If you’re a senior executive responsible for setting – and overseeing the attainment of – your enterprise’s corporate growth goals, I have a question for you: How informed are you on the individual contracts that comprise the overall total of your organisation’s business-under-pursuit? How certain are you that the priorities underpinning the prioritisation of current […]
When you’re under the pump with a short submission timeframe, your best default strategy for getting a top-notch bid out the door in good time and with the least stress possible is to “go with the current” in terms of people’s natural talents. You can coach people in their areas of weakness to a reasonable degree, but rarely will they be great in those particular aspects of bid production. The fact is, people generally gravitate back to the aspects in which they naturally excel and endeavour to avoid those in which they don’t. And when a bid manager is under the pump, the cold, hard fact of the matter is that he or she simply doesn’t have the time to coach or cajole. Identify the Priority Skills Needed The first step is to accurately identify the priority skills required for each part of the submission and the process, giving careful consideration to which individuals possess these. It’s also smart to consider personality traits or work habits that stand to either propel or impede progress towards the finish line. Really think about each person and who (rather than what ) they are. ‘Day job’ position titles can be misleading in the context of a bid. Often, the strengths and weaknesses you’d assume of an individual in a particular role just don’t import across into a bid team environment in the way you’d expect them to. I’ll cite as a case study, a small, component operation of a larger organisation with which I had been working. One of the operation’s few "white collar" staff members (aside from the GM) was assigned as bid manager. It was a pressure cooker timeframe and, a few days after kick-off, the schedule was already floundering. In short, this assumedly "natural" bid manager appointment was a disastrous choice. As it happened, fate graciously stepped in and saw that individual suddenly pulled off onto another contract elsewhere. Because I was working with the team by remote control, there was little choice but for the Construction Manager to take over the bid management role. ‘Humble Hammer Swinger’ Saves the Day Fate dealt the bid a lucky hand that day. The previous appointee’s weakness was the Construction Manager’s strength. This "humble hammer swinger" (his own words) made a brilliant bid manager. He was organised, efficient, exercised total diligence in keeping his own commitments, and had an affable but effective way of holding others to their's. His humility came in handy, too: If he could see anything going off the rails, he was quick to pick up the phone for advice. The fact that he couldn’t string two coherent sentences together on paper turned out to be inconsequential. When the now-former bid manager returned to the team, he gravitated directly towards - and excelled at – the bid’s writing tasks, taking on those that had, in fact, been assigned to the Construction Manager. So, by complete accident, we ended up with a highly functional bid team and a top-notch bid out the door in what, for that particular operation, was apparently record time. To re-emphasise the moral of the story: When time is unavoidably tight, ensure the highest quality and the least stress by getting to know your "human resources" and letting each wear the cap that most comfortably fits him or her.
New Zealand Government Press Release, February 25, 2025 From the Office of the Minister for Building & Construction and Minister for Land Information, the Honorable Chris Penk The Public Works Act will undergo its most significant reform in nearly 50 years to help unleash an infrastructure boom, Land Information Minister Chris Penk has announced. “Removing barriers to make it faster and more affordable to build the homes Kiwis need, creating jobs through new projects and providing infrastructure to support better public services is a major part of the Government’s economic growth agenda,” Mr Penk says. “Complex regulations and inefficient processes are slowing down development, resulting in blown out budgets and added costs for taxpayers. “The Public Works Act is the mechanism which empowers us to acquire land for new infrastructure, while ensuring that fair compensation is provided to landowners – but it is no longer fit for purpose,” Mr Penk says. “A targeted review last year has found unnecessary duplication in the system, issues with outdated negotiation processes and disjointed government agency practices. “Right now, it takes up to a year on average to acquire land. If compulsory acquisition is required, the process generally takes up to two years, with at least another year tacked on if objections to the Environment Court are made. “We cannot afford this in the face of a productivity crisis and critical infrastructure deficit. A modernised Public Works Act will set the foundation for building better.” Extensive policy changes will be announced over coming weeks. The first tranche will: Delegate land acquisition responsibility : Empower government agencies like the New Zealand Transport Agency, which regularly use the Public Works Act, to enter into acquisition agreements with landowners. The Minister for Land Information will remain responsible for compulsory acquisition by the Crown. Enable collaboration between agencies : Allow government agencies to work together when acquiring land for connected public projects. Instead of each agency acquiring land separately, they will be able to co-ordinate acquisition of land as needed to make the process smoother. Enable relocation of infrastructure : Allow both the government and local authorities to acquire land when they need to move existing infrastructure (like powerlines or pipes) that are in the way of new public works. Refine the role of the Environment Court : Clarify the factors that the Environment Court can consider when reviewing objections to land acquisitions for public works, with a renewed focus on individual property rights, removing overlap with the Resource Management Act. Require mediation for compensation disputes : Require that parties try to resolve disputes over compensation through mediation or alternative dispute resolution before going to the Land Valuation Tribunal, to avoid lengthy court proceedings where possible. Allow Transpower to by-pass standard processes : Enable Transpower, the State-Owned Enterprise managing New Zealand’s power grid, to use the Public Works Act to acquire land by agreement. This would streamline their process for building energy infrastructure. “We have already announced that the Government will fix a discrepancy in the Public Works Act which undervalues Māori freehold land compared to other land types,” Mr Penk says. "Further improvements will be revealed as we prepare to introduce the Public Works Amendment Bill to Parliament around the middle of 2025.”
