Mikko AJ Ramstedt Senior Project Adviser Financial Partnerships Unit Stage Gate approach towards project management Training event on PPP programming and process management 27 May 2008 Twinning Project CZ/2005/IB/FI/04 Mikko AJ Ramstedt Senior Project Adviser Financial Partnerships Unit

Introduction Background Stage Gate approach The need for Process discipline PPP vs. conventional projects Resource planning Greetings Outline summary of what presentation will cover. Key focus is on the three-way relationship between procuring public authority, contract and contractor. Why do we need to manage contracts? Is having to manage contracts not just a sign that the contractor isn’t willing or capable to do the job? Although appropriate to think about contract management, first need to set the context.

Background Why is PPP different? Contracted outputs Concession Fixed Performance & availability requirements Concession Longevity Contractually defined obligations – limited flexibility Mutual liability Incentives Greetings Outline summary of what presentation will cover. Key focus is on the three-way relationship between procuring public authority, contract and contractor. Why do we need to manage contracts? Is having to manage contracts not just a sign that the contractor isn’t willing or capable to do the job? Although appropriate to think about contract management, first need to set the context.

Background PPP programming and process management 6 stage process: Conception Development Procurement Construction Operation Handback Each element has a number of sub-stages Greetings Outline summary of what presentation will cover. Key focus is on the three-way relationship between procuring public authority, contract and contractor. Why do we need to manage contracts? Is having to manage contracts not just a sign that the contractor isn’t willing or capable to do the job? Although appropriate to think about contract management, first need to set the context.

Background PPP process Resource intensive (at all levels) ‘Front loaded’ inputs Long lasting consequences Accountable bodies need an effective way of tracking projects and monitoring risks. Greetings Outline summary of what presentation will cover. Key focus is on the three-way relationship between procuring public authority, contract and contractor. Why do we need to manage contracts? Is having to manage contracts not just a sign that the contractor isn’t willing or capable to do the job? Although appropriate to think about contract management, first need to set the context.

Stage-Gate approach: Principles Self-assessment tool Expert independent review Guard central government investment Mandatory for Scottish Government Departments & Agencies & PPP projects receiving central funding or requiring central approval. Maintain local accountability Accumulation of sector specific & market experience Greetings Outline summary of what presentation will cover. Key focus is on the three-way relationship between procuring public authority, contract and contractor. Why do we need to manage contracts? Is having to manage contracts not just a sign that the contractor isn’t willing or capable to do the job? Although appropriate to think about contract management, first need to set the context.

Stage-Gate approach: Purpose Establish clear and transparent criteria for project evaluation Audit projects at key stages Consistency of review / control Reassurance to public sponsors Reassurance to market: minimum standards Develop best practice Share lessons learnt Quality Assurance Greetings Outline summary of what presentation will cover. Key focus is on the three-way relationship between procuring public authority, contract and contractor. Why do we need to manage contracts? Is having to manage contracts not just a sign that the contractor isn’t willing or capable to do the job? Although appropriate to think about contract management, first need to set the context.

Stage-Gate approach: Context 1 Top 10 risks that have materialised during PPP procurements: Land acquisition Site ownership Planning permission Lack of consensus among stakeholders Greetings Outline summary of what presentation will cover. Key focus is on the three-way relationship between procuring public authority, contract and contractor. Why do we need to manage contracts? Is having to manage contracts not just a sign that the contractor isn’t willing or capable to do the job? Although appropriate to think about contract management, first need to set the context.

Stage-Gate approach: Context 2 Affordability Lack of competition Project scope unstable Unsecure bid price Commercial agreement Due diligence “unforeseens” Greetings Outline summary of what presentation will cover. Key focus is on the three-way relationship between procuring public authority, contract and contractor. Why do we need to manage contracts? Is having to manage contracts not just a sign that the contractor isn’t willing or capable to do the job? Although appropriate to think about contract management, first need to set the context.

