Introduction

At a time when our society faces unprecedented challenges, the concept of value for money is evolving to encompass more than just the outputs from new infrastructure assets. There is a growing emphasis to realise broader benefits^[1] and societal outcomes established in Environmental, Social and Governance (ESG) strategies that are intrinsically linked to organisational objectives and purpose.

The construction industry faces a broad range of diverse disruptors that shape our clients’ priorities and the things they care about. These include:

• Global political and economic events
• Digital innovation and technological change
• Climate change and Net Zero

This all takes place in an era of rapid advancement of the Internet of Things, Artificial Intelligence and Modern Methods of Construction (including Platform approach to Design for Manufacturers and Assembly^[2]) for constructing, renewing and reusing built assets.

Clients therefore need to evolve their overarching strategic ambitions whilst maintaining progress in the delivery of projects and programmes, ensuring there is a clear demonstration of the value that is being generated. Conventional approaches to delivering benefits from a commercial perspective need to evolve to keep pace with this rapidly changing, higher risk environment.

What are the challenges faced by our clients?

Our experience working across many sectors has revealed that there are a number of common challenges that arise which impact the efficiency, effectiveness and ultimately the success of delivering programmes. These include:

• Maintaining the “Golden Thread”: the ability to translate corporate ESG strategies into specific targeted benefits for programmes articulated clearly through strategy development, procurement and contract delivery. This is the ability to demonstrate to investors, shareholders and funders that their commitment and investment has been consistent with the business case and ultimately has been worthwhile.
• Managing exceptional market forces: the ability to plan for and sensibly manage the associated risk of market forces and their inflationary impacts. Clients and contractors cannot prevent exceptional market forces from arising but they can mitigate the impact through sensible discussions around risk allocation and adopting appropriate contracting approaches that leverage the optimum commercial outcome for both parties. Good market intelligence and supply chain visibility helps to manage the impact of these exceptional market risks but is not always seen as a priority for clients.
• Maintaining supply chain stability: the ability to understand the capacity and capability of the supply chain and its resilience to future shocks. Supply chain intelligence is critical to mitigating the impact of supply chain failure and keeping a programme on target.
• Experience of ‘benefits drift’^[3]: this is the ability to maintain a focus on the realisation of benefits established at the outset during project delivery. The natural instinct is to focus on delivery of assets within a time and cost envelope in the face of external challenges, at the expense of the broader benefits articulated in the business case. Initial investments erode over time as priorities change and therefore it becomes difficult to demonstrate value to stakeholders and investors.

Dealing with these challenges requires profound shift in our mindset when it comes to delivering infrastructure programmes and projects. It entails moving away from the traditional transactional approach that focuses on getting to a desired result quickly and transitioning toward to an evolutionary model. This model articulates and shares ambitions and risks with the supply chain prior to any commercial transaction.

What the change needs to be

Investment in infrastructure assets has increased over at least the last 20 years^[4] for a number of reasons, including:

• An increasing population^[5] putting pressure on infrastructure assets to perform beyond their natural asset life (eg much of our critical infrastructure was developed during the industrial revolution some 200 years ago)
• Historic underinvestment in assets (eg rail, utilities, roads etc)
• Economic stimulation and regeneration driving an appetite for individuals to relocate or travel compounded by the increased mobility of people
• Response to geo-political policy (eg carbon reduction)
• Innovation enabling upgrading and updating existing assets (eg rail electrification, wind generation, MMC platform construction).

The demands of ourselves – as clients or members of the supply chain – need to evolve to accommodate this, so that we start to think beyond the outputs of our projects and focus on the outcomes and benefits that can be delivered. This change in approach should drive better decision making around design, innovation and triple bottom line^[6] sustainability.

This isn’t novel. All organisations have strategic objectives that are centred around economic factors, social imperatives and environmental sustainability. But during procurement processes and contract delivery, the differences between these objectives often become apparent, putting successful completion of projects at risk, exacerbating relationships, delivery timescales and costs.

