Contracts & Procurement masterclass series for 2012

Transcription

1 Contracts & Procurement masterclass series for 2012 Masterclass 2: The importance of the business case and the project procurement strategy Presented by: Helen Barrow 28 March 2012

2 The masterclass series Knowledge of contracts and procurement in a project and programme environment and skill in its application is fast becoming a core competence to be a proficient project manager, because of its increasing impact on project and programme outcomes; organisations are increasingly procuring bespoke works or sub-projects, as opposed to manufactured goods and simple services; and major procurements are a project in themselves. The overall course is based on the structure of the forthcoming Procurement Guide The Procurement Lifecycle 0 - Concept & Feasibility 1.1 Project Procurement Strategy 1.2 Work Package Contract Strategy 1.3 Prepare Contract 1.4 Select Contractor & Award Contract 1.5 Manage & Deliver Contract 1.6 Contract Close

3 Today's session This evenings seminar will focus on: The importance of the business case - why the commercial project manager or project procurement professional should both have input into it and understand it. The development of the project procurement strategy in terms of how to break a project or programme down into packages, what factors to consider when giving direction on how individual providers will be selected, paid, rewarded, risks allocated etc. The Procurement Lifecycle 0 - Concept & Feasibility 1.1 Project Procurement Strategy 1.2 Work Package Contract Strategy 1.3 Prepare Contract 1.4 Select Contractor & Award Contract 1.5 Manage & Deliver Contract 1.6 Contract Close

4 APM vision A world in which all projects succeed C&P Sigs mission To increase awareness of the importance of procurement and commercial in the project community* *Vital to achieving the vision!

5 The strategic business case project formation Requirement Project sponsor Stakeholder analysis Governance Project brief Options analysis Scope statement Go no go decision

6 Requirement Something wanted or needed Something essential to the existence or outcome of something else

7 What is the business case Demonstrates strategic need - sets the case for change and associated benefits Considers options recommends a solution which provides best fit in terms of project drivers - cost/quality/time Demonstrates deliverability, commercially procurement or sales deliverability Demonstrates affordability confirms where the money is coming from and fit with budgets/phasing/tax requirements etc Demonstrates ability to manage the project so that the intended benefits are realised

8 Business case maturity Strategic Business Case Developed Business Case Execution Business Case Strategic case Economic case Commercial Financial case case Management case Maturity over time Outline procurement strategy Procurement inputs Project procurement strategy Sub-contract strategies

9 Stakeholder management Project sponsor who has your back? Stakeholders who needs to be engaged? Project board who holds you to account? Source: Learning Legacy Lessons learned from London 2012 Games Construction project

10 Low High Stakeholder analysis Keep satisfied Actively engage Influence Monitor Keep informed Low Interest High

11 Project scoping Project brief - The high level scope statement What s in scope? Example: Consolidation of spend on staff sourced through agency agreements Day rate contractors Perm staff Head hunter fees Advertising costs Temp staff Consultancy Fixed term staff

12 Define your measures of success The outputs on which the projects success will be measured: 95% of staff to be sourced through 3 suppliers A 15% reduction in spend on agency fees Standardisation of rates across 7 role types 85% conformance Simple contracting method improved user experience 90% satisfaction Sourcing of roles in under 3 weeks Anything less than this will not constitute success For the best chance of success these criteria should make there way into the tender, the contract, supplier incentives and project team incentives.

13 Options analysis Options analysis how can we deliver the requirement and business case benefits? Develop option long list Use consistent screening criteria Consider full life costs Early contractor involvement can be used to help develop options Example enhanced manufacturing capability delivery options A) Refurbishment of the old plant & equipment B) Purchase of new plant & equipment C) Outsourcing of the operations D) Do nothing (why action is imperative!)

14 Scope statement Essentially the specification What is in scope What is the preferred delivery option performance v conformance spec Assumptions the project is based on Define the time/cost/quality balance Detailed requirements pre-requisites, standards, qualification, Risk assessment threats and opportunities External constraints/dependencies Cost estimate for the project With the addition of the procurement strategy at this stage you have a developed business case

15 Gate review Go/no go decision! Gate 1 strategic case Gate 2 permission to go to market Gate 3 final tenders execution gate Commitment to deliver within the cost/time/quality boundaries defined in the business case What will you need to get the green light Stakeholders on board Documentation up to date and under control The confidence you can deliver!

16 Questions????!!!! Any Questions on the business case elements? Feedback on the procurement guide chapter content gaps/clarifications?

17 The project procurement strategy Project elements (project breakdown structure) Make vs. Buy analysis Approach to market (Packaging of the project breakdown structure) Dependencies

18 Work breakdown structure Programme level Project scope level 1 Project scope level 2 Detailed scope items

19 Work package breakdown structure The work package breakdown structure - How to contract for the programme scope? 1 company at the programme level With multiple companies across the horizontal slices On an individual box basis Deliver all in house The project procurement strategy stage designs the approach to the market

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21 Factors influencing the make v buy decision Capability do we have the necessary skills to deliver this in house? In house capacity do we have the capacity to take on the elements of this project? In keeping with policy no redundancies? Supply chain capacity does the market have this capacity is it competitive? Contractual routes in place or not in place particularly frameworks? Cost Is there a cost/benefit to making or buying? Risk Can the risk be transferred? at what cost? Who is best placed to manage the risk? Responsiveness which route is quickest to market? Time Could we run a shorter schedule if we buy this requirement? Regulatory requirements do we need to be certified is it cheaper/faster/better to buy from someone already accredited? Control is there a need/desire to keep control do in house? Standardisation are we buying an off the shelf, unvaried solution?

22 Make v Buy assessment High level Typical Construction project Typical IT project Scope Org A Org B Org C Org D Design M B B M Procure M B M M Construct B B B B Commission B B B M Operate M B M M Scope Org A Org B Org C Org D R qments M B B M Design M B M M Install B B B B Test B B B M Commission M B M M M= Make B = Buy

23 Overlayed onto WBS: Scope R ment Design Supply Install Commission Org A M B B B B

24 Identify scope packages Package similar scope, consider risk and number of interfaces Consider if any areas need to be carved out standalone contracts Use market knowledge & consider the past Review existing frameworks or live contracts Consider relationships and how closely you will need to work together to secure the benefits

25 Relationships & contracting Project specific specialist services Complex & Risky Nature of Relationship Long term business critical investments Project based relationship Strategic Partnership Transactional Call-off Simple : Commodity Type : Duration : One-off Permanent Provides a Flexible sourcing option for low risk repeatable items Low value low risk tactical purchases

26 Approach to managing the project Through a single Delivery Partner contract Via multiple sources with oversight by a Management Vendor Via multiple sources with the client performing the Management and Integration role Who manages the interface and holds delivery risk?

27 Typical structure of the procurement strategy Scope statement Make v Buy assessment Work package breakdown Risk and opportunity assessment Delivery management approach

28 Questions????!!!! Any Questions on the procurement strategy elements? Feedback on the procurement guide chapter content gaps/clarifications?

29 What you can expect from masterclass 3 Sub contracts strategies Incentivisation models Routes to market

30 Upcoming C&P SIG events Tuesday 24 th April what is the NEC? Cardiff Contracts & Procurement Masterclass 3 : Developing the Package Contract Strategy Afternoon of 22 nd May Bristol

31 Please provide any feedback or questions which occur post this masterclass Thank you