Greetings Outline summary of what presentation will cover. Key focus is on the three-way relationship between procuring public authority, contract and contractor. Why do we need to manage contracts? Is having to manage contracts not just a sign that the contractor isn’t willing or capable to do the job? Although appropriate to think about contract management, first need to set the context.

Stage-Gate approach Process - at each review: Submission Clarifications & Independent review against set criteria Independent recommendations Essential vs. desirable Response / action to recommendations Central Government review of actions taken No action –> HOLD / STOP Positive action –> GO Greetings Outline summary of what presentation will cover. Key focus is on the three-way relationship between procuring public authority, contract and contractor. Why do we need to manage contracts? Is having to manage contracts not just a sign that the contractor isn’t willing or capable to do the job? Although appropriate to think about contract management, first need to set the context.

Stage-Gate approach: Focus Outline Business Case Sound fit between need, policy and project scope: Clear demonstration of need, full options appraisal, comprehensive VfM assessment over procurement routes, project is affordable within relevant sensitivities and key deliverability issues have been identified. Greetings Outline summary of what presentation will cover. Key focus is on the three-way relationship between procuring public authority, contract and contractor. Why do we need to manage contracts? Is having to manage contracts not just a sign that the contractor isn’t willing or capable to do the job? Although appropriate to think about contract management, first need to set the context.

Stage-Gate approach: Focus Gate 1 - Pre-OJEU notice Readiness to go to market: Governance Scope Stakeholders Competition Procurement Risks VfM Assessment Greetings Outline summary of what presentation will cover. Key focus is on the three-way relationship between procuring public authority, contract and contractor. Why do we need to manage contracts? Is having to manage contracts not just a sign that the contractor isn’t willing or capable to do the job? Although appropriate to think about contract management, first need to set the context.

Stage-Gate approach: Focus Gate 2 - Pre-Invitation to Participate in Dialogue Readiness to go to start dialogue and conduct negotiations which will secure high quality, sustainable bids, with minimal bidder qualifications: Affordability VFM Commercial Issues Deliverability Data Room and background Information Greetings Outline summary of what presentation will cover. Key focus is on the three-way relationship between procuring public authority, contract and contractor. Why do we need to manage contracts? Is having to manage contracts not just a sign that the contractor isn’t willing or capable to do the job? Although appropriate to think about contract management, first need to set the context.

Stage-Gate approach: Focus Gate 3 - Pre-Invitation to Submit Final Tenders Is there sufficient technical and commercial certainty to end competition? Affordability VfM Risk transfer Commercial / Legal Funding issues Technical solution Deliverability Greetings Outline summary of what presentation will cover. Key focus is on the three-way relationship between procuring public authority, contract and contractor. Why do we need to manage contracts? Is having to manage contracts not just a sign that the contractor isn’t willing or capable to do the job? Although appropriate to think about contract management, first need to set the context.

Stage-Gate approach: Focus Gate 4 - Pre-Preferred Bidder appointment Ensure projects have minimised opportunities for ‘deal creep’ and reallocation of risk: Affordability Financial / Risk issues Commercial / Legal issues Technical issues Deliverability Greetings Outline summary of what presentation will cover. Key focus is on the three-way relationship between procuring public authority, contract and contractor. Why do we need to manage contracts? Is having to manage contracts not just a sign that the contractor isn’t willing or capable to do the job? Although appropriate to think about contract management, first need to set the context.

Stage-Gate approach: Focus Gate 5 - Pre-Financial Close To assist Authorities in considering what needs to be put in place in terms of staffing and resources ahead of the construction and operational stages of their PPP projects, to support and manage their PPP contract going forward: Contract management & Governance Payment Mechanism Stakeholder management Greetings Outline summary of what presentation will cover. Key focus is on the three-way relationship between procuring public authority, contract and contractor. Why do we need to manage contracts? Is having to manage contracts not just a sign that the contractor isn’t willing or capable to do the job? Although appropriate to think about contract management, first need to set the context.

