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Digital Benchmarking Report 2021 On-line Launch Event 15 June 9:00 BST

By Melissa Zanocco, in News,

The Project 13 Network invites you to join the Project 13 Digital Transformation Pillar to celebrate the on-line launch of the Digital Benchmarking Report 2021 on 15 June 2022 at 9:00 BST by REGISTERING HERE.
The Report, powered by the Smart Infrastructure Index, surveys members of the Infrastructure Client Group Digital Transformation Task Group, including Project 13 Adopters: Anglian Water, East West Rail, Environment Agency, Heathrow, Network Rail and Sellafield
After Mark Enzer, Chair Project 13 Digital Transformation Pillar, introduces the report, Andy Moulds and Anna Bowskill, Mott MacDonald, will uncover the results of the latest research into the state of the nation for digital adoption and maturity.
This will be followed by a panel of industry thoughts leaders and practitioners, chaired by Melissa Zanocco, sharing their views and best practice case studies including:
Karen Alford, Environment Agency – digital skills Matt Edwards, Anglian Water – digital twins Sarah Hayes, CReDo – Climate Resilience Demonstrator digital twin Neil Picthall, Sellafield – common data environments Matt Webb, UK Power Networks – digital operating models Will Varah, Infrastructure & Projects Authority – Transforming Infrastructure Performance: Roadmap to 2030 REGISTER to find out how much progress has been made at a time when digital transformation is a critical enabler for solving the global, systemic challenges facing the planet. The report will be available on the Project 13 Network immediately after the event in the Library and the recording will also be uploaded as soon as possible (you need to have registered on the Project 13 Network to be able to access this).
Please note: We plan to make a recording of the event available. Please note that third parties, including other delegates may also take pictures or record videos and audio and process the same in a variety of ways, including by posting content across the web and social media platforms.

What does it mean to be a Capable Owner? - Watch here!

By Amy Morrison, in News,

Project 13 has launched a series of events around each of its five pillars: capable ownership, organisation, governance, integration, and digital transformation. The first event: ‘What does it mean to be a capable owner?’ saw industry adopters discuss their experiences and some of the challenges they encountered when implementing the six capable owner principles. From articulating the voice of the customer, and of operations; to being value-driven in mindset, relating to the supply chain, creating complex systems, and finally, recruiting, building, and retaining talent. Each facet is integral to maximise the opportunities of infrastructure projects to effectively deliver better outcomes.
The event welcomed Andrew Page, Head of Commercial Services at Anglian Water, and co-chair of the Project 13 Capable Owner Group; Richard Lennard, Head of Clients, Programme and Project Partners (PPP) at Sellafield; and Paul Sexton, General Manager of Alliance Management at Scottish Water.
 
A capable owner “develops sustainable enterprises built on long term business to business relationships.” This sentiment was echoed across each of the leaders’ presentations. After 17 years at Anglian Water, Andrew Page stressed the importance of alignment, how commitment must start from the top, and the benefits of choosing the right partners: “Enterprises are made up of large companies and small companies… each business is just as important as the other. When sourcing and scoring tenders, less than 30 per cent of marks were associated with costings. Most marks were based on an organisation’s ability to demonstrate the right approach, i.e., collaboration, having the right people with the right attitude and way of thinking, and finally, the right environment that nurtures possibility.”
 
Anglian Water’s adoption of Project 13 principles has enabled them to delivery differently by creating higher performing teams that have clarity of purpose. This theme of clarity was continued by Richard Lennard as he discussed Sellafield’s six-year journey towards an integrated enterprise model. “We started by looking at how we delivered projects and realised we weren’t where we wanted to be. We had a fragmented supply chain that was very traditional and struggled to leverage the collective value of our portfolio of work.”
 
Richard explained how culture and clarity is at the front and centre of running a successful enterprise: “We had to be honest with ourselves to allow us to do something differently. Led from the very top of the business, this level of humility was important in driving us down a different path to improved behaviours, frameworks, and measurement protocols. To bring the rest of the business along with us, we had to hold a mirror up and acknowledge our faults and commit to driving forward with integrity.”
 
Finally, Paul Sexton discussed Scottish Water’s first year adopting Project 13’s capable owner principles. Resounding Andrew’s and Richard’s focus on culture and behaviours, Paul recognised early on that a widespread change in behaviour would be the biggest impact on improved efficiencies. To do this, Scottish Water developed a behavioural charter and undertook a maturity assessment to review internal practices, and those of their partners and organisations. By undertaking a thorough review, Paul explained how the outcomes were then captured in an alliancing charter to fuel the collective strategy. “We believe in the Project 13 framework and the pivotal role that owners and major clients play. Although Scottish Water has only been involved for the short-term, we have learned a lot and cannot recommend it enough.”
 
Following each leader’s discussion, the Q&A segment commenced. One recurring question from the many viewers was around how internal behaviours are transformed. Andrew Page said: “There is no easy route. It’s not enough to simply do a big splash of communications at the beginning, you will of course get some initial enthusiasm, but it will wane quickly. You’ve got to attack it at all levels, consistently, to change behaviours. We undertook many workshops and created a coaching program. By working closely with teams across our partnership organisations, we ensured that each of the leaders focused on remaining consistent in how they worked and shared information. We consistently reiterated the desired behaviours and reviewed individuals that were not performing or adopting the principles. Through the coaching programme, we were able to support and equip every individual with the tools, skills, and knowledge they needed to thrive.”
 