In a challenge workshop I held recently for a meeting of the senior marketing and sales personnel of a multi-national in the broader infrastructure and engineering space, I was told (I’m paraphrasing): “We struggle with converting client needs into end benefits. We’re good at communicating features, but not extrapolating these into project-relevant end-benefits.” Now, notwithstanding that the industry in question requires substantial use of technical specifications and other feature-related detail in submissions to its client audiences, the workshop participant that voiced that general concern was right on the money. These features still need to be converted to actual “benefits”. There’s a simple exercise for arriving at the benefits of a feature, without losing the necessary details of that feature, as required for the satisfaction of the client-side’s technical evaluators. Here’s the basic version: Throw up three columns onto your whiteboard. Head up the left-hand column, “Feature” – and articulate the key elements of the feature. Head up the middle column, “Relevance to Which Specific Project Objective?” . Head up the third column, “How It Helps to Achieve That Objective” . Again, this is just the basic version; more extrapolations are required to take this all the way through to any form of “win theme” contribution. But it’s a great start.
The following is an excerpt from my book, ‘Cracking the VfM Code: How to Identify & Deliver Genuine Value for Money in Collaborative Contracting’ . The commentaries of the experts I interviewed for this chapter are as pertinent to all B2B industries as they are to the infrastructure sector and the collaborative contracting movement. Any pursuit leader and/or bid strategist endeavoring to inject genuine, project-specific innovation into their submissions’ value propositions will benefit from their wisdom. Public Infrastructure Agency Commentary “Innovations are hugely important. But they need to put deeper analysis into coming up with more thoughtful innovations. Don’t just ‘come up with something’ you think is creative. This is where we see how much thinking they’ve put into it.” Several years ago, I conducted a series of very open-topic and broad-ranging interviews with project owner representatives for a conference presentation I was preparing at that time. During these discussions, many of these representatives took the opportunity to point to innovation – or the ability to innovate – as an essential ingredient in collaborative contracting success. Here’s how one interviewee put it, albeit he was speaking in the context of the bidding process: “Innovations are most important nowadays. You need to come up with really innovative ideas that make a real impact on a project at grass roots level. And you need to show how much time and thinking you’ve put into it. We want to see deeper analysis; more thoughtful innovation. This is a big sticking point for us as evaluators. “But you need to really understand the project and its bigger picture before you can see what the best, or at least any superior, way of delivering the project is. It’s of little value to just come up with something ‘creative’ on the fly. “So do your research first so that you’ve got something solid to offer. Then it’s of the utmost importance that you demonstrate your ability to think innovatively – and to think innovatively for the benefit of our specific project. ” But what are innovations? What is “innovation” ? Before launching into specific recipes for “innovating”, it’s important – in an era in which the definition of “innovation” has become amorphous and rubbery, often to the point of meaninglessness – to seek clarity around the concept. To quote innovation expert, Scott Berkun, from his 2010-released book, ‘ The Myths of Innovation’ : “Simply saying something is great doesn’t make it so, yet as the success of marketing and advertising demonstrates, this doesn’t stop people from trying. The i-word is thrown around so frequently it no longer means anything.” And from our own industry’s ‘Practitioners’ Guide to Alliance Contracting’ (Department of Treasury & Finance Victoria): “Is it really ‘outstanding’ or just ‘BAU’ by another name? The BAU expectation is actually changing year on year through continuous improvement in practices and performance metrics; ‘outstanding’ means a quantum change that informed opinion would judge to be clearly a significant departure from current industry best practice and best practice trends.” ‘Three Levels of Innovation’ Robert Newman is an organisational psychologist with Brisbane-based advisory firm Change Focus. He’s worked for 20 years in the field of organisational psychology and, within those two decades, he’s spent 10 years serving the infrastructure industry. Within that, he’s provided services to the collaborative contracting movement specifically, for eight years. As part of a broader service set, he facilitates conversations on the topic of “innovation”. Newman has some very distinct, professional theories and views about what constitutes innovation – and what doesn’t. “When people talk about ‘innovation’, they’re really referring to one of three ‘levels’, ‘types’ or definitions of innovating.” He explains his “three-type” theory: “ Type 1 is the most simple form of innovation,” says Newman. “This is the well thought-out logical solution, typically associated with specific professions or disciplines. They are ideas that are an extension of the expert’s own, pre-existing mastery. “These aren’t, however, ‘innovations’ in the strictest sense of the word. “ Type 2 is the bringing together of multiple disciplines which then engage with