Procurement and Integration

Welcomes

Arrangements

Introductions
Procurement and Integration

Introductions

Rethinking Construction

Principles of Collaborative Working

Understanding Customer Requirements

Supplier Relationships

Integrated Management

Managing Costs and Programme Collaboratively

Collaborative Improvement

Supplier and People Development

Bringing it all together

Construction Commitments - Endorsements

Procurement and Integration

Slides you get

Make notes from

• Discussions
• Flipcharts
• Group Work

martin brown
fairsnape

email: [email protected]
twitter: @fairsnape
mob: 07776234702
skype: fairsnape
 Procurement and Integration

Identify ‘stakeholders’

Identify collaboartive working ‘expectations’

(what others expect from us)

Identify collaboartive working ‘delivery’

(what we give to others)
 Procurement and Integration
Your
Procurement Customers and
and Integrated Clients
working Your
Construction
Sub Contractors
Industry
Suppliers
Expectations
You

Your Your
Staff Competitors
Your
Community
And
Society
 Procurement and Integration

Construction Commitment
A successful procurement policy requires ethical sourcing, enables best value to be
achieved and encourages the early involvement of the supply chain. An integrated
project team works together to achieve the best possible solution in terms of design,
buildability, environmental performance and sustainable development
• Procurement decisions will be transparent, made on best value rather than lower
cost, use evaluation criteria and where appropriate, specialist advisors, whilst
encouraging the contribution of smaller organisations
• All members of the construction team will be identified and involved at an early
stage, particularly during the design process, and encouraged to work
collaboratively
• Supply chain partners will be required to demonstrate their competency, their
commitment to integrated working, innovation, sustainability and to a culture of
trust and transparency
 Procurement and Integration

Construction Commitment (contd)

• To ensure effective and equitable cashflow for all those involved, all contracts will
incorporate fair payment practices, such as payment periods of 30 days, no unfair
withholding of retentions, project bank accounts, where practicable and cost
effective, and will include mechanisms to encourage defects free construction
• The duties of each project team member will be identified and shared at the
outset of the project and appropriate insurance policies, such as project insurance,
put in place
• Risks will be clearly identified, financially quantified and allocated in line with
each party’s ownership and ability to manage the risk
• All contracts will have an informal and nonconfrontational mechanism to manage
out disputes
• The employment practices of all organisations, including sub-contractors and the
self-employed, will be scrutinised by the client and the supply chain to avoid abuses
Procurement and Integration
 Procurement and Integration
Drivers
•Committed leadership
•Focus on the customer
•Product team integration
•Quality driven agenda
•Commitment to people

Project Process Improvement

•Product development
•Product implementation
•Partnering the supply chain
•Production of component

Targets for Improvement

•Capital cost
•Construction time
•Predictability
•Defects
•Accidents
•Productivity
•Turnover and profits
 Procurement and Integration

What are the implications of

•Rethinking Construction
•Never Waste a Good Crisis
•Collaborative Survival Guide

What are we doing?

What do we need to do?
(Overnight reading if not familiar
and revisit day 2)
 Procurement and Integration
Principles of Collaborative Working

Focus on Customers Values

Establish Relationships
Integrated Processes
Manage Costs / Time Collaboratively
Develop + Continuous Improvement
Leadership People Development

Developed from: Building Down Barriers

Prime Contracting Handbook
Procurement and Integration
Customer Requirements

Understanding

Business not Buildings

Early Involvement

Value Management and Engineering

 Procurement and Integration

Understanding Your Customers

• Who are they?
• What is their business?
• What motivates/drives them?
• Who are their customers?
• What are their strengths and weaknesses?
• What are their risks and threats?
• What are there aspirations?

think business not building

 Procurement and Integration
Opportunity v Cost
Opportunity Cost

Brief Design Construct In Use

Project Life
 Procurement and Integration

What are the implications of understanding customer

requirements?

What are we doing?

What do we need to do?

 Procurement and Integration

Who is responsible for Understanding Customer Requirements?