This was a fascinating discussion from three leaders at various stages of the capable owner journey.  If you would like to learn more about Project 13 and how we’re supporting change in infrastructure, sign up to our network.
 

Capable Ownership unlocks innovation and funding to create a new habitat

By Andrew Page, in News,

[This case study illustrates: the Project 13 Capable Owner Principle: The Enterprise is set up to deliver clearly articulated customer outcomes
and the Project 13 Governance Principle: The Enterprise is rewarded for Outcome performance]
 
Anglian Water has worked closely with Norfolk Rivers Trust to create a wetland in Ingoldisthorpe, which will improve the quality of effluent dispersed from a water recycling treatment plant. Using the Project 13 approach, the project was able to challenge traditional practices and focus on outcomes, resulting in significant time and cost savings compared to traditional solutions.
 
One of the core concerns expressed by Norfolk Rivers Trust was the impact such effluent had on the environment and how this affected the local people and surrounding wildlife. It was vital for Anglian Water to provide a solution that would ensure environmental protection and enhancement in the long-term.
 
Anglian Water’s biodiversity strategy addresses such solutions and practices; if a biodiversity net gain is to be achieved, traditional methods need to be reviewed and practicality questioned. This is exactly how this project was handled. By working to an ‘outcomes approach’, Anglian Water funded the creation of a wetland, which was designed, built, and managed by Norfolk Rivers Trust.
 
The new wetland provides natural filtration across the three-hectare site. As well as removing ammonia and phosphate from effluent, this is converted into energy to fuel the surrounding plants and wildlife prior to the water reaching the river.
 
Chris Gerrard, Biodiversity Manager at Anglian Water, said: “The typical approach to this project would have been to construct additional treatment units across the site. Or devise a system to pump the effluent to a larger treatment centre several miles away. This would have had a significantly negative impact as it would not have allowed the surrounding environment to flourish, nor would it have been future proof. By opting for a wetland, the need to pour any concrete was alleviated, which of course also saved time and reduced the overall costs of the project. To minimise the impact on local people, the project was developed and delivered in under three years.
 
“Overall, this solution is excellent for the environmental footprint and carbon reduction, highly preferable to enhance and encourage wildlife, and the quality of water is raised substantially. This has been a win all round.”
 
Anglian Water and Norfolk Rivers Trust’s Ingoldisthorpe project is considered exemplary across industries. To encourage more sustainable practices and to encourage a nation-wide objective of biodiversity net gain, Anglian Water is inviting other water companies and global infrastructure providers to visit Ingoldisthorpe’s new wetland to demonstrate just how beneficial this could be in one of, or each of their regions.
 
For more information on Anglian Water’s Biodiversity Strategy, visit the website here. 
https://www.anglianwater.co.uk/siteassets/household/in-the-community/anglian-water-biodiversity-strategy.pdf
 

What does it mean to be a Capable Owner? - Online event 07/04/2022

By Amy Reed-Gibbs, in News,

7th April 2022 9-10:30am BST
Register here
Join the Project 13 Capable Owner Pillar to explore the key steps and desired individual skillsets to becoming a Capable Owner in your projects. With expert research and industry examples from Project 13 Adopters, you will discover how to adopt Capable Ownership into your organisation to effectively deliver better outcomes.
The Capable Owner pillar is one of five Project 13 Pillar’s that come together to create an enterprise model for infrastructure delivery. This model brings together owners, partners, advisers and suppliers, working in more integrated and collaborative arrangements, underpinned by long term relationships. This is the first of a series of Project 13 Network events around the Project 13 Pillar Groups: Capable Owner, Organisation, Governance, Integration and Digital Transformation.
We will be hearing from Andrew Page on his research into the six key steps to being a capable owner and how Anglian Water are following alternative routes for financing, designing, building, and operating assets that their customers rely on in their daily lives. This will be followed by industry examples from Project 13 adopters, Sellafield and Scottish Water, where we will learn about their journeys in adopting the Project 13 model and how they overcame any challenges whilst doing so.
Background:
As part of its wider role, the Capable Owner develops sustainable enterprises built on long term business to business (b2b) relationships. Traditional hierarchical relationships are replaced with aligned and collaborative b2b relationships, with a collective focus on delivering the outcomes required. The right partners are selected based on capability and behaviours and work within incentivised value-based arrangements.
Enterprises are brought together to deliver the outcomes required (customer and societal) and to enable business performance. The focus on outcomes provides a back-to-back alignment through all parts of the Enterprise. Capable Owners can articulate the required outcomes, with processes in place to ensure these outcomes effectively represent the requirements of customers, community and society. A capable owner will be able to describe the asset performance required to achieve these outcomes and will engage with partners and stakeholders in delivering outcomes and asset performance.
Through best practice assembly and exchange, community engagement through the Project 13 Network , and opportunities to get involved in the debate, the Capable Owner pillar explores the following key areas of capable ownership to maximise the potential of their infrastructure systems:
Articulating the voice of the customer. Being value driven in mindset. Articulating the voice of operations. Relating to the supply chain. Creating complex systems. Recruiting, building and retaining talent. Sign up to the Project 13 Network and the Capable Owner team to find out more.
 
