Capturing And Delivering Value At Tfl Construction Essay

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TfL must ensure that added value is achieved through all of its contracts. There are many tool and techniques that TfL and the contractor can use to add value to the building of the new Data Centre. Some of the key areas that would add value to TfL are Supply Chain Management, Knowledge Management, Partnering/shared benefits, Integrated process and people, and a quality and customer focused agenda.

However, the contractor must also ensure that they are delivering their own initiatives to show TfL that they are adding value to the project. This can be undertaken using clear communication, reporting, aligning processes and reporting with TfLs, reducing accidents and defects, modelling of design and build stages, and detailing specific measurable objectives.

TfL must monitor and evaluate though qualitative and quantitative techniques how well the contract is meeting their perceived or dictated measures of added value. This needs to be feedback to the contractor to ensure that the contractor is aware of where they are failing to meet expectations but also where they are meeting them.

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Transport for London (TfL) currently house critical systems and management systems across several locations throughout London in unsuitable, outdated and crowded environments.

Transport for London (TfL) is investing in a new Data Centre to locate all critical systems and management systems together in one location. The location of the new Data Centre has been selected by TfL and a design and build contractor is now required to build the Data Centre.

The contractor should be able to demonstrate a strong track record in successfully delivering similar Data Centre specific large scale projects to reduce risk and improve confidence in the project's capability to meet TfLs objectives.

The initial budget for TfL on this contract is £10m, based on initial detailed research of similar builds. TfL are hoping to save 10% on the overall budget from suppliers through incentivisation to make cost and time savings and improve quality.

TfL are looking for a Data Centre that will not only meet the current huge variety of systems in use but to also look forward to what system requirements TfL might have over the next 30 years. The Data Centre not only has to provide benefits and savings over the lifecycle of the build but also allow TfL to meet and exceed potential future cost saving initiatives through 'future proofing' for the next 30 years taking into account emerging technologies and systems. The new Building should allow TfL to change its systems easily and without the need for major reworking or construction.

Why should TfL look into Value Added?

Added value occurs when the performance of both supplier and customer are maximised at the same time as keeping overall costs to a minimum. This leads to low cost goods and services without detriment to quality, performance or reliability.

Added value in all aspects of work at TfL is an important consideration, especially where large contracts are being considered, in order to ensure that the funding provided through the government is spent with the consideration of the public at mind.

TfL are currently undertaking a major change in the way funding is provided. TfL has been provided with less funding and a tighter remit to reduce costs in all areas of the organisation. There is a greater need to do more with the funding provided.

TfL project costs can spiral out of control and the public are often left feeling like they have picked up the bill. The current economic climate has forced TfL to look closely at where costs can be reduced and ultimately provide better value for money and better quality.

One key area that TfL can do this is through contract management. These are the areas where costs are greatest, and therefore, where the largest savings can be made and value added. TfL is now starting to renegotiate on all contracts to provide costs savings and to ensure value for money is being achieved.

TfL are a very large organisation in the UK and especially in London with a large budget. Many different companies work on TfL funded projects. TfL therefore have the ability to influence the way in which contractors work for them and with each other to deliver infrastructure projects in London. There is the potential for TfL to help change the way contractors work with each other on other projects around London and the UK.

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This could provide a much leaner, efficient, more resilient to economic uncertainties, and better value for money construction sector.

Scope and Definition of where value can be added

TfL require a contractor for the Design and Build of a new Data Centre in London to house all the systems currently in use and to provide 'future proofing' for the expansion and change the could happen over the next 30 years to TfL and the associated systems and technology.

Adding value in economic terms is the difference between the value of the inputs and outputs. Smyth and Pryke (2008) (citing Best and de Valence (1999)) look at added value from a value management perspective and state that there is a dependency on "time, cost and quality against the requirements". This is, however, balanced against the "basic ideal that the project should be completed at minimum cost, in the shortest possible time and to the highest possible standard". Importantly they make the distinction that "value always involves a relative and balanced consideration of tangible and intangible costs and benefits, as well as a willingness to give up in order to gain."