each other to operate from multiple perspectives on the problem to hand. Through a process of integration they build on their own knowledge bases, as well as bouncing off each others’ knowledge bases to produce a new and innovative solution. “The difference between Levels 1 and 2 is that the solution is not predictable based on any one discipline, background or instance of expertise. “ Type 3 is true innovation. This type of innovation takes place when the multi-disciplinary nature of the group produces a new paradigm that is not simply a logical extension of multiple disciplines. Rather, it is actually the creation of a new discipline.” Each of these three types of innovation produces a different form of outcome, Newman says. Drilling down in his explanation of each, he says “type 1” produces “continuous improvement”: “You can imagine how that works: a logical professional using their body of knowledge to build on what they already know, rather than creating a real paradigm shift. In other words, someone applies their body of knowledge to a problem and generates a different solution than was previously available to that problem. The reason they generated a new solution was the intensity with which they focused their body of knowledge and mastery on the particular problem.” Type 2, he says, results in an “integrated solution. “Multiple perspectives have been brought together to produce a solution that is now elegant, in that it straddles multiple facets of the problem. In terms of the difference in these outputs, “type 1 produces solutions that fit in a less complex context, while type 2 produces solutions that work better in more complex contexts, where no single discipline has a comprehensive understanding of the problem domain.” It’s the ‘type 3’ process that produces the genuine “breakthrough solution” , says Newman: “It produces these because the solution generated is not predictable based on the contributions of the individual disciplines that produce it. In other words, it’s new ground, and there’s no one process that creates this new ground . . . except that it’s the result of a new context, a challenging and bringing together of professionals and their expertise. “There’s something magical that happens at this level. It now moves into the zone of being no longer just logical. It’s no longer the sum of the parts; it’s now, in fact, something else – and it’s entirely new. For me, it’s the most pure form of innovation . . . where you look at the solution and have no idea how that solution came about by the process that lead up to it. “So, coming back to the three different types of innovation, the most fundamental question to be asked by a team looking to innovate or problem-solve is: “Can I just use an expert to solve this, or do I need to bring together a group of professionals, a multidisciplinary team? Or do I need to dispense with logic and go into the creative space and break new ground?” “If you find yourself answering that it’s the latter that you want to do, then you’re after pure innovation, not just continuous improvement or effective teamwork. “If that is the case, the thing to be totally mindful of is that pure innovation is jolly hard, very rare, and typically doesn’t arise when you are looking for it.” Why not? “It’s that ‘unpredictable’ element. It’s not something you can push. It’s like saying run faster, but you can’t. What pure innovation is asking you to do is to find a new level of running.” Innovation is in Eye of the Beholder “Again, those first two types or levels of innovation aren’t in that sphere. That’s not to say that the result of those particular processes aren’t valuable . . . even immensely valuable, in some cases. It’s just to say that they’re more the product of logical thinking and hard work: one percent innovation, 99 percent perspiration. “From the expert’s perspective, in more instances of ‘innovation’ than not, they would not call it that themselves. You could ask them, and they’d say, ‘No! I worked jolly hard at and kept at until I reached that outcome.’ They’ve applied their own expertise over and over again to move up to new levels – but it’s still not ‘pure innovation’ in the sense that is actually incremental improvement, to whatever degree. “So, of these three levels of innovation, the most common and the easiest to engineer, is the expert progressing his or her expertise. All that’s required is to find a diligent, motivated and tenacious expert and give him or her the problem and the resources to solve it. “The second level or type of innovation is a little harder to acquire, because it requires some of the foundation work involved in developing teams e.g. clear roles and contributions, a clear understanding of the problem, good communications between disciplines, and an intention and a willingness to collaborate. “This is typically what we are aiming for in relationship contracting. “But moving up to that ‘pure’ type of innovation requires more, because it’s not formulaic. “This – what I call ‘type 3’ – is the ultimate in team-generated innovation,” he explains. “It requires team functionality first and foremost. It also requires a climate that allows trying things out and making ‘mistakes’, a willingness to defer judgment, and a high degree of openness to explore possibilities – which is not typical of many professional experts. “It’s the nature of experts to believe their discipline’s perspective of the world is the only one that exists. People who become experts are often very happy to be seen as knowing it all about a certain thing. It’s a part of their ego needs; a part of their personal identity.” Newman says, however, that innovation “types 2 and 3” always underpin, to some degree, the optimisation of value for money. “But – whatever they choose to call it – an alliance is always hoping to achieve type 3 innovation to really maximise client value and, if possible, increase their margin. This is the hope, the promise and the holy grail of relationship contracting. Sometimes it’s achieved and sometimes it’s not.” Newman reiterates that there’s no formula for this type of innovation. There are, however, some principles and conditions that make it more likely to transpire. Principles & Techniques for Creating ‘Pure’ Innovation “You’ve got to start with a highly functional group, because ‘type 3’ innovation rests on the requirements of ‘type 2’ innovation, in that it requires the injection of multiple perspectives towards a multi-faceted perspective on the problem and its solution. “There are ways that you can get nonfunctional teams to innovate, but their performance won’t be consistent. The ideal is to create an environment where they want to work together and innovate . . . where experts, for example, in one discipline, start enjoying interacting and gaining the perspectives of experts in other disciplines; where professionals who are secure in their profession realise that there are other ways to look at the world, and are curious about the differences between those perspectives. “You only need one or two of those in a group to create a climate of curiousity, which can actually drag along those who are less secure or more closed-minded. If you create ground rules that foster curiosity, open-mindedness and a goal focus, then we tend to see this type of team-based innovative thinking emerge. “So, the basics include creating an environment in which thinking together across multiple disciplines is desirable and enjoyable. This requires the development of the team itself. You have to build the familiarity and comfort level between team members, identifying each individual’s expertise and the common ground between them, building communications skills, getting clear on goals for the problem at hand, and being clear on the method of discussing these. “When you’re in the ‘brainstorming’ phase of the ‘type 2’ process there are many methods you can employ – for example, the Kepner-Tregoe multi-disciplinary problem-solving method, or any other recognised group process for exploring problems and their solutions in the engineering field. “And, at any point, you need to be clear on what stage you’re at in the overall discussion – you need to know whether you’re in the phase where you’re generating possible solutions, or the phase where you’re evaluating options against the criteria. “One of the things that works against different disciplines functioning well together is the lack of a clear methodology; the lack of a structured/staged process for thinking.” This foundation of high-functionality ‘type 2’ team performance then requires the addition of several more fundamentals, Newman says, in order to cultivate ‘type 3’ innovation. “The group leader, himself or herself, has to be a role model for curiosity, openmindedness and goal focus. To move up to this higher level, the leader needs to epitomise these character qualities. They also need to create an environment that gives people license to be comprehensive in their exploration of the problem and the possibly prolific range of solutions. “Next, there has to be a generous amount of time dedicated to the cause; it’s very rare for innovative thinking to emerge without some sort of dedicated focus. People need to be taken offline. They can’t be part of an operational process and have half their mind on that while they’re trying to be involved in this sort of initiative. “They also need to be allowed to make mistakes. The attitude that needs to reign is: ‘Everything is possible. Mistakes are expected on the way to the final solution.’ A Rider A rider from Newman: “In this commentary, I don’t mean to give the impression that any of these ‘types’ of innovation is inferior or superior to any of the others. It’s simply that, more often, people haven’t really thought through the nature of innovation they’re referring to, and in most instances, it’s ‘type 1’ innovation they’re referring to. Although, of course, in the context of collaborative contracting, they’re aiming for – and quite often producing – ‘type 2’. “Type 3 is just the icing on the cake. It’s unsual, uncommon, unpredictable. And while it’s not always necessary for a highly successful alliance, there is no question that that type of innovation leads to superior value for money outcomes. “And that’s the type of innovation that defines and underpins true gamebreaking results on project alliances.” A Strategist’s Perspective on A Psychologist’s Theory Robert Newman’s commentary, inadvertently, leads naturally into my own philosophies and teachings – as a (bid) strategist – on “thinking”. These are not dissimilar to Newman’s theories on innovating, in that there are various levels, or types, of thinking . . . and there’s a fundamental progression between them. More often than not, when I’m working for the first time with a new bid team, the initial expectation that team has is that we’re going to get straight down to the business of strategic or creative thinking. But it doesn’t work that way: There are different types of thinking. One of them is “logical” thinking (which sounds like a natural, “default” output but, typically, it isn’t) and its output is the foundation of all other productive thought processes. If a “strategy” or the output of a creative thinking process should ever proved on target without it, it would be more often than not, a fluke. Why is this? That in itself is logical: If the brief is to think “strategically”, this implies that a solution to a problem is sought, or that a strategy is sought towards the achievement of a specific objective. Thus, that problem or that objective needs first to be broken down, investigated and understood at the level of its component parts. This needs to be followed by further research and thinking through of issues like previously-tried solutions or strategies, sub-problems and sub-strategies, obstacles and fall-back positions, resources and limitations, benefits and trade-offs – and numerous other elements of consideration that may arise only in the midst of the thinking process. The foundation thinking in all those processes is first and foremost logical. As an added requirement, it should be comprehensive. In other words, the facts need to be methodically collected, and the objectives identified and worked through comprehensively, before anyone turns their mind to strategy formulation – or to becoming “creative”. In other words, it’s only on the basis of a comprehensive base of research and other facts, and clarified objectives, that useful, directed strategic thinking can take place, since strategic thinking (in my book, at least) involves taking all these elements and then determining the most intelligent, success-likely course of action to take towards a specific qualified and