 
Speakers:
@Lucy Howard
@Andrew Page
@Richard Lennard
@Paul Sexton

How to create an organisation that delivers outcomes

By James Crompton, in News,

This case study illustrates the Project 13 Capable Owner Principle: The Enterprise is set up to deliver clearly articulated customer outcomes.
“For an organisation to deliver outcomes, the structural and cultural objective to simply ‘deliver scope’ must be shifted.”
James Crompton, Strategic Pipeline Alliance Director at Anglian Water, discusses the business’s Strategic Pipelines Alliance (SPA) initiative; exploring the principles and process of creating a new enterprise organisation that is equipped to deliver core customer outcomes:
“Integration and collaboration are two words we hear consistently, and particularly when businesses are forming alliancing-type models. Whilst these are critical in creating a successful delivery model, the central component should be alignment. This has consistently maintained its prevalence within basic alliancing through to mature enterprising.
Without alignment, there is no key anchor point that informs the operating model or the organisational structure, which ultimately makes it far more difficult to cement a purpose, form goals and identify the outcomes.
When it came to SPA, we had a very clear purpose that was detailed in our procurement documents. We took the time to articulate our aspirations and the type of organisation we wanted to create, as well how, albeit at a high level, it would operate. We also stated the various capabilities and behaviours that were required to successfully deliver our goals and outcomes.
Integrator
To demonstrate the practicalities of the SPA approach, I want to discuss a specific project and highlight some of the challenges we identified along the way. To begin, we wrote down our purpose: ‘To make the East of England resilient to the risks of drought and to secure water supplies for future generations.’
To bring this vision to life, we created the Integrator with our key partners, this is a high-level operating model that is complimented by a production based operating model, which was backed up by our wider network.
We soon identified how challenging it was to talk solely about outcomes, whilst trying to understand the sheer scale and scope of the project. We discovered that the delivery outcomes were losing impact, particularly when faced with a Water Resources Management Plan that showed over 475km of pipelines.
This was an incredibly valuable lesson to learn; just how easy it is to slip back into that ‘scope and scale’ mindset. Together, we paused and considered two things. Firstly, we stated very specific examples of what an outcome for SPA was: to provide an additional million litres per day from X to Y distribution zones by Z date. This was instead of ‘design and build X length of pipe at Y diameter with Z storage.’ The latter only reemphasised the scope of the project and left little room for innovation.
The second thing we did was to support the above outcome with two mantras: ‘If we don’t lay pipes we will fail. If we just lay pipes we will fail’, and ‘The space that lies between scope and outcomes is where innovation and imagination can thrive.’
We began describing each element of the project as a smart and integrated strategic asset, all consisting of transmission pipes, innovative solutions, and smart technologies. Additionally, we integrated stringent carbon targets into SPA, not only to align with our specific goals and outcomes, but to ensure we continued to support Anglian Water’s ambitions to achieve Net Zero Carbon by 2030.
As we progressed with this project we retained a keen focus on capabilities, behaviours and the value required to deliver our outcomes; this meant we put very little focus on the commercials. In fact, fee only accounted for 12 per cent of the overall scores and no work was priced in the process. This really shifted the goal posts as reward mechanisms were based on out-performance earned from successful delivery, rather than on scope of work.
Production Delivery
By using industry best practice and benchmarking we introduced a production based operating model. This successfully pinpointed the various outcomes and aligned them with our community and environmental pledges.
Throughout this operating model, we made a very deliberate change in language. To truly embody and embrace our outcomes, ‘detailed design’ is now ‘engineering and integration’; ‘construction’ is now ‘production and assembly’, and ‘handover’ is now ‘network integration’. Each phrase has been evolved to provide more specificity and depth, and hones in on the specific roles to drive efficiency.
This process has provided us with an integrated and mutually dependent organisation that is completely aligned to the purpose, goals, and outcomes of the owner. In turn, we have witnessed further alignment across organisational structures and across wider operations.
This is a real-world example of how integrated organisations and an alignment around outcomes, powered by concurrent language and terminology, transformed conversations, and fuelled an inevitable drive towards success."

Anglian Water: How Customer Engagement Shapes its Enterprise Outcomes Definition

By Andrew Page, in News,

[This case study illustrates the Project 13 Capable Owner Principle: The Enterprise is set up to deliver clearly articulated customer outcomes]
 
Anglian Water has successfully engaged with partners in delivering better outcomes from its capital the investment programme. One of the key enablers to this and that made a significant contribution to transforming delivery models was a comprehensive and in-depth customer research project that enabled a clear articulation of the outcomes required. Outcomes that through this consultation process integrated customer views and requirements. By implementing a 38-channel route of engagement and communication process, over 500,000 interactions were made across a vast range of customer segments. The collated results have shaped Anglian Water’s business strategy and fuelled a rich engagement culture across day-to-day operations.
  