It can be seen that the concept of added value is driven from the client side, however, it is interpreted by the supplier as to what, over and above the minimum needs specified in the contract, is require to satisfy the contract. The client's idea of what they need and desire may be different to that perceived by the supplier and this is the most common problem with added value. Added value must be client focused.

It has also been noted that added value is ever increasing as the current added value delivered by one contractor is delivered by other contractors as standard and therefore becomes the expected value. Contractors must be aware of this and should always strive to achieve added value above average market expectations, especially on long contracts spanning several years - continuous improvement.

TfL has the ability to enable value to be added to this project thought various different tools and techniques. These are detailed below:

Partnering - is a technique involving multiple organisations working together to improve performance, agreeing mutual objectives, devising a way for resolving any disputes, committing to continuous improvement, measuring progress, and sharing the gains. This stimulates trust, co-operation and teamwork which enabling the combined effort focus on project objectives. This technique leads to shared benefits, where any costs saving made by any partner are shared equally between all other partners in order to incentivise each other to work together to try and make further cost savings.

Standardisation and Pre-Assembly - prefabrication of units which can increase the speed of construction, lower cost and increase quality.

Value management - is a structured approach for the elimination of waste from the brief and from the design before building starts.

Integrate the process and the team around the product - it is important for the contractor to focus on TfL's needs and focus on the product and the value it delivers to TfL. Integration with client businesses formal processes such as forms, reporting, and project management methodologies (PRINCE2 / APM / PMI) can help the contractor to integrate with the client. Physical integration into TfL will help with knowledge transfer between client and supplier. This will allow monitoring of the contractor by TfL and will allow enhanced communication. Contractors should aim to align with TfL in terms of strategy and reason for project. The contractors goal/aim for the project outcome should be the same as for TfL, rather than just high cost to minimum time and quality constraints.

A quality driven agenda - Quality means not only zero defects but right first time, whether it be in design, materials or construction on site focusing on benefit for TfL. Quality means the total package - exceeding TfLs expectations and providing real service.

Commitment to people - means a commitment to training and development of committed and highly capable managers and supervisors as well as decent site conditions, fair wages and care for the health and safety of the work force.

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Committed leadership - management should be totally committed to driving forward improvements and communication required for cultural and operational changes the organisation.

Knowledge Management/Knowledge Transfer - contractor and client should take advantage of the lessons learned. This feedback system allows all parties to learn from positives and negatives of the current project and from previous projects and experience.

Clear Objectives - TfL must set clear objectives and scope for the project so that contractors can accurately assess the amount of work required on the project and associated costs.

Reduced Rates - Rates can be driven down by TfL to ensure that the contractor is not charging over the odds for the work required. This should be carefully assessed at the procurement stage and also at the initial budget setting stage through the research into costs on other similar projects.

Supply Chain Management - utilise efficiency and integrate all partners and their related activities in producing, completing and delivering within a project so that costs are minimised while exceeding service level requirements.

Stakeholder Management - it is important to manager any individuals or groups who have an involvement or interest in the outcome of the project. Good stakeholder management will ensure that all interested parties are satisfied and that the project runs smoothly.

Focus on the Customer - contractors should provide precisely what TfL needs, when it needs it, at a price that reflects client value. Activities that do not add value from TfL's viewpoint are classified as waste and should be eliminated. The contractor should be proactive in their support of TfL rather than just reacting to the TfLs' suggestions. Continuous improvement by the contractor should help TfL recognise that the contract is focused on TfL rather than their own financial gains.

Early identification of Risks and Opportunities - each partner in the project should be able to reduce costs and provide added value through the early identification of Risk affecting the project and any opportunities that can be gained by the whole project.

How can contractors manage and monitor the relevant inputs for value added?