It is powerful for a client to understand and articulate their priorities to their stakeholders, internal and external, and set out the key commercial principles that guide their approach to business. Doing this early, and building a visible pipeline for the market, provides the opportunity for clients to identify and enhance market appetite. Thus creating a “market of clients” with the supply chain able to select which projects they want to focus on, rather than a client using their investment or cashflow as leverage.

To manage the impact of external challenges, it is essential to adopt a different approach – one that focuses on building commercial structures based on benefits delivery and can result in greater programme resilience. Such an approach needs to provide commercial confidence, driving the realisation of broader benefits and societal outcomes. It also needs to establish the programme’s business cases, through to sustainable risk allocation with the supply chain to the delivery of contractual obligations.

How we can help you

G&T contributed to the Infrastructure and Projects Authority (IPA), Project Initiation Routemap: Procurement Module, which provided a new approach to delivering infrastructure programmes. Through our hands-on industry best practice of delivering complex programmes successfully, we recommend that further work should be carried out by the client upfront to determine the benefits case, the manner in which the client would model itself to deliver projects and optimise the relationship with the supply chain.

Our approach is centred on asking our clients following nine important questions in a logical and structured manner that require their strategic thinking and critical decision making at the outset of a project. With G&T facilitation each response creates a strand that enables the effective production of a benefits-led strategy.

1. Benefits Definition: Do you know what you want to achieve and how you are going to communicate it?
2. Client Configuration: What kind of client do you want to be and what roles, responsibilities and risks are you best placed to manage?
3. Supply Market Management: What supply markets will you need and what leverage do you have to deliver value for money outcomes?
4. Relationships: How do you want to work with the supply chain and how does the supply chain want to work with you?
5. Packaging: How will you structure the resources and capability you need from the supply market and what interfaces will you create?
6. Contracting: What will your commercial relationships look like, what incentives and protection will the parties need to work effectively together?
7. Route to market: What procurement transaction approach will you take to select the fittest suppliers?
8. Commercial Contract Management: How do you keep the delivery on track and how do you ensure that risk remains where it is placed with the supply chain?
9. Benefits Realisation: How will you measure whether your programme has been a success?

Focussing on the “golden thread” helps to frame all the activities around this foundation to create more resilient and sustainable relationships, both within a cross functional team and across the supply chain.

This generates more consistent communication and a collaborative framework that creates a robust basis for reframing issues when conflict arises. This is the foundation that drives the success in programme and project delivery.

References

_{[1] The Infrastructure and Projects Authority in its publication Guide for Effective Benefits Management defines Benefits as “The measurable improvement resulting from an outcome perceived as an advantage by one or more stakeholders, which contributes towards one of more organisational objectives”.}

_{[2] The Infrastructure and Projects Authority in its publication Transforming Infrastructure Performance: Roadmap to 2030 describes the platform approach as “Platforms identify features of assets that could be shared and then harmonise those features. This approach provides the opportunity to create common ‘kits of parts’, through which the platform embodies the shared features. Harmonised cross-sector demand for these ‘kits of parts’ can enable their manufacture in high volume, with configuration allowing delivery of multiple asset types across sectors (e.g., schools, apartments, healthcare facilities)”.}

_{[3] Definition of ‘Benefits Drift’ - the fact that society evolves and its requirements and expectations change, thus impacting the Benefits case of inflight programmes (these can be delivered over multiple decades)}

_{[4] Based on data from the National Infrastructure Commission report Infrastructure Progress Review 2023}

_{[5] ONS data shows that the UK population grew by 6.3% between 2011 and 2021 (according to Census Data: https://www.ons.gov.uk/peoplep...)}

_{[6] Triple Bottom Line is a business concept that reminds firms to look beyond their financial performance and to take responsibility for the impact that their business has on society, the economy and the environment}