Stage-Gate approach: Focus Post Occupation Evaluation Has the project delivered its strategic project objectives? Reflection Documenting & disseminating lessons learnt Greetings Outline summary of what presentation will cover. Key focus is on the three-way relationship between procuring public authority, contract and contractor. Why do we need to manage contracts? Is having to manage contracts not just a sign that the contractor isn’t willing or capable to do the job? Although appropriate to think about contract management, first need to set the context.

Stage-Gate approach: Options Peer review Independent review Ownership Central requirement & local accountability Avoid conflicts of interest Greetings Outline summary of what presentation will cover. Key focus is on the three-way relationship between procuring public authority, contract and contractor. Why do we need to manage contracts? Is having to manage contracts not just a sign that the contractor isn’t willing or capable to do the job? Although appropriate to think about contract management, first need to set the context.

The need for process discipline Maximise VfM Market confidence To counter external pressure Minimise procurement cost & time Time = money Every change requires resources and time Individual responsibility to meet the critical path really is critical! Greetings Outline summary of what presentation will cover. Key focus is on the three-way relationship between procuring public authority, contract and contractor. Why do we need to manage contracts? Is having to manage contracts not just a sign that the contractor isn’t willing or capable to do the job? Although appropriate to think about contract management, first need to set the context.

PPP vs. conventional projects Differences process controls are necessary because: New forms of project delivery require a higher degree of scrutiny Fixed risk transfer impacts on available mitigation strategies resulting a need to manage future liabilities Public-Private relationship regulated through a single contract resulting in a greater interdependency within the public sector Projects often negotiated with a highly developed and competitive market requiring an increased level of delegated authority. Greetings Outline summary of what presentation will cover. Key focus is on the three-way relationship between procuring public authority, contract and contractor. Why do we need to manage contracts? Is having to manage contracts not just a sign that the contractor isn’t willing or capable to do the job? Although appropriate to think about contract management, first need to set the context.

Resource planning 1 Get it right from the start! Each of the 6 stages have different resource requirements Conception – technical, financial Development – management, commercial (L/F/T), specialist input Procurement – management, specialist commercial Construction – management, monitoring, specialist technical Operation – management, monitoring Handback – monitoring, specialist technical Greetings Outline summary of what presentation will cover. Key focus is on the three-way relationship between procuring public authority, contract and contractor. Why do we need to manage contracts? Is having to manage contracts not just a sign that the contractor isn’t willing or capable to do the job? Although appropriate to think about contract management, first need to set the context.

Resource planning 2 Competitive Dialogue issues: A number of separate but parallel negotiations Each bidder may come up with different technical solutions needing specialist advice to the authority Financial, legal and technical input requirements increase inline with the number of bidders Greetings Outline summary of what presentation will cover. Key focus is on the three-way relationship between procuring public authority, contract and contractor. Why do we need to manage contracts? Is having to manage contracts not just a sign that the contractor isn’t willing or capable to do the job? Although appropriate to think about contract management, first need to set the context.

Resource planning 3 Resource Planning is key for successful project delivery Upfront investing into a long term partnership Continuity is key for successful delivery of benefits and continuous improvement Project Management requirement does not end at FC! Greetings Outline summary of what presentation will cover. Key focus is on the three-way relationship between procuring public authority, contract and contractor. Why do we need to manage contracts? Is having to manage contracts not just a sign that the contractor isn’t willing or capable to do the job? Although appropriate to think about contract management, first need to set the context.

Summary A well structured Stage Gate -type review process in an invaluable project management & monitoring process and can help in market creation. In order to deliver successful outcomes all PPP projects should prepare a resource management plan covering the period from project development to handback. Greetings Outline summary of what presentation will cover. Key focus is on the three-way relationship between procuring public authority, contract and contractor. Why do we need to manage contracts? Is having to manage contracts not just a sign that the contractor isn’t willing or capable to do the job? Although appropriate to think about contract management, first need to set the context.

Questions? Mikko AJ Ramstedt mikko.ramstedt@scotland.gsi.gov.uk 0131 244 4940