procuring for a successful outcome : presentation how to ... for a successful outco… · professor...
TRANSCRIPT
Procuring for a successful outcome: presentationHow to get on the right track
#PELCPD
Welcome
House keeping
•Fire exits – no planned drills
•Mobile phones
•Refreshments
•Feedback
Get involved
•Tweet: #PELCPD
•Follow: @PellingsLLP
•WIFI password: 12345cav
Speakers
Nigel Goddard, Partner, Pellings
Professor Stuart Green, Professor of Construction Management, University of Reading
Kristian Melgaard, Managing Director, Barking & Dagenham Reside
Jonathan Sims, Chief Procurement Officer for Engie UK & Ireland
Getting on the right track….
“Procurement is the process of finding and agreeing to terms, and acquiring goods, services, or works from an external source, often via a tendering or competitive bidding process.
Procurement generally involves making buying decisions under conditions of scarcity.”
The world is changing….
The Five Pillars of procurement ✓ Value for money✓ Open and effective competition✓ Ethics and fair dealing✓ Accountability and reporting✓ Equity
Top objectives of most business's purchasing departments.o Lower costs. This is by far the primary function of the
purchasing departmento Reduce risk and ensure the security of supplyo Manage relationshipso Improve qualityo Pursue innovationo Leverage technology
“Procurement is the business management function that ensures identification, sourcing, access and management of the external resources that an organisation needs or may need to fulfil its strategic objectives. Procurement delivers a range of benefits. It not only seeks to reduce costs and to ensure supply, it also supports strategic organisational objectivessuch as market expansion and product innovation.” (CIPS)
Setting the Scene….Purchasing v Procurement
Construction procurement: Where did it all go wrong?
Stuart Green
14th November 2019
Procuring for a successful outcome
• Promoting innovation through procurement
• Procuring for outcomes and value
• Encouraging collaboration through procurement
• Early contractor involvement (ECI)
• Empowering the supply chain
• Rethinking the business model
• Identifying key enablers
• Managing risk
• Modern methods of construction (MMC)
The standard view of construction
• Industry synonymous with a sick, or even dying patient.
• Dysfunctional training model.
• Lack of innovation and collaboration.
• Non-existent R&D culture.
• Low productivity continues to hamper the sector.
• Critical shortage of skilled workers.
• Flawed business model.
Resistance to change is a myth
An alternative diagnosis…
• Focus lies on understanding how the construction sectorchanges over time in response to an evolving policyenvironment.
• Coverage includes the changing way we think aboutprocurement, and how it is organised.
• Procurement policy dictates what we give attention to; it alsodictates what we ignore.
• Procurement policies over time are directly implicated inshaping the deficiencies which we routinely decry.
12
Five distinct phases
• 1945-1979… the age of the planned economy.
• 1979-1997… the dawn of enterprise.
• 1997-2010… enterprise meets social democracy.
• 2010-2016…the new age of austerity.
• 2016-date…a legacy of dilemmas.
13
The age of the planned economy
• Nationalisation synonymous with modernisation
• Ministry of Public Building and Works.
• Tripartite social contract.
• Massive investment in public housing.
• Consensus on the role of demand management.
• Widespread support for direct employment.
• Emphasis on consistency in placing of contracts.
• Procurement advice was to fix everything in advance
• Ensure complete information shared with all parties.
Homes for heroes
14
1960s High Rise Housing
15
16
(Source: Construction Statistics Annuals)
17
The dawn of enterprise 1979-1997
• Trust in top-down State planning had broken down.
• Liberalisation of the economy.
• Extensive privatisation: British Airways, British Gas, British Leyland, British Telecom, BAA, British Rail, PSA, BRE
• Confrontation with trade unions – miners’ strike 1984-5.
• Imposition of spending restrictions on LAs.
• Creeping centralisation in government.
• Right to buy – 1 million homes in 10 years.
The enterprise culture
18
Privatisation and outsourcing
• Extensive privatisation of the industry’s client base.
• Widespread outsourcing of professional expertise (PSA,1990; LAs).