 
Some of the key similarities that emerged off the back of the ongoing communications were around a 25-year Strategic Direction Statement and Water Resources Management Plan. This also encompassed further conversations around corporate governance and Anglian Water’s plans for enhancing resilience in the long-term.
As part of this long-term focus, one of the key topics of conversation was around younger people, more specifically what their interests and needs are, and how these are likely to evolve over the next few decades. In addition, all customers expressed a desire for ongoing engagement and to be a part of new solutions that will enable them to manage water use.
Each of these facets have fuelled Anglian Water’s ‘Outcomes for Delivery’ plan; a robust and sustainable proposal fuelled and driven by customers’ priorities. Over the next five years, Anglian Water is committed to delivering performance in the areas that matter most to customers, and to improving overall performance across the board.
The delivery plan is split into three sections: Smart Business, Smart Environment and Smart Communities. Within each are tangible goals that will ensure there are fair charges and fair returns, a commitment to ensuring supply meets demand, and the assurance that safe, clean water will be provided amidst a flourishing environment. Each element of Anglian Water’s plan is practical and will shape the future of the business and how it responds to the evolving needs of its customers.
One core theme that emerged is ‘value’. More than 80 per cent of customers stated that they’re willing to pay higher bills if each outcome delivers real valuable results. In addition, most customers would opt for a natural capital approach to improving environmental outcomes, rather than opting for more traditional routes.
The resulting outcome framework provided an overall context for the investment programme, but crucially this was the level at which partners relationships were formed and against which alliance and partner and alliance contribution was measured. This has enabled more aligned relationships and ensured that partner capability has been leveraged more effectively. The track record of the alliance has gone on to demonstrate the significant contribution partners can make in delivering better outcomes. 
Anglian Water has adopted a unique approach to its business strategy; with people, sustainability, and smart ways of working at the heart of the business, there is a clear route to successful longevity.

How cultural and digital initiatives enhanced integrated working and governance on the A14

By Amy Reed-Gibbs, in News,

Author: Mark Berg, A14 Integrated Delivery Team and Costain senior project director
More than 14,000 people have worked together as one team over the past five years to transform 21 miles of strategic A-road network connecting the Midlands with ports in the East of England. Jim O’Sullivan, CEO of Highways England was proud to declare that the A14 is the only £bn+ project in Europe that has been delivered ahead of programme (eight months) and on budget.
The first phase of the Cambridge to Huntingdon improvement scheme was completed a year ahead of schedule, and the second eight months early with £196m in efficiencies realised against the client target of £108m. One of the questions I’m often asked is ‘how?’.
More than meets the eye
 
You see a road project, We see data driving success
watch video
This complex scheme involved widening the existing road to a three and four-lane dual carriageway and improvements to over 20 miles of local road network. It was delivered by a Costain, Skanska and Balfour Beatty contractor joint-venture, working alongside designers Atkins and Jacobs, as an Integrated Delivery Team (IDT) with client, Highways England, supported by various strategic supply chain partners.
From the start, the IDT wanted to set a new standard for major project delivery, and to do that, we’d need to foster a high performing culture of collaboration, continuous improvement and innovation. In this article, I’ll explain how we used data and digital tools to help us achieve this, and how we built trust - in the information and in each other - to deliver on budget, ahead of time, and with a strong safety record.

Mark Berg with Grant Shapps, Secretary of State
Identifying the optimum pavement solution
With the largest pavement package of its time to be awarded, the IDT needed to identify the optimum commercial pavement solution, with efficiency and sustainability at heart. Tendering pavement contractors were provided with all available data from the outset and tasked with value engineering the pavement design to use local sources and minimise impact on the surrounding communities. The winning solution would lead to c.£5m cost saving efficiencies. 
Creating a collaborative environment
We knew that one of our most significant challenges would be bringing together five delivery partners, our client Highways England and suppliers, and enabling people to work effectively - on site and remotely. Our solution was to create environments that supported collaboration.
From the outset we set-up system access for all site offices to be the same, so people could move seamlessly from one physical space to another, without the hassle of accessing unknown systems. Consistency also helped us build a ‘one team' mentality.
But the scale of the project meant we had to go further to strengthen people’s connections with each other. At the commencement of work on site in 2016, the Office 365 tools many of us rely on now were just being released to the market. We worked with Microsoft to maximise the benefits of them so people could work from anywhere and still share information and ideas.
Agreeing strong leadership and common ways of working
To ensure we had a high performing, Integrated Delivery Management Team (IDMT), a competency framework was developed and used to select the right person for the right role, with a strong focus on collaborative skills, behaviours and leadership qualities as well as technical expertise. This behaviours-led methodology was extended across the project and incorporated into supply chain procurement.
Every organisation involved in the project had its own way of working, so our next step was to develop a shared vision, values, culture and quality management system, or integrated management system as we called it, that established clear and consistent processes to guide our work. To do this, we drew on best practice from all joint venture partners. The initiative, which was led by the work streams rather than a central team, created a common way of working for the project - ‘the A14 way’ - that people could relate to.
Establishing a single source of truth
As a leadership team, we had to make timely decisions on behalf of Highways England. We also wanted to be open with our client, partners and suppliers about our progress and performance in key areas. To achieve this, we created a cloud-based platform to hold project data and act as a single source of truth. We then spent six to 12 months working with our client to refine the content and frequency of the reports that would be generated from it.
We established what we referred to as a ‘rhythm’ to ensure we could deliver on the commitments we made. Beginning with the end of month report that was aligned to Highways England’s objectives, we asked ourselves what data was required to produce that document. We then put a schedule in place to ensure the information would be available in time.

