Programme procurement in construction : learning from London, 2012

"This book ... adds to the impressive 'legacy' of learning which is still emerging from the successful delivery of the London 2012 construction programme. The authors combine the reforming zeal of a champion for change, who was there every step of the way, with academic rigour, and the result is delivered with impressive passion and commitment to the topic ... All spenders and suppliers need to read this, to understand how conventional understandings of procurement fall so dramatically short when applied to high value-high risk acquisitions, which invariably is what large construction projects represent."
-- Don Ward, Chief Executive, Constructing Excellence, UK

Successful construction is often attributed to one or more aspects of the delivery process from good planning, design and clever engineering to efficient project management and quality construction. Before any of these disciplines can begin, they all require some form of procurement to select the team or supply chain to meet a client's or a project's specific requirements. The concept of PSE - Purchase and Supplier Engineering - originated in the procurement of the construction and infrastructure required to stage the 30th Olympiad in London during 2012. At the time of writing PSE has successfully delivered almost £25bn of public procurement meeting client and project requirements and without legal challenge.

The construction of the venues and infrastructure needed to stage London 2012 was such a resounding success that it boosted not only the reputation of the UK construction industry but also the confidence of the UK population in the country's ability to organise, build and run a major international event. Its success has been lauded as something from which clients and industry could learn. The ODA has established a comprehensive and informative body of evidence as part of a Learning Legacy. While the ODA is well aware of the many elements of the procurement and supply chain management, the complete end to end concept of how the Olympic supply chain procurements were managed has until now not been captured.

For example, how does one buy the stage for an Olympic Games? How does one manage the details of thousands of contracts and the many firms of contractors, subcontractors and material suppliers and ensure that no one organisation adversely affects any other to the detriment of the programme? How are a client's requirements beyond those of the capital asset realised as part of the investment? How does one measure programme exposure, or manage performance? How does one measure capacity and the ability of firms to cope with the work and manage the risks involved?

Programme Procurement in Construction: Learning from London 2012 covers the planning and preparation of a programme's procurement processes from understanding and developing the client's requirements, to monitoring performance based on the benchmarks contractors set out in their own tender submissions. The emphasis is on a close attention to detail to avoid surprises, while keeping a focus on the total programme. Purchase and Supplier Engineering provides an overview of managing the interest of firms in participating and the resulting capacity and workloads of all suppliers, including the main contractors and the critical subcontractors and material suppliers.

Offering techniques, tips and lessons learnt from the implementation of PSE on London 2012 and Crossrail, this book is aimed at public and private sector clients, developers, senior management and those businesses and professionals involved in undertaking the procurement, supply chain management and delivery of multiple construction projects or complex major construction programmes.

Author Notes

John Mead, Director, Davis Langdon
30 years of experience working at all levels within the construction sector, including on site as a trade contractor, in project management, policy development for the Construction Industry Council and with the Movement for Innovation (M4I). And for the last 8 years within construction consultancy specialising in supply chain management.
He is a Director at Davis Langdon, an AECOM Company and works within the Program Management team leading the supply chain management function for a number of clients, programs and projects.
John currently divides his time between the Supply Chain Management function for the Olympic Delivery Authority for the delivery of the infrastructure for the London 2012 Olympic and Paralympic Games. A project which until recently he led for over 3 years and the Crossrail programme where he is taking the strategy and implementation he developed and delivered for ODA and is now implementing on this program.
John has captured the learning from his previous roles including the success achieved for ODA and now being delivered for Crossrail, and has developed the Purchase and Supplier Engineering service which forms part of the Davis Langdon Program Management.

Stephen Gruneberg, Reader, University of Westminster
Visiting Fellow, Faculty of the Built Environment, Northumbria University, and Teaching Fellow, (Part-time), Development Planning Unit, Bartlett School, UCL.
Publications include: (2008) Construction and Property Markets in a Changing World Economy in Les Ruddock (ed) Economics for the Modern Built Environment, Taylor and Francis (2000) The Economics of the Modern Construction Sector , (with G Ive), Macmillan (2000) The Economics of the Modern Construction Firm , (with G Ive), Macmillan, (2000) The Building Industry and the Building Process. in Knox P., and Ozolins P., Design Professionals and the Built Environment , John Wiley, USA, (1997) Construction Economics; an introduction , Macmillan.