• Retreat of government as a provider of mass housing.
• Shift of responsibility for existing housing stock tohousing associations/TMOs.
• Outsourcing strategies driven by regulatory pressuresand the introduction of yardstick competition.
• Demise of Direct Labour Organisations (DLOs).
• Compulsory Competitive Tendering (CCT).
19
Housing completions by tenure 1946-2018(Source: MHCLG)
0
100,000
200,000
300,000
400,000
500,000
600,000
700,000
800,000
Stacked area
All dwellings Private enterprise Housing associations Local authorities
21
Strategic imperative of ‘structural flexibility’
• Systemic reliance on subcontracting.
• Emergence of the ‘hollowed-out’ firm.
• Growth in self-employment from 30% in mid-1970s to 50% in mid-1990s.
• Reduction in trade union membership.
• Decimation of apprenticeship system.
• Proliferation of procurement methods: design-and-build, management contracting, construction management.
• Declining status of the traditional ‘professional’.
Innovation vs change
1979-1997 Conservative Government
New Labour Government
Self-employment: 1984-2003Source: Labour Force Survey
24
The Egan Report
• Perennial argument that the construction sector is under-achieving.
• Recurring problems: poor quality, lack of modernisation,adversarial culture, client dissatisfaction, fragmentation.
• Exhortation to procure on basis of ‘Egan principles’.
• Overriding emphasis on efficiency; eliminate waste whichdoesn’t add value to the client.
• Construction sector restructuring legitimised bythe Egan Report (1998) – Year Zero.
• Legitimising storylines: lean construction, supply chainmanagement, partnering, collaborative working.
Dissenters few-and-far between…
26
1998 2002 2008 2009
A cloying consensus….
Enterprise meets social democracy
27
28
Enterprise meets social democracy
• PFI relabelled PPP
• Schools, hospitals and prisons
• Performance management runs rampant.
• Discourse of sustainability – triple bottom line
• Proliferation of improvement quangos
• Partnerships, partnering, collaborative working.
• Rapid increase in migrant workers from Eastern Europe from 2004.
• Financialisation of major contractors.
• Emergence of global mega-consultancies.
0%
10%
20%
30%
40%
50%
60%
70%
80%
90%
100%
1997
1998
1999
2000
2001
2002
2003
2004
2005
2006
2007
2008
2009
2010
2011
2012
2013
2014
2015
2016
2017
2018
Self-employment:1997-2018Source: Labour Force Survey
1997-2010 New Labour Government
2010-2015 Coalition
Conservative
One Death is too Many (Donaghy, 2009)
• “The Construction Industry generally is modelled to provide maximum flexibility. Consequently the majority of functions are contracted out and at least 40% of workers are self-employed or CISs”.
• “The advantages are obvious in that it reduces overheads. Some but not all argue that it improves profitability and productivity. The disadvantages are that it become more difficult for a safety culture to flourish, worker engagement is weak, employment security and continuity is minimal and skills training is at best patchy.”
New age of austerity 2010-2016
31
32
New age of austerity 2010-2016
• Bonfire of the quangos.
• Debate stripped back to cost reduction, carbon reduction. Two dimensions.
• Low cost procurement dominates.
• Leanness and agility in the marketplace.
• Partnering marginalised.
• Low carbon jobs, retrofitting the housing stock.
• PFI/PPP exposed as poor VFM.
• BIM becomes the answer to every problem.
24 June 2016: UK votes to leave EU
33
Farmer review– October 2016
• Primarily focused on house building – also invited to examine the barriers and enablers to the greater use of off-site construction.
• Egan report is lauded as a ‘watershed’.
• Previous calls to arms have not been acted upon by the industry.
• Ticking ‘time bomb’ is the industry’s workforce size and demographic.
• “The wide-scale incidence of self-employment is a reflection of the desire for flexibility”.
• 10 key recommendations – no cherry picking.
A legacy of dilemmas
35
Cole Report (2017): Edinburgh Schools
• “The construction industry … suffers greatly from the boom and bust syndrome, resulting in difficulty in maintaining the availability of highly skilled tradesmen because of the lack of a guaranteed continuity of work”.