Making data accessible
Building trust in the data that helped us build trust in each other
To build trust in the single source of truth, we started by encouraging people to move data from spreadsheets to our cloud-based platform, so we could unlock the value of the data that was held within individual, digital tools such as Oracle’s Primavera P6, Business Collaborator, Mosaic and EnterpriseOne – systems which normally don’t talk to each other. But in doing so, we were also asking people to embrace a more collaborative and open approach – and that took time to develop.
At first, some people feared the data would be used to point out where they might be under-delivering, and – understandably – they were reluctant to share information. We worked hard to drive change from the top down. As a leadership team, we demonstrated the trust we’d developed in each other, and shared data to promote transparency and keep people informed. Having robust data to hand built our client’s and colleagues’ trust, enabled us to take an objective view of performance and identify areas of work that would benefit from receiving greater support.
Then, when it was clear the data was being used to inform and empower colleagues, people embraced it. Within six months, many realised its value, and a year on, they wanted to contribute even more. We also made sure that information was accessible - to our partners, colleagues and supply chain. The data was brought to life through dashboards that were displayed on 79 digital signs installed at three main compounds, two sub compounds and permanent welfare facilities across the 35km site.
Democratising data to enhance productivity, safety and innovation
Instead of asking colleagues to take a leap of faith, it was important to demonstrate the benefits of data – that is, provide the information they needed to respond to challenges or opportunities. Several examples are below.
Productivity
The IDT developed an app called Andon, which enabled our surfacing works partner, Aggregate Industries and our slipform partner PJ Davidson, to monitor in real time when work on site was either ongoing, had paused or stopped, using digital signage in the construction operations office just like a control room. On a project of this scale, if someone is unable to start work because of delays in another area, it can have a significant impact on the schedule. Having access to up-to-date data enabled us to boost surfacing productivity by 50%, Cement Bound Granular Material (CBGM) pavement by 50% and slip barrier and drainage by 30%.
Health, Safety and Wellbeing
Safety observation cards provide valuable insight into safety culture. But when we introduced our Observation app, the number of safety observations increased from around 500 to more than 4,000 per month. More importantly, the data we collated demonstrated that as the number of positive observations increased, negative ones decreased, and the number of incidents reduced. That showed us how important it is to recognise the right behaviours. Making the data visible helped us maintain our positive approach.
Innovation
A team called the ‘Red Team’ was set up to reach out to the wider workforce when we needed help to solve difficult problems. The digital signs in the offices were used to share people’s good ideas and demonstrate how they were making an impact. In one case, we were struggling to find a way to build two bridges over the existing A14 without significantly impacting drivers or our schedule.
Inspired by a solution he’d seen on YouTube, a young engineer responded to our call for suggestions. He put forward a plan to construct the bridges off-site, transport them to the area, and lift them into position. We worked with the engineer to develop the idea and conducted a digital rehearsal to demonstrate to our client that the innovative approach could work. The result was two bridges were installed in one weekend, which meant we avoided 80 night-time full closures of the A14.
Having a consistent and reliable data source also enabled us to explore the potential of predictive technologies. As work on the scheme progressed we worked with Highways England and Microsoft on a pilot study into the use of artificial intelligence and machine learning to understand how 140 different factors influenced the risk to workers, for example, working time, incidents and observations, ratios of supervisors to different operational roles and schedule activities. The information was shared with our safety teams, who could carefully monitor the situation on site. The pilot achieved 75 percent accuracy, which reduced to 65 percent after rollout, due to a decrease in incidents. The technology proved to be more than 160 percent accurate compared with a statistically random guess.

Sharing data and lessons learned
The cultural and digital initiatives the IDT implemented on the A14 improvement scheme helped us build people’s trust in each other and in the data. The digital solutions and real time reporting enabled the project to stay on programme and be handed over early. It’s worth noting that less than one percent of the total budget was allocated to these digital initiatives.
Our team won the prestigious Digital Initiative of the Year award (Civils) and Overall Initiative of the Year award at the British Construction Industry Awards in 2019 and was the first project to achieve 44001 collaborative accreditation. The hope is that the cultural methodology, digital approach and data leveraged on this project will help the many projects that follow.
Costain has evolved many of the digital tools developed on the A14 such as the Power BI dashboards, Safety Observation and Andon Apps as part of our own smart delivery platform (SDP). The SDP will soon enable data to be the fulcrum on all complex programmes in a similar way. In addition, we’ve leveraged our experience to help create the Intelligent Infrastructure Control Centre (IICC) which federates data at project, framework and enterprise level. Through tools such as these, data’s power to make infrastructure delivery safer, faster, greener and more efficient can be grown exponentially

The Construction Productivity Paradox

By Simon Murray, in News,

The productivity of the UK construction sector has been rising up the political agenda.  Reports by the World Economic Forum (WEF) 1, McKinsey 2, the Infrastructure Client Group and the Institution of Civil Engineers 3 have all highlighted that over the last twenty years productivity in construction has barely changed whilst productivity in manufacturing has improved by around 80%.  If the UK construction sector could achieve the levels of productivity seen in manufacturing, there would be a lot more money to invest in hospitals, schools, roads and railways.
 
The construction sector isn’t short of advice on how to improve productivity.  The WEF proposes six key areas for change, McKinsey suggests seven areas for action and, in its Construction Sector Deal, the Government lists yet more actions to support improvement.  The recommendations include familiar themes like greater use of offsite construction, digital technologies and developing advanced manufacturing methods for construction.  These innovations have been available for some time and are not widely used in construction.  Perhaps we should ask why the industry is reluctant to invest in improving its productivity.  And we could begin by understanding what we mean by construction productivity.
 
“Simply put, productivity is the ability to get more economic output from any given level of inputs.  Or, even more straightforwardly, the ability to make more stuff with the same number of workers.”
 