R Responsible (for ‘doing’)

A Accountable (for ‘approving’)

C Control (goverance, legislation, best practice)

I Inform (communicating, dialogue)

 Procurement and Integration
Principles of Collaborative Working

Focus on Customers Values

Establish Relationships
Integrated Processes
Manage Costs / Time Collaboratively
Develop + Continuous Improvement
Leadership People Development

Developed from: Building Down Barriers

Prime Contracting Handbook
Procurement and Integration

Supplier Relationship

Selection

Procurement

Fit
Procurement and Integration
Procurement Basics

Finance

Technical

Ability (soft issues)

Performance Experience
 Procurement and Integration
Ability (soft issues)

Quality

Safety

Sustainability

People
 Procurement and Integration
Procurement Models

Historic Need Develop Procure Implement

Develop
Tranistional Need Procure
Implement

Develop
Asiprational Procure Need
Implement
Procurement and Integration
Integrated Management Maturity Matrix
http://bit.ly/77M2EB
 Procurement and Integration
Customer Attractiveness
High
Strategic Critical
Strategic Development •Long term alliance
•Business certainty
Attractiveness of Account

•Sustainable profits
•Pay close attention
Strategic Strategic
•Better understanding of
•Nurture account
Development clientsCritical
needs
•Develop relationship
•Develop Win-win
•Seek further
•Value management
opportunities
•Continuous review and
improvement

Exploitable Account
•Short term gain
Nuisance Account
•Adversarial client
•Maximise variations
•Low income •Seek shortcuts
Nuisance
•No customer risk Exploitable
•Pay late
•Pay low attention •Pass risks to
•Lose without pain!!!!! contractor
•Drive lowest deal with
contractor

Low Income High

 Procurement and Integration
High Customers Procurement Strategies

Strategic Security Strategic Critical

•Sensitive to supply •Business/customer
•Low flexibility on spec critical
•Insensitive to cost
Strategic sensitive to supply
•Very Strategic
•Customer/Business •Develop Win-win
Security
Critical Critical
•Long term alliance
Risk
•Consider aggregating •Share risk
Nature of demand •Continuous review and
•Evergreen contracts improvement
Supply
Tactical Acquisition Tactical Profit
•Minimal supply risk
•Minimal customer risk
•No supply risk
Tactical •Prescriptive
Tacticalspec
•No customer risk
•Selection based on cost
•HighAcquisition
flexibility on spec Profit
•Short-term renewable
•Process costs more
contracts
•Eliminate the Process
•Reverse Auctioneering
•Procurement Cards
•Spot Deals

Low Expenditure High

 Procurement and Integration
Sustainable Relationship
High Customers
Strategic Critical

•Strategic Alliance
•Long Term
Strategic Relationships
Security •Inter-dependability
Risk

Strategic Critical

High
Tactical •Strategic Alliance
Tactical Profit
Acquisition •Long Term
Relationships
Strategic

Attractiveness
Low High •Inter-dependability

of Account
Development
Spend (£)

Suppliers
Nuisance Exploitable

Low High
Income (£)
 Procurement and Integration
Sustainable Relationship
Strategic Critical

High
•Strategic Alliance
•Long Term
Relationships
•Inter-dependability

Low High
 Procurement and Integration

What are the implications of supplier relationships?

What are we doing?

What do we need to do?

 Procurement and Integration

Who is responsible for Supplier Procurement?

R Responsible (for ‘doing’)

A Accountable (for ‘approving’)

C Control (goverance, legislation, best practice)

I Inform (communicating, dialogue)

 Procurement and Integration
Principles of Collaborative Working

Focus on Customers Values

Establish Relationships
Integrated Processes
Manage Costs / Time Collaboratively
Develop + Continuous Improvement
Leadership People Development

Developed from: Building Down Barriers

Prime Contracting Handbook
Procurement and Integration

Integrated Management

Common Processes

Integrated Project Team

Clustering

Communication and Information

 Procurement and Integration

Understanding Your Suppliers

• Who are they?
• What is their business?
• What motivates/drives them?
• Who are their other customers?
• What are their strengths and weaknesses?
• What are their risks and threats?
• What are there aspirations?
 Procurement and Integration

Draw or map out your understanding of

an
Integrated Project
Procurement and Integration
 Procurement and Integration

Horizontal Clusters:
Clusters formed across suppliers and subcontractors, often to increase
range and scope of services, across a number of contracts for a number of
clients

Vertical Clusters:
formed down through supply chain, often led by a main contractor or
client based on a particular building type, eg housing

Specialist Clusters:
formed around a specialist, either technical or building specialism, eg
AMEC airport pavement team

Ready to Go:
Clusters can emerge and be formed from existing relationships where
proven working togtehr success has been demonstrated and put on hold
pending the correct contract or opportunity to activate.
 Procurement and Integration

What are the implications of integrated working?

What are we doing?

What do we need to do?

Do we have a strategy?
 Procurement and Integration

Who is responsible for Integrated Working?