quantified desired outcome. ‘Creative Thinking’ Creative thinking is a step further on from strategic thinking in that a “best strategy” may often require, or at least benefit from, elements of creativity. A discussion about “creative thinking” or “creativity” takes us squarely back to the domain of Newman’s “three types of innovative thinking” philosophy. Similarly to innovation (which is, arguably the same thing in this context), there is creativity that results from a “continuous improvement” style of thought process (think Edison and his 10,000 attempts to invent a long-lasting electric light bulb); there is the collectively-based creative thinking that takes place in groups comprising complementary professional skill sets where tenacity prevails until the best “creative” solution is arrived at; and then there is the truly inspired, less explicably arrived at, “it just materialised in our minds” type of output. In this latter instance, it might be said that the various intellects and creative minds have come together and produced a “1 + 1 + 1 = 10” type of result. But this level of inspiration can’t be reached without a diligent, methodological approach to first conducting the fundamental layers of research and thinking. Again, you’re innovating for a reason and without that reason squarely in front of you or your team to keep you focused on the logic of your solution, you’re at grave risk of going off into the “creative for the sake of it” space, without a solid foundation. That said, while there should be structure to the levels or types of thinking to be undertaken, it is neither my belief nor my experience that these can be templated (at least, if peak results are to be achieved), as is the endeavour of so many operatives. As I explain to any new bid teams I work with, template-style “processes”: “Box” or “mechanise” thinking (they keep you “inside the square”). Standardise a team’s thinking and its approach. Occasionally help you go broad, but definitely inhibit depth. I hold, again, my own modus operandi and daily working experience shows clearly that structured thinking can be achieved without the aid (or interference) of rigid processes. I hold also to my assertion that the optimum value of any form of “thinking” cannot be extracted by reducing it to a template. To think strategically and creatively in a group (without placing it at risk of “group-think”), I believe the optimal “methodology” to employ is free-flow thinking within a (moveable, expandable) structure – a structure that can only be set on the basis of a comprehensive collection of facts and logical ordering. Formulating the best strategy from those logically-ordered facts then requires room for “thinking” to move and develop sideways, up, down and any which way . . . allowing for an endless number of paths to an undetermined number of possibilities on the way to arriving, ultimately, at the very best option. I have seen many agendas for bid strategy workshops that feature, for example, a session on “competitive intelligence” between 2pm and 3pm, or a session on “innovation” between 3pm and 4.30pm. It’s a complete nonsense. The brain, let alone a group of brains, can’t work to order as rigidly as that. You have to invest time, and accept the unpredictable timeframe associated with digging and thinking deeply into each area of strategy – or into each area of the problem you’re endeavouring to innovate a solution for. Conversely and yet, at the same time, similarly I’ve also witnessed some slightly off the wall, but equally time-locked “innovation stimulation” sessions. I once had the dubious privilege of sitting in on an alliancing coaching/bid team preparation workshop where a group of otherwise sane engineers ran around with rubber balls and timers in an attempt to come up with a list of “silver bullets”. Following that, they were given a little bucket of playdough to help loosen up their cerebral region so that they could mastermind group lists of innovations for a specific Request For Proposal (RFP) to which they were about to respond. Notwithstanding the obvious value of brain limbering-up exercises, that sort of entertainment (i.e. in my view that’s the nature of that type of activity) is not the way you arrive at well-researched, well thought-through, credible innovations – or strategies of any kind. Improvements & Innovation; ‘No-Brainers’ & Eureka Moments Let’s see how theory looks in practice. At the time he was interviewed for ‘Cracking the VfM Code’ , Leighton Contractors’ Northern Region Operations Manager for Transport Infrastructure, Iain Ward, was fresh off two of Brisbane’s most recent collaborative contracting success stories, the Inner Northern Busway Alliance (Queen Street to Upper Roma Street) and the Eastern Busway Alliance (Buranda to Main Avenue) – both well-known for their “innovative” approaches to various issues. He provided his views on the broad topic of innovation. Ward was Alliance Manager on the Inner Northern Busway (completed in May 2008), and Alliance Manager on the Eastern Busway (completed in August 2011). “Innovating is critical on projects like these,” says Ward. “You can do anything with money, but in these projects obviously the funding is not endless. If you just keep spending money you’ll get a solution, but we want to reach the best, most flexible, whole-of-life cost-effective solution. These are the issues that are important to the overall, long-term success of these busway projects. “The key to achieving this type of result is to be prepared to continually challenge your project team. If you do that, and do it right, you’ll develop amazing improvement and/or innovation time and time again,” he says. “You can start out with things that appear to be almost impossible to achieve, but when highly motivated teams start developing ideas based on clear objectives, and you get teams of experts bouncing ideas off each other, it’s amazing how quickly they pump these great concepts out. “With these projects, we know that when we start, there’s a high-level concept that maps out what we need to achieve. So you have the team, you identify how you’re going to build it, you identify the constraints, then the team develops solutions to eliminate or miminise those constraints, and then you develop an actual solution. “Depending upon how complex the project is, you might go through that loop a number