To drive performance improvement the contractor should set itself clear measurable objectives and targets, and then give them focus by adopting quantified targets, milestones and performance indicators. This can be done through the following:

Specific Measurable Objectives - the objectives and targets that the contractor sets out must be directly related to TfL's perceptions of performance. Measures of improvement should be in terms of cost, time and quality. Performance measurements against clear targets for improvement, in terms of quality, timeliness and cost, should be the means of sustaining the relationship between TfL and the contractor, as well as suppliers. The Contractor could aim to save 10% on each part of the design and build and this could then be monitored.

Time Monitoring & Recording - Monitor activities of contractor staff working for client in terms of time keeping. Show contractor staff who are working on a fixed time contract are working extra hours over and above hours required for the contract at no extra cost to TfL.

Partnering - enables the combined efforts to focus upon project objectives. This technique also leads to shared benefits, where cost savings made by any partner are shared equally between all other partners in order to incentivise each other to work together to try and make further cost savings. The contractor can make its accounts open to TfL to view to show that no extra costs are being incurred and that cost savings over the original forecast are being met.

Process Integration - construction site processes could be mapped out for TfL so that it is possible to measure and compare on-site performance against planned performance.

Value management - is a structured method of eliminating waste from the brief and from the design. The contractor can use value management to deliver more effective and better quality buildings, through taking unnecessary costs out of designs, and ensuring clearer understanding of the brief by all project participants.

Benchmarking - is a management tool which can help construction firms to understand how their performance measures up to their competitors' and drive improvement up. Achieving zero defects in construction would be attractive to TfL in order to prevent defects "going down the line" and the building requiring remedial attention during its operational lifecycle, especially where critical systems are involved. The contractor can establish processes and schedules and streamline processes.

Meeting expectations - maximising TfL satisfaction should be paramount for the contractor. In order for the contractor should be accessible providing a dedicated contract manager and point of contact. The contractor can establish service levels on which to monitor and report their performance.

Continuity - Same team throughout the term of the contract (where practicable) would help provide TfL with reassurance that all working on the construction are bought into the philosophy of customer service and quality expectations as well as the processes and procedures to provide value.

Client engagement - regular communication and regular meetings as well as responding to situations in a timely manner, return calls and messages promptly.

Modelling of final product - this could be used early on in communications with TfL to show how particular complicated parts of the construction will take place, providing TfL with confidence in the contractor that the work will be undertaken with competence and to the standard required.

Professional certification - the contractor can show or gain new professional certification to show competence to TfL.

Accidents - reduction in reportable accidents to zero would be important to TfL. Either the contractor should show that they are already able to meet this standard or they should show how they will ensure this level throughout the project.

Welfare - monitoring of changes in working conditions and high ethical and moral standards would align with TfLs own policies. The contractor should offer training for any of its team to bring them up to the required standard and offer work to minorities.

Means of measurement of the value added outputs

It is very important for TfL to measure both quantifiably and qualitatively the value added output from the contractor. TfL can directly measure value added from the service provider through:

Monitoring timesheets by TfL against forecast/contracted time allocation and forecast costs from the start of the project. If TfL have a target cost for all areas of the build in terms of staff time then anywhere where time has been saved on the project will add value in terms of cost saving as well as time.

Monitor any costs saving provided by the contractor. Transparency and partnering will help the contractor demonstrate costs savings and efficiencies and pass on any cost savings to TfL and suppliers.

Monitor the supply chain effectiveness through meetings with all partners of the supply chain to assess progress, cost savings made, risk, time savings, quality and satisfaction.

Monitoring the Partnering agreement in terms of seeing how waste has been eliminated and costs have been shared. This could be undertaken though open book accounting whereby all partners can view the costs incurred and the savings made. The contractor can also highlight in their reporting how they have worked with suppliers or with TfL to reduce costs, resolved disputes, worked on continuous improvement and shared gains.

