Delivering the Procurement

Challenge

CIPS South of England Dermot Doherty – Senior Procurement Manager

Kerry Underhill – Commercial Manager

Olympic Delivery Authority

23rd January 2013

Agenda

The Procurement Challenge

Strategic Framework

Balanced Scorecard

Packaging Strategy

Procurement Methods & Tools

Supply Chain

NEC3 Form of Contract

Delivery Partner

Outcomes

Lessons Learned

Questions & Answers

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Olympic Park Stakeholders

Olympic Delivery Authority :

“Building the theatre”

London Organising Committee of the

Olympic and Paralympic Games :

“Putting on the show”

London Legacy Development

Corporation :

“After the Games”

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Procurement Challenge

– Immovable deadline

– Startup organisation

– Bid Commitments

– 200 Hectare Brownfield Site

– Entrenched Industry Practices

– Public Body:

– Public Contracts Regulations

– Transparency

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Strategic Framework

Set programme objectives

Establish policies

Commit resources

Set up ‘teams’ to address priority themes

Board level buy-in

Governance

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Six Phases of the Project

• Planning (to Spring 2007) • Demolish, Dig Design (to Beijing Games)

• Big Build (to summer 2011)

• Test Events (April to Games 2012)

• 2012 Olympic and Paralympic Games

• Games Legacy (post 2012)

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Procurement

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Balanced Scorecard for Procurement C

riti

cal

Su

ccess F

acto

rs/P

rio

rity

Th

em

es

KP

Is There will be a standard set of measures

Measures will be designed for each contract based upon these and the overall Policy values.

For Construction Projects the UK Construction Industry KPIs will be used with detailed sub-measures

beneath as required

On Time

Functionality[Games and

legacy]

Construction

quality

Design

impact

Health & Safety

Behaviour

& Culture

Health & Safety

Construction

& Operation

Health & Safety

Scope & Design

Environmental

Responsibility[energy, waste etc.]

Supply

Chain

Management

Ethical

Sourcing[Materials &

human rights]

Promoting

Equality &

Diversity

Community

Engagement

Employment[IR, skills, fair

employment, wages,

welfare provision]

Cost

Value for Money

Fit for Purpose

Financial

Viability & WLC

On Time

for the Games

Project

Time

Sub-programme

Time

Programme

Cost

Sub-programme

Cost

Project

Cost

Contract

Cost

Contract

Time

Security[Design, construction

& operations]

Quality &

Functionality

Safe &

SecureEnvironment

Equalities &

InclusionLegacy

MISSION

To deliver venues, facilities, infrastructure and transport on time for the

London 2012 Olympic and Paralympic Games that are fit for purpose and in a way

that maximises the delivery of a sustainable legacy within the available budget.

Ownership &

Management

Structure

Community

Utilisation

& Benefits

Sustainable Development

Promoting

excellence and

innovation

Inclusive

Design

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Applying the Scorecard

SELECTION

CRITERIA

MEAT/VFM

COMMERCIAL

EVALUATION

TECHNICAL

EVALUATION

Price

Financial

Profile &

Insurance

Quality &

Functionality

Project

Delivery

Experience

& Capability

Governance

PQQ ITT Balanced Scorecard

Cost

Cost & On Time

Environment

Quality & Functionality

Legacy

On Time

Supply Chain

All 7 Objectives of the

Balanced Scorecard

Safe & Secure, Equalities

& Inclusion, Supply Chain,

Employment

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Packaging Strategy

ODA central control:

•Security

•Logistics

Central supply:

•Quality

•Sustainability

•Leverage

Enabling Works

Utilities

Structures, Bridges

& Highways

Permanent Venues &

Associated Works

Temporary Venues

Landscape & Public

Realm

Lo

gis

tic

s

Se

cu

rity Cluster Packaging

Model

Venue packages

•Responsibility

•Programme

Flexibility

•Palatable Risk

•Managed Package

(temp venues)

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Shared Services

• Soil Remediation

• Logistics Centres

• Rail – freight facility at Bow East

• Waste Management

• Medical Centre

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Shared Commodities

•Ready Mix Concrete

•Fuel, oil and lubricants

•Aggregates

•Sustainable Timber

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EU Procurement Routes Used

• Restricted tendering procedure, (most common)

• Negotiated tendering procedure

• Competitive dialogue tendering procedure

• Framework Agreements

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eTendering & eEvaluation

• Information Control

• Central data source

• Audit Trail

• Simultaneous Complex

evaluation

• Transparent decision making

• £5m productivity savings

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Evaluator 1

Score :

Rationale :

Evaluator 2

Score :

Rationale :

Consensus Scorer

Score :

Rationale :