of times. In fact, you most likely will. On the first pass, you come up with your proposed solution, then as a group you challenge that. That’s like a peer review; you’re challenging the solution and confirming that it’s a good one and that you haven’t oversimplified anything. “So, each time you come up with an answer, you’re challenging it – most especially for the purposes of ensuring you haven’t missed anything. Also, you might go through that whole challenging and refining process a number of times on any one solution, and then still ultimately leave that one behind and do it all again with another proposed solution.” Ward says it can happen, on some projects, that “the first idea is the best idea”. “There are times when the solution is more obvious – even if that’s just because some highly skilled person sees it the first time. Obviously, using highly skilled people increases the likelihood of developing very refined answers easily. “You need a broad cross-section of disciplines and experience on these teams to come up with these ideas. And you don’t just want senior leaders from each of the alliance participant organisations. Don’t underestimate what the youngest person in the crew can provide, because it’s these newer minds that have the potential for the highest degree of free thought. If you keep going back to the old tried and tested personnel, where you are simply challenging the norm, you inadvertently keep going back to the way they’ve solved things previously.” Ward agrees with Robert Newman’s philosophy, in that “you can get a group of people together, split them up and send them away with the problem, and they’ll come back with the answer and it will be an incremental improvement. Or the same group of people might come back with a solution or a breakthrough that is really something special.” Further agreeing with Newman, he says that often the difference between the “incremental improvement” and the “real innovation” is the amount of time and effort people are empowered to invest in its development. “If you’re restrictive, it’s unlikely you’re going to get a breakthrough answer.” Sometimes though, he says, the most beneficial propositions aren’t “innovations” at all. “They’re no brainers. Changing all the light fittings in a tunnel might save enormous whole-of-life costs over the 100-year life of a tunnel, for example. Technology can change quickly, and so, especially in a long project like a tunnel, sometimes you’ll find pearlers that can save the project a huge amount of money.” However, he says, there certainly are a good many times when a non-formula produced, genuine “breakthrough” idea emerges. “Once people start feeling and seeing that ‘no problem is too big to solve’, then from that point on, they will see both that the best way is the team approach and that the first answer isn’t usually the best solution, and they’ll go through every aspect of it to push into new areas of improvement. “What can happen, during these processes, is that someone will put an idea out there that is just so far out of left field – but it is the perfect answer. And it has comes from a deep understanding of what the issue is. Having talked through proposed solutions, suddenly, for whatever reason, an individual or a group of people will come up with that ‘Eureka moment’. “That’s not a formula. You can’t set up a group of individuals and say, ‘Right. On Friday the 22 nd , we will meet here at 9am and develop a Eureka solution.’ You need to set the scene, help people understand where you’re trying to get to, bounce around conventional thought processes, and then – sure enough – one day when you might not be specifically expecting it, you’ll get a Eureka moment. But you need to get there via diligence in those first processes of understanding, communicating, investigating, challenging and refining.” The other side of this coin, Ward says, is that there can be a relentless drive in a group to keep perfecting existing answers. He cautions that this tendency needs to be kept in check, where the “grand breakthrough” version of innovation isn’t necessary or, at least, isn’t ultimately the most strategic use of time and resources. “There are plenty of instances where it just doesn’t make sense to let the ‘potentially perfect’ get in the way of the ‘good’,” Ward says. “It’s the old 80/20 rule i.e. the extra investment won’t bring you a dramatic degree of improvement to the end project.” Ward says there are robust, formal controls that help identify that trigger point and guide a team to the best balance of time and resource investment versus benefit. “We have processes to support us when we’re working to quantify the benefits of these improvements and innovations. They help us work out whether something is a go or a no-go. “For example, a team might have developed an extremely innovative concept to table that will provide benefits to the project. However, implementing it might cost, say, $2 million. In such a case, the robustness of our processes will help to ensure we’ll identify the fact that the net benefit to the project as a whole does not offset the extra cost. “Using a combination of these processes and his or her own savvy judgement, the Alliance Manager needs to quickly recognise the point at which you now have in front of you the optimum solution . . . as opposed to a perfect solution. “Often, you get to a point where you have an answer – and you need to be brave and skilled enough to know when it’s a good or a great answer, and taking it further is not going to provide a Eureka moment, only a slightly incremental improvement that may take more time or money than that increment of improvement is worth and may, in fact, jeopardise other priorities like budget and timeframes. “If you can successfully achieve that balance in those particular instances, then you can focus your innovation efforts on other areas where the current solution is not going to get you where you need to be, and where you really can’t move on in the project until you do produce that Eureka moment.” Ward says another checkpoint mechanism it’s important to have in place for the sake of efficiency, is the ability to record all suggestions. “You’ve got to be quick to track your ideas and innovations. If someone has an idea that they think has some merit, and if it’s been reviewed and hasn’t got legs, close it out quickly. “What you’ll find is that the same ideas often come up repeatedly on these sorts of projects. This especially happens where people are particularly passionate about certain ideas. Someone has an idea that they think represents an exceptional piece of innovation and it keeps on coming up. You need to have a process in place so that if these same ideas that have been previously put aside do arise again, it’s a very quick and definitive conversation and then you move on.”