• “The traditional and hugely valuable concept of building contractors employing and training tradesmen such as bricklayers and joiners through apprenticeships within their own workforce has also largely disappeared”.
Hackett Report (2018)
• “Roles and responsibilities for ensuring building work meets the requirements of the Building Regulations are unclear”.
• “This lack of legal accountability within the current system is exacerbated by industry fragmentation and multiple layers of sub-contracting. It is inconsistent with other contexts where ensuring delivery of ‘user’ safety is a fundamental issue”.
Raising the Bar – Interim report (2019)
• Low margins and the cyclical nature of construction also contribute to the lack of direct employment, and the proliferation of the sub-contracting model within construction.
• This lack of investment within a directly employed team, can lead to a lack of maintenance and development of workforce skills, which could hamper the safe and competent delivery of the project.
• Contractors are increasingly divorced from the point of execution on site, sometimes by up to four or five layers of contracts and often ending in the use of transient self employed labour.
Concluding thoughts on ‘quality’
• “The place to improve the world is firstin one's own heart and head and hands,and then work outward from there.”
Robert M. Pirsig
Positive steps to take us forward
• Encouragement and support of direct employment and investment in skills development – clients to agree a ‘code of employment’ (CLC, 2019).
• Reflects a broader trend towards supply chain transparency.
• Modern working practices: responsible corporate governance, good management and strong employment relations (Taylor, 2017).
• Sectoral strategy to ensure that the low paid are not stuck at the living wage minimum or facing insecurity.
• Reclaim the idea of building stewardship: thinking beyond fixity and permanence.
• Celebrate and strengthen notions of professionalism – knowledge about construction procurement should be in the public domain.
Procurement: lessons learned from the client side
Kristian Melgaard
Managing Director
Barking and Dagenham Reside
An introduction to me and Barking & Dagenham…
✓ Investing over £750m tobuild over 3,000 newcouncil funded and builthomes over the next fouryears
✓Set up of Be First, a whollyowned council regenerationcompany, to accelerate thepace and scale ofhousebuilding across theborough.
✓Expansion of Reside, awholly owned local housingcompany, to let, manageand maintain the newhomes built.
Start by giving a focus to the…
1. Programme
2. Policy
3. People
4. Politics
5. Problems
Really understand the market…
1. Your current
approach
2. Research good
practice &
innovation
3. Engage your
networks & peer
groups
4. Explore the risks
5. Establish a clear
purpose
Assemble the right team…
1. Identify the
resources required
2. Set your timescales
3. Define
responsibilities
4. Equip your team to
manage complexity
5. Obtain professional
advice
6. Engage stakeholders
Get the governance right…
1. Clarify thepurpose
2. Establish thestructures
3. Develop acommon vision
4. Be clear on rolesandresponsibilities
5. Commit totransparency
Invest in the partnership…
1. Plan a programme
2. Declare commitments
3. Gain support of stakeholders
4. Scrutinise robustly and address issues promptly
5. Review, challenge, and reinvigorate
6. Respect the partnership
7. COMMUNICATE!
Thank you for listening!
Kristian Melgaard
Managing Director
Barking and Dagenham Reside
RESTRICTED INTERNAL SECRET
Group Procurement Department
ENGIE Procurement
November 14th, 2019
“We are ENGIE Procurement”
What are ENGIE doing?Our “three pillars”
ENERGY
Power GenerationStorage
RenewablesTradingSupply
SERVICES
Facilities ManagementTechnical Services
Energy ServicesBusiness ServicesLifecycle Services
REGENERATION
Development & InvestmentSustainable HousingBuilding Renovation
Community DevelopmentProperty ServicesRetirement Living
ServicesFacilities Management
Technical ServicesEnergy Services
Business ServicesLifecycle Services
EnergyPower Generation
StorageRenewables
TradingSupply
RegenerationDevelopment and Investment
Sustainable HousingBuilding Renovation
Community DevelopmentProperty ServicesRetirement Living
ServicesFacilities Management
Technical ServicesEnergy Services
Business ServicesLifecycle Services
What are ENGIE doing?Our “three pillars”
JONATHAN SIMS – CPO ENGIE UK
The ENGIE HomesteadFuture Model’s of Procurement
Roof integrated solar PV
Coupled local energy networks & battery storage
Smart heating and hot water solution (smartphone
controlled)
Super insulated, air tight and thermal bridge free envelope
LED Smart lighting throughout and energy
efficient smart appliances
Future proof electric vehicle charging point
and broadband
Shallow loft area for inverter & ASHP
Integrated smart tools and control strategy
Maximising sunlight, greenery and water
harvesting
Smart security and entry system
Supply and Demand
• Key materials and trade availability challenges.