Evaluation Guidance

Excellent Confidence =

Good Confidence =

Minor Concerns =

Major Concerns =

Evaluation Methodology

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Balancing

the budget

Working

with our

stakeholders

Building a

world class

organisation

Supply Chain

Cascade Responsibilities

• Balanced Scorecard

• Maximising results throughout the

supply chain

• Supply Chain monitoring

• Pyramid ‘multiplier’ effect

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Supply Chain

Sir Robert McAlpine – Olympic Stadium

Tier 2 opportunities 35

Tier 3 opportunities 363

Tier 4/5 opportunities 22

Total 420

Pyramid Multiplier

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Supply Chain

Matching Service

1. Buyer registration

2. Input & publish

opportunities

3. Evaluate

responses

Buyers

1. Supplier registration

2. Build profile

3. E-mail alerts for

relevant

opportunities

Suppliers

www.london2012.com/business

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Forms of NEC3 Contract Used

• Engineering and Construction Contract

• Term Services Contract

• Professional Services Contract

• Framework Contract

• Engineering and Construction Subcontract – Tier 1s

• Supply Contract – launched 2010

• Options:

• Option A – Priced Contract with activity schedule

• Option C – Target contract with activity schedule

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Why did the ODA use NEC3?

NEC3 provided: • Flexibility

• Collaborative & proactive approach

• Cost visibility (except Option A)

• Change transparency

• Prescribed methodology

• Known quantity

• Supply Chain

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What key changes did ODA make?

• Legal:

• Additional Collateral Warranties

• LOCOG clauses

• Commercial:

• Minimal use and reliance upon retention

• Enhanced payment terms (18 days)

• Vesting

• Dispute avoidance (Independent Disputes

Avoidance Panel)

• Insurances

• Subcontracts (competitive tendering; flow

down provisions)

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Delivery Partner

• Competitive Dialogue

• NEC PSC Option G (Term Contract)

• Incentivisation

• Rapid Mobilisation of Category Experts

• Integrated Procurement Team

• Aligned objectives

• Creative tension

• ODA Governance

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The ODA and NEC3 Success

• People

• Process

• Systems

• Assurance: • Contract Deliverables

• Cost and Payments

• Anticipated final cost

• Fraud

• Accepted Programme

• Early Warnings

• Compensation Events

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• Credit crunch and worsening economic outlook – increasing

insolvencies

• Construction exposure- 150 major T1 contracts, 7,500 T2 contracts and

43,000 in total

Our response

• Supply chain team monitors all T1 and critical T2 suppliers

• Supplier-held materials vested or delivered to holding depot

• Intervention in T2 procurement to prevent high risk appointments

• Finance Panel / Framework for disputes and insolvencies

Number of insolvencies kept to a minimum against average

Supply Chain Management – Insolvency &

Capacity Risk

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Outcomes - Equalities, Inclusion, Employment & Skills

Unemployment

Target – 7% of Olympic Park

workforce previously unemployed

– achieved >12%

Apprentices

Target – 350 – achieved - 428

SMEs

Of the ODA’s 1,700 Tier 1

suppliers, >530 (31 per cent) are

SMEs

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Outcomes - Health and

safety

AFR 0.16 – half construction

average, better than overall

average

17 sets of a million hours worked

without a reportable accident.

On-site medical centre & health

campaigns, saving 80,000 person

hours of productivity

Avoiding equivalent cost of

£6.3m

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Outcomes -

Sustainability

Material Re-use – 80%

soil recycling

Waste Management

Target – 90%, Actual

99% - >£68m saving

Sustainable Transport –

100,000 lorry journeys

avoided

eProcurement – 8.2m

sheets A4

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Change - Olympic Park, November 2012

On Time Big Build

construction

delivered a year

ahead of Games

On Budget £6.7bn AFC

(£1bn saving)

Fit for Purpose Designed for legacy

as well as Games

Priority Themes Achievements above

industry benchmarks

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CompeteFor

What would we do differently?

• International market engagement

• Framework strength

• Supply Chain Monitoring

• Scope Change

• Energising regional suppliers

Lessons Learned

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Lessons Learned

What would we do again?

• Senior management buy in

• Scalability built in

• Consistency is vital

• Clear policy objectives

• Balanced scorecard – drives change

• Lower tier competition

http://learninglegacy.london2012.com

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“…shows that Britain

can deliver major

projects

successfully and

provides a striking

illustration of the UK

construction

industry at its very

best.”

David Cameron

Prime Minister

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The official Emblem of the London Organising Committee of the Olympic Games

and Paralympic Games Ltd is protected by copyright. © London Organising Committee

of the Olympic Games and Paralympic Games Ltd 2007. All rights reserved.

Thank you & Questions