The following is an excerpt from my 320-page book, ‘Cracking the VfM Code: How to Identify & Deliver Genuine Value for Money in Collaborative Contracting’ , published in 2013 (but with genuinely timeless insights on the whole ‘Value for Money’ conundrum). Infrastructure bidders struggle mightily with the concept of “Value for Money”. In some instances, I’ve seen it extrapolated into some convoluted Einstein-ish mathematical formula; in others, I’ve seen it seen as synonymous with that questionable “value added” buzz phrase and seen as a prompter to roll out every guesswork-based bell and whistle a bid team can think of with which to sweeten the deal. Both extremes miss the critical point: “VfM” is whatever the client deems it to be. Your job is to get inside the client’s world and into his head, in order get to the bottom of his unique and project-specific take on “value for money”. Everybody’s Got A Viewpoint: A Concept Looking for a Definition In terms of the search for * the * definition of “value for money” in alliancing and other forms of collaborative contracting, the seemingly endless “VfM” debate rages on. Many proponents have put forward their own personal take on VfM as representing that singular, much-sought definition. Yet with all the definitions mooted and all the eminent spokespersons on the topic making perfect sense in their own individual right, still the industry continues to seek out some hallowed definition that will lead it to salvation on this issue. (Arguably, the best answer arrived at thus far is that “VfM is project-specific”. Yet that’s nothing but a principle, albeit now a widely-agreed one.) The truth is, every one of the theories put forward has held a part of the answer. VfM, as it turns out, is a multi-layered, multi-component formula to which multiple parties hold the key. Critical to the success of the formula, however, is getting its components in order, to ensure (a) recognition by each contributor that each part of the formula is exactly that i.e. a part of the formula, and (b) that each successive component is influenced by the correct preceding component. In other words: What needs sought out is not one exact and specific “definition” of value for money, but rather the starting point for, and successive order of, the many layers of the VfM cascade . If we agree, then, that there’s room for everybody’s perspective of VfM, and that these ultimately make up one collective “value for money” picture, what’s required is for the lens to be pulled back to a macro focus to see where all the individual takes on VfM fit in. Once we’ve grasped the whole picture, then the role and relative priorities of the various “micro” components of that overall picture, fall logically into place. These become what we might see as a series of layers. VfM Is A Many-Layered Thing The first, the foundation and, arguably, the most critical component of the formula lies within the “big picture” requirements of the project funder which, for the purposes of this book and its readership we will deem to be Treasuries – either at a State, or the Federal, level. This logic recognises the “whole of Government” imperatives of the project, as dictated by the investor. Next would come the immediate project owner’s (usually the infrastructure delivery agency) objectives, including those dictated by the components of the supporting business case on the basis of which funding was granted. It is critical to note that it is only after the acknowledgement and consideration of these – essentially societal – goals, and in the context of them, that any conversation on VfM can be lead by the design or construction sector. Continuing on with the “layers” logic, next comes a layer of VfM specific to the type of project. For example, if we’re talking a water project, then there might be certain quarters of the industry that do that with greater specialist skill than others. If we’re talking a roading project, there might be certain quarters of the industry kitted out for greater efficiency than others. And if we’re talking airport infrastructure, there might be those who have broader knowledge bases or greater experience than others, possibly leading to a high degree of project-level VfM. From there, the VfM equation enters into the domain of the alliance or collaborative contract team itself. It’s down to the cost planning, the value engineering, the design (and any innovation therein), the construction, and all matters related to implementation (including efficient use of overhead staff, good governance, proper project controls and sound project management practices), actual functionality of the end output itself, and ongoing operational, maintenance and “future proof” value. These layers form a logical cascade, each guided by the objectives of the preceding layer. (Incidentally, this is why – as a bid strategist and business development operative – I constantly reinforce the danger of a bid team’s placing insufficient emphasis on researching and understanding the “big picture”. Almost without fail, I find engineers getting lost in the “micro”, without anything even nearing sufficient knowledge of the “macro”. In other words, in focusing on the “how”, it is critical never to forget the “why” behind a project. The “why” comes first, last, and should never be forgotten in any part of the middle, either. This is the reason I also constantly reinforce the great importance of structured, well-planned research into a project being bid for, along with asking quality questions of the client and having a system to collate the findings and the answers. And doing all this well ahead of time.) Let’s take it from the top. To summarise thus far, VfM (as there is now little debate within the industry) must be defined at a project-specific level. But that’s only the “micro” perspective that’s created out of direct reference to the macro level provided by the