R Responsible (for ‘doing’)

A Accountable (for ‘approving’)

C Control (goverance, legislation, best practice)

I Inform (communicating, dialogue)

 Procurement and Integration

• “Construction is information-intensive”
– “information overload”
– paper-intensive
 Procurement and Integration
Communication and Information
‘Technologies’ evolving to support collaboration

• Video- and tele-conferencing

• Face-to-face
• Extranets
• Written word
• Web-conferencing applications
• Hand drawings
• Telephone • File-sharing (P2P)
• Telegram • Instant messaging
• Telex • Discussion forums
• Fax • VOIP Skype
• CAD … BIM • Home pages (iGoogle)
• Email • Wikis
• Groupware (eg: Lotus Notes) • Blogs
• File transfer protocol (FTP) • RSS
• Websites • Social networking
• Intranets, enterprise portals
• Social search, tagging, sharing
• Mashups: Mapping, time-lines, etc
• Virtual worlds
 Procurement and Integration

Live Demo Examples of collabortive ICT / Web, eg

RSS feeds to igoogle / google reader
Collaborative project blogs
Linkedin
Twitter
Facebook
Woobius
Supply Chain / Project Mashup (visualisation on googlemaps)
Earth Exchange
Project timelines - Dipity
Doodle
Googlewave collaboration with supply chain
Second Life
Networks and forums (be2camp and AEC Network)
Procurement and Integration
Building Information Modelling
Procurement and Integration
Procurement and Integration
 Procurement and Integration

What are the construction implications of

Collaboartive ICT
Social media
Building Information Modelling?

What are we doing?

What do we need to do?

 Procurement and Integration

Who is responsible for Collaboartive ICT?

R Responsible (for ‘doing’)

A Accountable (for ‘approving’)

C Control (goverance, legislation, best practice)

I Inform (communicating, dialogue)

 Procurement and Integration
Principles of Collaborative Working

Focus on Customers Values

Establish Relationships
Integrated Processes
Manage Costs / Time Collaboratively
Develop + Continuous Improvement
Leadership People Development

Developed from: Building Down Barriers

Prime Contracting Handbook
Procurement and Integration
Collaborative Programme

Time Certainty

Lean Construction

Last Planner
 Procurement and Integration

projectfootprint
100%
1200

90%
1000

80%
800

70%
600

400 60%

200 50%

0 40%

-200 30%

-400 20%

-600 10%

-800 0%
1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 31 32 33 34 35 36 37 38 39 40 41 42
Summary
Non-Productive Productive Productive Support Statutory
 Procurement and Integration

lean…

Lean Management

Lean construction can

Lean Construction reduce programmes by
30% !
Last Planner

CICLOPS –
Construction Industry Collaborative Planning System
 Procurement and Integration

managing the gaps

Interstitial Spaces
Procurement and Integration
Procurement and Integration
Procurement and Integration
 Procurement and Integration

What are the implications of

collaborative time management?

What are we doing?

What do we need to do?

Procurement and Integration
Collaborative Costs

Price v Cost

Open Book

Cost Certainty
 Procurement and Integration
Understanding ‘price’
Old New
Price Thinking Thinking

Claims
Profit = extra cost +
profit
Overheads
Labour
Profit
Plant
Overheads
Material
Tender price Labour
Plant
Waste
Material
 Procurement and Integration

What are the implications of

collaborative cost management?

What are we doing?

What do we need to do?

 Procurement and Integration

Who is responsible for Collaborative Time and Cost Management?

R Responsible (for ‘doing’)

A Accountable (for ‘approving’)

C Control (goverance, legislation, best practice)

I Inform (communicating, dialogue)

 Procurement and Integration
Principles of Collaborative Working

Focus on Customers Values

Establish Relationships
Integrated Processes
Manage Costs / Time Collaboratively
Develop + Continuous Improvement
Leadership People Development

Developed from: Building Down Barriers

Prime Contracting Handbook
Procurement and Integration
Improving

Plan Do Check Act

KPI’s

Process Improvement

Improvement Plans
Procurement and Integration
Constructing
Excellence
KPI’s
Procurement and Integration
 Procurement and Integration

What are the implications of

Integrated Improvement?

What are we doing?

What do we need to do?

 Procurement and Integration

Who is responsible for Improvement ?

R Responsible (for ‘doing’)

A Accountable (for ‘approving’)

C Control (goverance, legislation, best practice)

I Inform (communicating, dialogue)

 Procurement and Integration
Principles of Collaborative Working

Focus on Customers Values

Establish Relationships
Integrated Processes
Manage Costs / Time Collaboratively
Develop + Continuous Improvement
Leadership People Development

Developed from: Building Down Barriers

Prime Contracting Handbook
Procurement and Integration
Development

Supplier Development

People Development
 Procurement and Integration
Fit Organisations

Values
Competitive strengths

People

Suppliers and
Customers

Organisational
structure

Processes

Products and
Services

Hardness to
Copy
 Procurement and Integration

What are the implications of

collaborative people development?

