn't consider without investing large resources
■ A large company may decide to form a joint venture with a smaller business in order to quickly acquire critical intellectual property, technology, or resources otherwise hard to obtain
■ To penetrate restricted markets where, for example, through targeted procurement the employer wishes to develop the skills of an emerging firm
What are the different types of joint venture?
■ The formation of a separate business entity with ownership by parent companies (permanent or long term project basis)
■ A coming together of different companies for a specific short term project
How do joint venture operate?
■ The members of the joint venture pool their resources and the contract is executed by the joint venture using the pooled resources, or
■ The work and obligations making up the contract are broken down into discrete elements and assigned to a specific member who assumes full responsibility for its execution, under the direction of the joint venture.
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Joint ventures in developing countries
Structured Joint Ventures are sometimes used as a way of furthering the growth and capacity of local SMEs.
The employer may, through procurement, make it a requirement of larger companies to enter into an agreement with a local or somehow disadvantaged business as a qualification requirement to tender for the work.
Example: Black economic empowerment in South Africa
South Africa has developed a system of procurement, called targeted procurement, to permit procurement to be used as an instrument of social policy in a measurable, quantifiable, auditable and verifiable manner. This is to address imbalances in business ownership patterns arising from the system of apartheid in the construction sector. At the same time, targeted procurement enables social objectives to be linked to procurement in a fair, transparent, equitable, competitive and cost effective manner. This system of procurement, which includes structured joint ventures, has both facilitated and accelerated growth in the black construction sector.
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Build effective teams and share knowledge
- The key determining element responsible for joint venture failures is the human factor. It is sometimes difficult for employees to accept an alliance that may seem like a threat to them and a way of life/working that they have become used to.
Team building and knowledge sharing
■ Building the relationship between the venture partners
Making sure that both sides are invested in the venture and understand how much they have to gain from this joint venture. But more importantly, how much they can lose by not partnering
■ Building the relationship with and between staff
The joint venture partners must ensure that employees feel comfortable. This is crucial to the success of the joint venture. The new combined entity should have a common goal and encourage a shared ethos amongst its staff. Staff must know and trust each other and must feel invested and excited about the new company and its shared future
■ Knowledge sharing
Information sharing is vital, and it is essential that, as early as possible, both teams talk and exchange their knowledge. This entails meetings, steering committees, joint company events, employee "swaps" and internal promotions. By encouraging knowledge sharing, sceptical staff become aware that they can have lots to gain from the new venture including new skills and new promotion opportunities
- A good joint venture agreement (CIDB, 2003):
■ Should clearly and comprehensively set out the contributions to be made by each member towards the activities of the joint venture in securing and executing the contract and should allocate monetary values to such contributions
■ Should record the percentage participation by each member in all aspects of the fortunes of the joint venture, including risks, rewards, losses and liabilities
■ Should provide for meaningful input by all members to the policy making and management activities of the joint venture
■ Should provide for the establishment of a management body for the joint venture
■ Should provide measures to limit, as far as possible, losses to the joint venture by the default of a member
■ Should promote consensus between the members whilst ensuring that the activities of the joint venture will not be unduly hindered by failure to achieve it
■ Should provide for rapid, cheap and easy interim dispute resolution and for effective final dispute resolution, if required
■ Should be sufficiently flexible to allow for joint ventures which differ in nature, objectives, inputs by members, management systems, etc
Further reading:
CIDB document 1013 (March, 2003: Edition 1) Best Practice Guideline D2: Joint venture arrangements
J.N. Govenderand R.B. Watermeyer. CIB (2000) Potential Procurement Strategies for Construction Industry Development in the SADC Region
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Programme management – programme governance and supply chain management
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Topic: Procurement and delivery
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How can you manage resources, people and supply chain companies in a programme?
- Programme governance deals with designing and implementing the functions, processes, procedures and responsibilities that define how the programme is to be set up, managed and controlled. The challenges may include:
■ Changes may be required to organisational structures, to reflect the change in focus, as the programme moves towards transition
■ The programme may require dedicated teams to carry out procurement and contract management activities relevant to the programme
■ Programmes tend to have a wide range of stakeholders, making effective communication difficult
■ The upheaval associated with change inhibits maintaining continuous services
■ A supply chain is a system of organisations, people, technologies, activities, information and resources involved in moving a product or service from supplier to customer. Many of the exchanges encountered in the supply chain are between different companies that seek to maximise their revenue within their sphere of interest, but have little knowledge or interest in the remaining players in the supply chain.
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Example: supply chain for infrastructure delivery - Low-cost housing, Jozini, South Africa
Supply chain:
■ Labour – skilled foremen contracted from larger towns, unskilled local labour (beneficiaries from community)
■ Supporting services – water deliveries by truck, raw material deliveries, telecommunications
Supply chain challenges:
■ Remote and isolated site – creating logistical challenges for materials and staff
■ Intermittent deliveries – any missing link, particularly water, halts the programme
■ Theft of materials (e.g. cement) – by unsupervised contractors. Lack of commitment by one member of the supply chain undermines the project
■ Supply chain management is the planning and management of all activities involved in sourcing, procurement, conversion and logistics management. The basic goal is to optimise the entire supply chain rather than sub-optimise based on a local interest. This will lead to better planned overall productivity and distribution, which can cut costs and give a more attractive final service, leading to better overall results for the companies involved.