Duncan Weldon, Two Hundred Years of Muddling Through – Little Brown 2021
 
Productivity is the value added by a business divided by the amount of labour employed in producing its products and services and is typically expressed as £/person employed or £/hour worked.  The value added is the wages paid to the workers plus the business’s gross operating profit 4.  The Office for National Statistics (ONS) calculates the productivity of the UK construction sector by aggregating the value added and the labour employed for all of the companies in the sector.
 
The ONS defines the construction sector as all activities within sections 41 to 43 (excluding 41.1) of the UK Standard Industrial Classification of Economic Activities 2007.  This includes the construction of buildings and civil engineering works and some trades such as plastering and scaffolding.  It does not include consultancy services, computer systems or many manufactured items like precast concrete or transport equipment.  Whilst most of these items are recorded as inputs to the construction sector, they are not directly included in the value added by the sector.
 
Construction productivity is a measure of the value added per unit of labour for thousands of building and civil engineering contractors and specialist sub-contractors from the very largest national contractors right down to the smallest local building firms.  It is an interesting economic statistic, but it is of little help in understanding how construction companies add value and in measuring the effects of specific initiatives to improve productivity.  That requires us to investigate the productivity of individual businesses and, in particular, the large general contractors that have such influence over project delivery in the UK.
 
For an individual business, productivity is defined as:
 

 
A company’s gross profit is its revenues minus its cost of sales and is shown in the consolidated income statement that most large contractors publish in the financial statements in their accounts.  A metric that investors often use when comparing the performance of different companies is the gross profit margin or gross profit expressed as a percentage of turnover.  It reflects the company’s business model and is seen as a measure of how well it controls its cost of sales or how efficiently it uses labour and materials in its production process.    
 
Data from the accounts of quoted UK contractors suggests that their gross profit margins are typically in the range 5-10%.  In comparison, many leading manufacturers have gross profit margins in the range 10-40%.  Before the Covid pandemic, Boeing Inc’s financial reports showed a gross margin of 19.6% and Apple Inc a margin of 38.3%.  This difference reflects the different business models in contracting and manufacturing.
 
Most contractors obtain their projects through competitive tendering and then sub-contract up to 80% of their value.  This means that the prices they charge for their projects and their costs of sales are largely determined by competition in the market, leaving few opportunities to improve their performance by investing in better people, new technologies or better processes.  This approach also limits contractors’ opportunities to collaborate with their suppliers in reducing the costs of their inputs.  If a supplier has been through arduous tendering and negotiations to win a sub-contract, they are unlikely to share information or collaborate in reducing their prices.
 
It is possible for contractors to improve their productivity without reverting to the 1970s business model when they owned their plant, employed most of the labour on site and controlled the production process.  It requires careful thought and some simple analysis based on the definition of productivity set out above.  It is tempting for firms to just go ahead and implement some of the recommendations in the many reports on construction productivity.  But, without careful thought and analysis, they risk wasting their efforts and possibly, reducing their productivity even further.      
 
An obvious strategy for improving productivity would be for a contractor to produce better projects without increasing costs and then persuade their customers to pay higher prices for them.  Analysis shows that if a company could increase its prices by 5% without increasing its staff numbers or the costs of its sub-contracts, its productivity would improve by more than 30%.  The challenge for the company would be to develop demonstrably better projects than its competitors and then persuade its customers to pay higher prices.  This would require radical changes in current approaches to procuring projects that are unlikely in the medium term.
 
An alternative strategy would be to reduce the cost of sales by improving efficiency in the company’s supply chain.  The contractor could collaborate with its suppliers and invest in its supply chain to reduce costs, sharing the benefits with the suppliers.  If it was able to reduce the costs of its sub-contracts by 10% and share this 50:50 with its suppliers, its cost of sales would reduce by 5% and analysis shows that productivity would increase by nearly 30%.  Unfortunately, the improvement could be short lived, as other contractors would adopt the new approach, and competitive tendering would pass the cost reductions on to customers in lower prices.
 
The most promising strategy for improving productivity could be to reduce the time it takes to deliver projects.  If a contractor was able to deliver its projects in half the time without increasing its staff and with continuity of work, it could effectively double its revenues.  Allowing for the fact that the cost of its sub-contracts would also double, it would still deliver the same gross profits, and analysis suggests that its productivity would more than double.  A 50% reduction in time would require a radically different approach to planning and managing the project from detailed engineering through the manufacture of components to assembly on site.  But the benefits would more than justify the investment.
 
It is in all our interests for construction to improve its productivity, but the industry is not going to achieve this by randomly implementing the initiatives set out in the many reports on the subject.  We should begin by creating market conditions that encourage improvements in productivity, which means helping customers define value in their projects and creating procurement practices that reward the delivery of value.  The construction industry could then start the painful process of adjusting its business models and integrating supply chains to reward every participant for the contribution they make to the value delivered to the customer.
 
In time, these arrangements would lead the construction industry to focus on productivity as a priority and measure productivity consistently across projects.  It would also encourage contractors and suppliers to work together, investing in new technologies and practices that would continuously improve productivity.  As the economist Sir John Kay put it in an article in the Financial Times:
 
“modern humans – uniquely – are productive because they engage in cooperative activity.”
 