What are we doing?

What do we need to do?

 Procurement and Integration

Who is responsible for People and Supplier Development?

R Responsible (for ‘doing’)

A Accountable (for ‘approving’)

C Control (goverance, legislation, best practice)

I Inform (communicating, dialogue)

Procurement and Integration
Construction Commitments

Company Responsibilities

Business

Integrated Team Activity

Risk

Performance
 Procurement and Integration
Construction Commitments
Company Responsibilities

PI.01
Does the company apply an integrated procurement policy?

PI.02
Do you apply evaluation criteria in a transparent way to your contribution to the framework
decision process?

PI.03
Do you involve your supply chain partners, where appropriate, in the design and planning
stages of the framework decision process?

PI.04
Where appropriate do you seek specialist advice to assist in your contribution to the
framework decision process?

PI.05
In what framework process areas do you currently seek specialist advice and what is the
source of this advice? of
 Procurement and Integration
Construction Commitments
PI.06
Do you identify your supply chain partners at an early stage of a framework contract?

PI.07
Does the company assess sub-contractors before they participate in its supply chain?

PI.08
Does the company monitor the performance of members of its existing supply chains?

PI.09
What are the procedures adopted by your company to assess the competency of existing and
potential supply chain partners?

PI.10
What is the average timespan of the established relationships with your key suppliers?
 Procurement and Integration
Integrated Team Activities
Construction Commitments

PI.11
What are the criteria does a supplier or subcontractor need to meet to to sustain a long term
relationship with your company?

PI.12
Does the company liaise/meet with its supply chain partners on a regular basis to maintain an
effective business to business relationship?

PI.13
Are ‘action plans’ communicated to all relevant supply chain members' staff?

PI.14
Does the company liaise/meet with its supply chain partners to assess specific project-related
performance?

PI.15
Does the company involve its supply chain in the design and planning stages of construction
projects?
 Procurement and Integration
Business Practices
Construction Commitments

PI.16
Does the company award supply chain contracts based on open book cost/ transparency of
cost basis?

PI.17
What percentage of the company's supply chain contracts in 2009 were awarded contracts
on open book cost/ transparency of cost basis?

PI.18
Does the company's supply chain members abide by the provisions of the Fair Payment
Charter e.g. 30 day payment periods?

PI.19
Do you check the financial standing of individual members of your supply chain at regular
intervals?

PI.20
Does your company allocate financially qualified risk to its framework partners?

PI.21
Do you and your integrated team partners align cash flow and year end reporting?r e
 Procurement and Integration
Construction Commitments
Risk Management

PI.22 Does the company clearly identify and financially quantify the risks arising from
participation in a framework process?

PI.23 On what basis do you cost financial risks?

PI.24 What procedures does your company have in place to check that your framework
partners are adequately resourced to cover their financial obligations throughout the
framework agreement?

PI.25 How is the workload exposure managed to account for the collective behaviour
of the team and the consequential risk?

PI.26 Do you have procedures in place validate the financial resources of your
downstream supply chain partners?

PI.27 What are your company's requirements in evaluating tender submissions from
your supply chain partners?

PI.28 Does the company liaise/meet with its supply chain partners regularly to assess
specific project related risks?

PI.29 Do your supply chain members measure and report your performance back to
you?
 Procurement and Integration
Performance Measurement
Construction Commitments

PI.30 How many innovation improvements have been developed by the company's
supply chains over the last 3 years?

PI.31 Does the company use KPIs to measure the effectiveness and efficiency of its
supply chain during/after the construction phase of construction projects?

PI.32 Does the company use supplier performance defect values to compare
performance against its peer group and/or other industry benchmarks?

PI.33 "Does the company use any financial indicators (other than ""profit"") to monitor its
business performance?”

PI.34 What actions has the company taken in the last three years to improve its business
performance indicators?

PI.35 Does the company use staff indicators to monitor this area of its business?
 Procurement and Integration
Performance Measurement Construction Commitments
PI.36 What actions has the company taken in the last three years to improve staff
performance?

PI.37 Does the company have development plans specifically for the staff responsible for
managing its supply chains?

PI.38 How does the company monitor the implementation of staff development plans within
its supply chains?

PI.39 Does the company have a procedure that ensures clients’ needs and requirements are
delivered before, during and after project completion? last three contacts

PI.40 How many projects did the company complete last year?

PI.41 How many of last year’s projects were completed on time?

PI.42 How many of last year’s projects were completed within budget?

PI.43 How many companies are in the company's immediate supply chain pool?

PI.44 How many companies have been in the company's immediate supply chain for more
than 5 years