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Understand project and supply chain interactions to maximise benefits to all parties
- Programme governance should consider the following:
■ Set up the organisational structure (e.g. appoint programme director, manager etc); procure or lease appropriate facilities and tools to manage the programme (e.g. intranet, programme office); establish procedures for managing risks, resolving issues and reporting progress
■ Consider HR management to deploy and retain staff; allocate resources to programme-level procurement and contract management; devise a communications plan, linking all stakeholders; start procedures and responsibilities for project-level reporting and programme-level monitoring and control
Supply Chain Management must aim to:
■ Incentivise performance by balancing competition and collaboration; consider risk allocation as part of the procurement route (in integrated teams, risks should be allocated to individual risk owners who understand their responsibility); ensure competencies and reliability throughout the supply chain; integrate processes to share information and arrange payment terms and methodologies for exchanging funds
■ Where distribution networks are involved, also consider distribution network configuration (number and location of suppliers, production facilities, storage facilities, and customers) and distribution strategy; trade-offs in logistical activities and inventory management
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Example: municipalities procuring infrastructure projects through tender adjudication and awards committees may consider the following:
■ Appoint service providers using contracts in place with other organs of state
■ Develop service provider rosters
■ Make one person clearly responsible for each project, ensuring that there are no delays
�� Develop standard specifications for particular groups of projects
■ Group similar projects into one tender
■ Supply Chain Committees should have qualified staff
■ In the case of bulk services to be funded by developers, municipalities should not insist on the bulk contributions being paid into their coffers, but commission developers to develop bulk infrastructure themselves
Further reading:
The Office of Government Commerce (OGC) – Introduction to programmes:
APM, Introduction to Programme Management
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Corruption within the procurement system
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Topic: Procurement and delivery
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How and where does corruption occur within the procurement system?
- ISO 10845-1:2010 defines procurement as “the process which creates, manages and fulfils contracts relating to the provision of goods, services and engineering and construction works or disposals or any combination thereof”
■ Corruption can occur at any of the phases of procurement. The players involved in the process include the project owner (client), the tenderers and the successful tenderer (contractor), the tender evaluation panel members, those that administer the contract; and even multi/bi-lateral funding agencies, in aid-funded development. Consultants, government officials, subcontractors and suppliers are also frequently involved in various phases of the procurement process
■ Corruption damages companies and public bodies, resulting in uncertainties in tendering, wasted tender expenses, increased project costs, economic damage, reduced project opportunities, criminal prosecutions, fines, blacklisting and risks to reputation
Useful references and links
www.transparency.org
www.anticorruptionforum.org.uk
www.giaccentre.org
www.u4.no
www.unglobalcompact.org
- Corruption during project tender and selection stages:
Loser’s fee
All tenderers include a secretly agreed additional sum (the total estimated tender costs of all the competing contractors) in their tender price. Whichever one is awarded the contract then divides this sum between all the unsuccessful contractors, who thereby recover their tender costs. This is not disclosed to the project owner. The project owner is therefore unknowingly paying more than they would have done had the unsuccessful tenderers borne their own tender costs.
Bribes to award a contract:
A tenderer pays a bribe to a government official; in return the official ensures that the bribing tenderer wins the contract. The official ensures that the information regarding what was tendered is kept secret, so that no-one knows that the bribing tenderer was not the most competitive or his offer was made more favourable after the closing of tenders, or the official manipulates the tender evaluation to favour the bribing tenderer.
Bribes to issue a contract:
A client could demand a bribe from a selected consulting firm/individual at contract negotiations to issue a contract.
Inflating payment certificates:
The engineer and contractor agree to inflate the payment certificates, and share the margin.
Intention to withhold payment:
A project owner places a contract. He intends, in order to increase his project profitability, to refuse to pay the contractor the retention sum upon completion of the project, by concocting artificial counterclaims to offset against the retention.
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Embrace best procurement practices to combat corruption
- The CUTS-CITEE IWOGDA II project identified a range of measures, put in place by government in various countries to deal with corruption in public procurement:
■ The maintenance of an independent judicial system
■ The auditing of supervision/management systems and expenditure by the office of the auditor general
■ An array of laws relating to corruption, reporting on corrupt practices, establishing a body to investigate complaints, promoting access to information, promoting just administration and the protection of those disclosing information relating to corrupt practices
The IWOGDA II report made the observation that the success or otherwise of all these initiatives is dependent on there being in place comprehensive, well formulated and documented procurement procedures that are free of undue discretion and subjectivity. The success rate for prosecutions is low in the absence of such procedures.
(see www.cuts-international.org/pdf/synthesis-report.pdf )
ISO 10845-1:2010 establishes processes, methods and procedures for the establishment of a procurement system that are fair, equitable, transparent, competitive and cost-effective. This standard provides a framework around which public, private and international organisations may develop their procurement systems to achieve fair competition, to reduce the possibilities for abuse and to improve predictability in procurement outcomes.
- FIDIC has developed Guidelines for Integrity Management in the Consulting Industry. This enables consulting firms to put in place an internal system that is designed as an effective tool to prevent corrupt behaviour and to encourage integrity.
Other ways of combating corruption within the procurement system include:
■ Using IT technology to improve transparency and efficiency, e.g. publish tenders and tender awards online
■ The introduction of anti-corruption clauses in procurement documents
■ The adoption of anti-corruption, project transparency and hospitality/gift policies
■ Training and raising awareness of anti-corruption measures
■ Introducing codes of conduct governing those engaged in procurement processes
■ Adoption of standard forms of contracts such as the NEC3 and FIDIC family of contracts
■ Conducting random audits of tender processes and payment certificates
■ Blacklisting companies that engage in corrupt practices
See also: www.constructiontransparency.org