John Kay, FT Weekend 28/29 July 2018
 
 
 
 
References
 
1.     Shaping the Future of Construction – Future Scenarios and Implications for the Industry.  World Economic Forum, March 2018.
2.     Reinventing Construction: A Route to Higher Productivity.  McKinsey Global Institute, February 2017.
3.     From Transactions to Enterprises, A New Approach to Delivering High Performing Infrastructure.  Institution of Civil Engineers and the Infrastructure Client Group, March 2017.
4.     The Value of Everything, Making and Taking in the Global Economy.  Mariana Mazzucato, Allan Lane 2018                                 

Transforming Infrastructure Performance: Roadmap to 2030 sets the context for the Project 13 Principles to thrive

By Melissa Zanocco, in News,

Dale Evans, Chair Project 13 and member of the drafting team, explains how the Project 13 Principles align with Transforming Infrastructure Performance and how it supports the creation of  outcome-focused, collaborative delivery models.
Transforming Infrastructure Performance: Roadmap to 2030 (TIP) published today, sets out a clear direction for infrastructure and recognises the role infrastructure plays in ensuring people and places thrive. It is recognised that the current transactional model for delivering major infrastructure projects and programmes is broken. The outdated transactional approach prevents efficient delivery, prohibits innovation and as a result fails to provide the high-performing infrastructure networks that businesses and the public require.
Doing things differently
TIP offers a different direction and is prepared to tackle the restrictive practices embedded in the industry. By focusing on people and nature thriving, building on the Construction Playbook and Our Vision for the built environment, TIP contains a concrete Action Plan to ensure the right environment is created to enable better delivery. The opportunity offered by Enterprise models like Project 13 and digital transformation can be realised more fully, achieving benefits for society and nature.
Our Vision highlights that this is the right time for change: we know what best practice looks like, we understand the opportunity from digital transformation and we now have the opportunity to deliver differently. Made up of the Built Environment Model, five Focus Areas and an Action Plan, TIP is committed to putting these better ways of working into practice and making them the norm.
Focus Area 1: Delivering new economic infrastructure to drive improved outcomes for people and nature
As with the Construction Playbook, Government has consulted widely with industry and the result is the richer for this consultation. Focus Area 1 is most aligned with Project 13 and illustrates why the Enterprise model is most effective in responding to the system of systems that make up our built environment:
"Aligned outcomes and corresponding incentives: Greater impact from investment, at the societal level as a direct result of outcome-led and value-based decisions. Greater realisation of benefits that industry can bring through innovation. Adopters of Project 13 are demonstrating how engaging partners to deliver the required outcomes and aligning reward models accordingly, enables a broader system perspective, for example opening up opportunities to incorporate the optimisation of existing assets alongside the delivery of new assets and also enabling modern methods of construction."
Project 13 is looking forward to working with Government and the industry to implement TIP. The need for change has never been greater and we can only do it thorough collaboration and concerted effort.
 
 


Case study - Six Steps for Capable Ownership

By Andrew Page, in News,

Anglian Water began its journey to set up an alliance of organisations in 2004. Head of Commercial Services Andrew Page discusses the six key steps that continue to fuel its success.
Anglian Water’s Alliancing Journey.
Back in 2004, Anglian Water began its journey to set up an alliance of organisations as part of its Assessment Management Plan (AMP). Now, the business has seven different alliances, each of which cover many facets, from large scale infrastructure projects to IT solutions. Together, the Alliance is focused on Anglian Water’s investment programme to build a sustainable world.
1. Commitment starts at the top.
“We knew that changing the way we procured large programmes would be a challenge. We shifted the delivery of a multi-billion-pound regulatory investment programme to an entirely new commercial model. Our success was achieved by the unwavering commitment of our management board and investors, after 17 years, this commitment remains firm. As part of this process, our CEO continues to chair a quarterly Alliance Principals Group meeting with senior executives from each of our partnership organisations. This is a real, B2B conversation that not only demonstrates the commitment from our most senior members of the business but ensures that our focuses are consistently aligned.”
2. A Sustainable Commercial Model
“Adopting a sustainable commercial model delivers the efficiencies required by the owner and the returns required by each of our partners. A sustainable model must drive the right behaviours; behaviours that focus on delivering the outcomes required by the owner, whilst constantly delivering increased rewards to the shared Programme Pool. It’s important to note that this commercial model must also increase the size of the programme pool, and not increase the share generated for individual members.”
3. Choosing the Right Partners
“At Anglian Water, we understand that we don’t have all of the answers to every challenge. This is why our Alliance is made up of organisations that bring varied skill sets to tackle said challenges. We keep skills at the forefront of our minds when scoring tenders submitted for our alliances; fewer than a third of the marks available are for cost-based responses. We have a genuine focus on an organisations’ ability to demonstrate the right approach, the right people and partners, the right processes and systems, and the right environment.”
4. Creating Symbiotic Relationships
“Success requires an understanding that every partner in the enterprise has an equal voice. We have an unwavering acceptance that the enterprise will only succeed if all recognise the importance of each partner in delivering that success. These relationships are long-term, and the trust developed is an essential ingredient.”
5. Developing High Performing Teams
“In the early days it is all too easy to confuse great team spirit with a successful enterprise. The measure of the success of an enterprise is how it responds to challenges, and how open and transparent the team is. The key to success is absolute clarity of purpose around aligned outcomes. Anglian Water introduced a High Performing Teams development plan very early in the journey. It has proven to be an essential tool in helping newcomers adopt a new model and progress their journey with us.”
6. Deliberately Deliver Differently
“Anglian Water is now in its 17th year of its Alliancing-type delivery model. Throughout this time, we have had continuous support from the leaders of the business and have adapted the commercial models to meet each new regulatory period. We have worked through all challenges together, as an alliance. Each of our partners have been integral in delivering our Business Plan submissions to our regulators, this collaborative approach creates the conditions required for innovation and creativity to deliver our desired outcomes.”
Anglian Water’s alliancing journey is the cornerstone of what collaboration and alignment can achieve. As the regulated infrastructure owners in the UK increasingly look at various delivery models for major infrastructure investment, these are exciting times for further development of the P13 enterprise approach. We will continue to follow alternative routes for financing, designing, building, and operating assets that are our customers rely on in their daily lives.