John Armitt and Howard Shiplee and Martin Rowark and Geoffrey E. Petts

About the authors	p. xi
List of figures and tables	p. xiii
Forewords	p. xv
Preface	p. xix
List of acronyms	p. xxvii
1 Purchase and Supplier Engineering and the London 2012 Olympics	p. 1
Introduction	p. 3
The concept of Purchase and Supplier Engineering	p. 4
Programme organisation - an Olympic case study	p. 8
Procurement organisation structure - the Olympic Delivery Authority	p. 11
Roles and responsibilities	p. 11
Projects and programmes	p. 13
Concluding remarks	p. 14
Reference	p. 15
2 A framework for understanding markets in construction	p. 17
Introduction	p. 18
Managing the supply market	p. 19
The client and construction	p. 23
Projects, programmes and construction dynamics	p. 25
The client and the supply chain	p. 27
Denning the supply chain	p. 28
Outsourcing and subcontracting	p. 31
Understanding and managing conflict in construction	p. 34
Concluding remarks	p. 39
References	p. 40
3 The client's values and the balanced scorecard	p. 43
Introduction	p. 44
Developing a framework for measuring performance	p. 46
All from a project vision	p. 47
Performance measurement	p. 50
Using balanced scorecards to communicate values and measure performance	p. 53
Developing a balanced scorecard	p. 56
Measures including key performance indicators	p. 58
Construction KPI measures of economic sustainability	p. 58
Social sustainability: Respect for people KPI measures	p. 59
Environmental sustainability: Environmental KPI measures	p. 59
Creating appropriate KPIs from a project vision and scorecard	p. 62
Concluding remarks	p. 63
References	p. 64
4 Packaging and contracting strategies	p. 65
Introduction	p. 66
What, why and how to buy	p. 68
Packaging strategy	p. 70
Gestalt theory	p. 73
Programme clusters	p. 75
Programme application	p. 78
Contracting strategy	p. 79
Forms of contract used in the 2012 Olympics procurement	p. 79
Classification of contracts	p. 82
Concluding remarks	p. 85
References	p. 88
5 Common component and commodity strategies	p. 89
Introduction	p. 90
The benefits of a common component strategy	p. 91
Factors influencing the procurement of common components	p. 93
Market leverage	p. 93
Supply chain security	p. 95
Future maintenance and operations	p. 95
Design efficiencies	p. 96
Developing a common component strategy	p. 96
Stage 1 Performance criteria	p. 97
Stage 2 Assessment of benefits of implementing a common component strategy	p. 98
Stage 3 The benefits of a common component purchasing strategy	p. 99
The common component procurement strategy	p. 100
Concluding remarks	p. 102
References	p. 102
6 Engaging with, suppliers: How to attract suppliers and increase interest and awareness	p. 103
Introduction	p. 105
Gathering market intelligence	p. 107
Supplier dialogue	p. 109
One-way supplier dialogue - Supply chain events	p. 110
One-way supplier dialogue - Industry days	p. 110
One way supplier dialogue - One-to-one meetings	p. 111
One-way supplier dialogue - Meet the buyer events	p. 112
One-way supplier dialogue - Meet the contractor events	p. 113
One-way supplier dialogue - Supplier guide	p. 114
One-way supplier dialogue - Business opportunities website	p. 115
One-way supplier dialogue - Opportunity slides	p. 117
Two-way supplier dialogue - Supplier registration and pre-assessment questionnaires	p. 117
Two-way supplier dialogue - Market soundings	p. 120
Concluding remarks	p. 125
Reference	p. 126
7 eSourcing and process codification: Standardising programme procurements	p. 127
Introduction	p. 128
The guiding principles of a robust procurement process	p. 129
Standardising procurement documentation	p. 130
Security of the procurement system	p. 131
Evaluation of tenders	p. 132
The application of electronic tools in the procurement process	p. 133
eSourcing	p. 134
eEvaluation	p. 139
Aspects of managing systematic procurement processes	p. 141
Standard processes	p. 141
Schools of excellence	p. 142
Governance	p. 143
Assurance	p. 144
Training	p. 145
The milestones of procurement reporting	p. 146
Standardisation and codification of the procurement process	p. 147
Stage gate 1 Agreeing the procurement strategy	p. 148
Stage gate 2 Tender documentation completion	p. 148
Stage gate 3 Tender list agreement	p. 149
Stage gate 4 The tender report	p. 149
Procurement reporting	p. 151
Concluding remarks	p. 151
References	p. 154
8 Managing supply chain involvement across a programme	p. 155
Introduction	p. 156
Supplier relationship management	p. 157
Remaining in contact with all firms who tender for work	p. 159
Supply chain mapping	p. 162
Concluding remarks	p. 167
Reference	p. 168
9 Due diligence and the management of capacity	p. 169
Introduction	p. 170
Modelling supplier utilisation	p. 170
Monitoring the financial strength of suppliers	p. 180
Sub-tier supplier engineering	p. 182
Identifying critical suppliers	p. 185
Concluding remarks	p. 189
References	p. 191
10 Performance management	p. 193
Introduction	p. 195
The Purchase and Supplier Engineering model and programme management	p. 197
Purchase and Supplier Engineering and the programme management office	p. 197
Performance management within Purchase and Supplier Engineering	p. 197
Analysis	p. 198
Control	p. 199
Performance improvement through Purchase and Supplier Engineering	p. 200
Benchmarking	p. 201
Concluding remarks	p. 201
Index	p. 205

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Table of Contents