Monitor the level of risk the contractor reduces through the monitoring of their risk register at all levels of the build and through the supply chain, not just the reported risks. This will show TfL that the contractor and suppliers are actively mitigating risks and are successful in their mitigations.

TfL can undertake internal satisfaction surveys amongst the internal team to assess if there is perceived value added by the contractor. This could be in terms of smoothness, lower risk, less stress and perceived efficiency of the contractor.

Weekly and monthly reports can be produced demonstrating to TfL what value has been added. Reports should highlight any extra work carried out under the same contract at no extra cost to TfL. Any streamlined processes to make the project run with less risk or more efficiently should be highlighted also.

The contractor can highlight to TfL where knowledge has been gained and shared explaining the importance to TfL. This can be documented to show the added value provided. This can also work for knowledge gained from suppliers that the contractor can pass on to TfL.

Clear documentation as to how zero defects has been achieved on the build and the level of zero defects achieved can be presented to TfL on a regular basis at the same time as documentation about reportable accidents and how lessons have been learned. This could also apply to the whole supply chain. TfL could also undertake monitoring themselves of defects and accidents to gain a second comparable set of data.

Summary

Transport for London (TfL) is investing in a new Data Centre to locate all critical systems and management systems together in one location. TfL require the contractor to be able to demonstrate a strong track record in successfully delivering similar Data Centre specific large scale projects while adding value to the project and TfL as a whole.

The initial budget for TfL on this contract is for £10m, based on initial detailed research of similar builds. TfL are hoping to save 10% on the overall budget. TfL are looking for a Data Centre that will not only meet the current huge variety of systems in use but to also look forward to what system requirements TfL might have over the next 30 years.

TfL, in the current climate of funding cuts, must ensure that added value is achieved through all of its contracts. This project, due to its large budget, could be a good starting point for TfL to work on managing contractors to deliver added value.

There are many tool and techniques that TfL and the contractor can use to add value to the building of the new Data Centre. Some of the key areas that would add value to TfL are supply chain management, knowledge management, partnering/shared benefits, integrated process and people, and a quality and customer focused agenda.

However, the contractor must also ensure that they are delivering their own initiatives to show TfL that they are adding value to the project. This can be undertaken using clear communication, reporting, aligning processes and reporting with TfLs, reducing accidents and defects, modelling of design and build stages, and detailing specific measurable objectives.

TfL must monitor and evaluate though qualitative and quantitative techniques how well the contract is meeting their perceived or dictated measures of added value. This needs to be feedback to the contractor to ensure that the contractor is aware of where they are failing to meet expectations but also where they are meeting them.

If the added value techniques in this report are utilised effectively then a saving of 10% should be possible and added value should be achieved for TfL.

Reference & Bibliography

Morris, P. & Pinto J. (2004), The Wiley Guide to Managing Projects, New Jersey: John Wiley & Sons Inc.

'APMP Body of Knowledge' (5th Edn.), High Wycombe: Hobbs the Printers Ltd.

Walker, A. (2007), Project Management in Construction (5th Edn.), Oxford: Blackwell Publishing.

'Managing Successful Programmes' (2002), Office of Government Commerce, HMSO, London.

Edkins, A. E., Smyth, H. J. and Morris, P. W. G. (2008), Building a Client-Orientated, Knowledge-Based, Value-Driven Industry, National Platform, Constructing Excellence, London

Kamara, J. M. et al (2002), Capturing Client Requirements in Construction Projects, Thomas Telford, London.

Pryke, S. (2009), Construction Supply Chain Management, Oxford: Blackwell Publishing

Egan, J. (1994), Rethinking Construction: The Report of the Construction Task Force, London: Crown.

Winch, G. (2002), Managing Construction Projects: an information processing approach, Oxford: Blackwell Publishing.

'Managing Successful Programmes' (2002), Office of Government Commerce, HMSO, London.