Covid-19 digital transformation response revisited - what has really changed?

By Melissa Zanocco, in News,

Juned Ahmed, business analysis and improvement graduate, Openreach, summarises the main points from the DTTG Peer Review Programme Covid-19 re-visited session.
The Infrastructure Client Group’s Digital Transformation Task Group (DTTG) is made up of Chief Data Officers and their equivalents from the most progressive economic infrastructure clients and evolved from the Project 13 Digital Transformation Pillar. DTTG members met virtually in April 2020 for a special session to share initial learnings from the Covid-19 crisis along with common lessons, challenges and successes and the place digital transformation had in managing the pandemic in their organisations. You can read the initial reflections here.
One year on, the DTTG members met in May 2021 to reflect on the lessons from the pandemic. Members gave their thoughts regarding the ‘digital’ changes that were taken in response to COVID-19 and the lessons learned. They then looked forward and reflected on the extent to which those lessons will be incorporated / embedded into their ongoing strategy and culture.
A high-level summary from the discussion can be found here but highlights included:
Digital is now accepted by all parts of the organisation as inevitable.  Doubters and laggards have been forced to switch their mindsets, suspend their disbelief, and change the corporate mindset of ‘this won’t work for us because people won’t do it’. The gulf between the extent that people have personal readiness for digital and their level of expectation, which was significantly higher than the business was ready to make before, is now closing. ‘Resilient as a business, fragile as humans’: The importance of mental health and seeing the requirements of people, not just business needs, is now obvious. Methods and expectations in the delivery of training particularly for field-based operatives has had to change and adapt. The ideal state would be to create tools that need minimum or no training as they are intuitive and user friendly. Learning to trust employees to do their work even when they are not being physically overseen and to believe that people can adapt and be effective away from the office took time but is now reaping benefits. ‘Work is something you do, not somewhere you go’. There is an increased need for collaboration spaces in “the office” less need for desks Success breeds success approach: Building a constructive culture that celebrates success rather than focusing on the 2% that went wrong. What can we do better? If something went wrong, asking how we can help and offering thanks when it is fixed rather than having a blame culture leads to a more productive and innovative workforce. Miranda Sharp, Chair, DTTG Peer Review Programme, commented:
 

ECITB Project Collaboration Toolkit and Project 13

By Melissa Zanocco, in News,

A number of Project 13 adopters have benefited from application of the ECITB (Engineering Construction Industry Training Board) Project Collaboration Toolkit.  First developed to support project teams working in the oil and gas sector, the Toolkit incorporates learning from across a range of oil and gas projects to provide a ‘go to’ guide based on the principles of collaboration.
In seeking to drive the changes in culture and behaviour that underpin successful projects the toolkit shares common ground with Project 13 – and it is apparent why the adopters will have recognised this alignment in using the Project Collaboration Toolkit to support their change programme.
This relationship is now being further developed, with the ECITB’s Collaboration Toolkit being made available through Project 13 to help bring both improved productivity and cost savings on major infrastructure projects.
Background
The Project Collaboration Toolkit is a practical ‘go-to’ guide, created by the Engineering Construction Industry Training Board (ECITB) and aimed at supporting and benefitting projects through improved collaboration and smarter ways of working.  Originally designed for the offshore oil and gas sector, the toolkit is freely available for projects across other engineering construction sectors, helping to guide clients and contractors on how to work together more efficiently whilst sharing industry best practice on joint working.
Use of the ECITB Project Collaboration Toolkit across major offshore projects – such as Shell’s Brent Bravo topsides decommissioning project which achieved cost savings of 40% – shows that collaboration between investors, developers and the supply chain network can achieve significant efficiencies, greater productivity and faster project completion.
Now in its second edition, and closely aligned with the ISO 44001 standard on collaborative business relationships, the toolkit has been updated to fit all industry sectors engaged in capital projects. Presented as a workflow aligned to a typical project lifecycle, the toolkit is designed to be used at all levels of the supply chain, from regulators and operators through to contractors and suppliers, with the intention of building on existing synergies to help them become even stronger over time. The whole toolkit can be used to support project collaboration from inception to completion, or individual phase steps and activities can be applied by project managers to projects which have not been established on a collaborative strategy.
Next Steps for Project 13 and the Project Collaboration Toolkit.
Both Project 13 and the ECITB Collaboration Toolkit have sought to consolidate industry learning and to share this learning across the wider sector. In both cases this open sharing of best practice has served to accelerate broader industry progress.
It is no surprise that the two initiatives are now looking to develop a closer relationship, sharing progress from two sectors that are underpinned by significant investment programmes.
As a first step the Toolkit is now available through the Project 13 network. The start of what will be a mutually beneficial relationship.   
Find out more and download the free toolkit HERE

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