• Planning and visibility of pipeline both internally and externally
Quality
• Ensure our supply chain deliver the quality our clients expect.
• Training
Compliance
• Ensuring compliance to specification and order.
• Insurance
• Quality
Legislation
• Brexit
• Understanding future regulation changes.
MMC
• Need for alternative solutions.
• Understanding what method suits.
• evaluation.
Engagement
• Internally and externally
• Understand what our clients want now and in the future.
Supply chain challengesOur view
Source - Dr Terry Keech B Eng(Hons) C Eng PhD MCIBSE MEI MIET
Supply chain challengesIndustry make up
No experience Little experience Experienced
12
42
91
55
159
40
3225
75
84
9792
99
41
77 71
115
90
111
66
24
53
7
90
104
66
41
Solar Photovotaic
Solar Thermal
Ground SourceHeat Pump
Air SourceHeat Pump
Wind Turbine
Communal Heating / CHP
MVHR (1) Passive Building Design
Biomass
Num
ber o
f Res
pond
ents
Experience of Low Carbon Technologies currently used M&E Contractors in the UK
2 – 13 Employees
Sole Traders
14 – 24 Employees
More than 25 employees
2% 2%
44%
52%
Higher quality Improved planning Risk reduction Innovation &
value creation Collaboration Responsible procurement Improved margin
What are we doing?ENGIE Procurement Client of choice
Stage 1 - Detailed spend cub analysis, top 35 category analysis, rebate generation and compliance reporting. Procurement routes and success.
Stage 2 - Supply chain long-list generation. Multidisciplinary divisional teams across operations, commercial, finance, work winning, legal and procurement.
ANALYSIS
Understanding the current procurement
& supply chain landscape
Supply chain long-list formation via multidisciplinary team
WORKSHOP 1 -FORMATION
Stage 3 - Afford the business with key supply chain information to enable it define, select and consolidate the supply chain with greater certainty.
Stage 4 - Based uponthe business profilingand scoring by the keydivisional stakeholders,we build and structurethe supply chain.
Stage 5 - Production of the category, supplier and subcontract potential work profiles aligned to the business plan - client, sectors and procurement routes. Understand the future supply chain composition, exposure levels and spread of work across strategic, preferred and approved supply chain members. Understand where gaps exist and enable proactive identification, profiling and introduction of new entrants.
Supply chain profiling and assessment
ALIGNMENT
Supply chain selection &
segmentation
Develop the future work profile
WORKSHOP 2 -DIVISIONAL / NATIONAL
SELECTIONStage 6 - Formal communication of the ENGIE supply chain relationship status. Assignment of an ENGIE Senior Point of Contact (SPoC) to be the relationship manager for all strategic relationships. Agree relationship management plans, SLA’s / KPI’s and standard terms and conditions.
Stage 7 -Communication of the process, the journey, our commitment and the future. Awards to leading suppliers and subcontractors. More effective communication, collaboration, alignment and integration.
VALUE CREATION
Supply chain engagement
Strategic Supply Chain Conference
Delivering Client of choice7 Steps
Client of choiceStructure & Reward
Not Approved
New Entrant
(INNOVATION & COMMERCIAL EDGE)
Approved
(TRANSACT)
Preferred
(MANAGE)
Strategic
(INVEST)
InvestmentClean growth fund