investment priorities and criteria applied to the project’s approval at State or Federal level. In other words – in a sense – the customer is always right. In this case, of course, the customer is the State or the Federal Government, and is represented by the Treasury department in question, which plays the role of investor. There certainly wouldn’t be any argument from the Treasuries over this logic. And since they’re the only ones with the “whole of Government” perspective and drivers, this reasoning – theirs and mine – does pass the test of applied logic. It is then the owner agency’s responsibility to guide and/or work with its non-owner alliance (or other form of contractual) partners, in the “best value” execution of the project, program or service, in direct accordance with the rationale, priorities and other essential elements of its (the owner’s) business case. Here though, must be recognised the call from many industry participants to be given the opportunity to contribute the benefits of their expertise at earlier stages in the whole process. This is a point of passionate and worthy debate catalysed by the October 2009-released ‘In Pursuit of Additional Value – A Benchmarking Study into Alliancing in the Australian Public Sector’ (produced by industry consultants Evans & Peck and the University of Melbourne for the Treasury sector.) It should be noted that the design and construction sector at large saw ‘In Pursuit’ as endeavouring to push non-owner participants further back in the VfM identification and discussion process. We’ll investigate that debate in detail in a later chapter. But now, let’s hear the rationale of the different parties, look at whether or not the logic always applies, and what other facets of the discussion come into play in and around this logic. VfM – Through the Eyes of Treasury It was the Victorian Department of Treasury & Finance which both heated up and took a lead role in the VfM debate, with its lead sponsorship of the ‘In Pursuit of Additional Value’ publication. (As an aside at this stage, this report recommended price-competition based alliance selection be adopted as the default position for those projects delivered as alliances, although there is provision in the guidelines still for partial price-competition and non-price competition in alliance selection). The preference for this “dual Target Outcome Cost (TOC)” version was reinforced in with ‘ Guidance Note No. 4 – Reporting VfM Outcomes in Alliance Contracting’ – a stance echoed, in short order, by other states’ Treasury departments.) With the release of this publication, this particular state Treasury department put its stake in the ground and declared that what represented value for money to treasuries – as guardians of the public purse – was the default definition for VfM . . . or perhaps, more correctly, was the peak definition from which all other elements of the VfM picture should emanate. One of the more mutually agreed findings to come out of the review was that agencies owed it to Treasury, to themselves, and to the Non-Owner Participants in their alliances to ensure the production of clear, timely, detailed and robust business cases. (A business case has been simplistically described, in this context, as an analysis of the costs and risks versus the service delivery benefits to the community.) The business case, it indicated, should form the basis for an additional, “VfM Proposition” document – which would directly guide the alliance as to the agency’s value for money requirements of the project. Let’s get really clear on what a “business case” and a “VfM Proposition” are. The Victorian Treasury’s ‘Practitioners’ Guide to Alliance Contracting’ , provides the following definitions for these in its glossary: ‘Business Case ‘The vehicle that is used by the owner to obtain approval and funding to undertake the project, as required by that owner’s jurisdiction. ‘Owner’s VfM Statement ‘The owner’s VfM Statement sets out the project deliverables to be achieved by the alliance and the success criteria by which the alliance will be ultimately judged. It is designed to be specifically relevant to, and applied by, the alliance. The development of the owner’s VfM Statement should use the approved Business Case as the starting point (etc).’ Unfortunately, one of the findings of ‘In Pursuit of Additional Value’ was that ‘business cases often did not clearly define the project VfM proposition to the rigour required for investment decision-making, and noted that ‘the average increase from base case cost estimate to AOC was of the order of 45 to 55 percent’. (It should, however, be noted that the research sample size and diversity represented a sizeable bone of contention with the non-owner participant sector.) Further on in this report is the recognition that, “The challenge of defining VfM has been subject to much review and has driven the development of several methods of project performance assessment. A key element of any such model is the development of a robust and comprehensive business case on which to benchmark project success as well as inform the investment decision.” Distilled down to one core imperative: Treasuries and agencies must exercise their respective responsibilities for ensuring the effective application of “whole-of-Government” perspectives and priorities at project level. Nick Tamburro, Director of the Victorian Department of Treasury & Finance’s Commercial Division, has had a decade’s experience in the full gamut of public-private partnership projects, and across a wide variety of infrastructure sectors (before which he had managed traditional public construction projects and been involved in policy development). In 2008, he was made responsible for alliancing policy and guidelines. Tamburro believes it would behove NOPs to broaden their perspectives on projects, such that they fully appreciate that the granting of funding for any specific project represents but one element in a much larger statewide (or nationwide, if it’s a Federally-funded project) picture. He points out that in the process of obtaining project approval, the specific Government infrastructure agency that will own that project, has had to compete with (literally) hundreds of other proposed projects for its funding. And in that process, the agency has had to argue its case primarily on the basis of value for money. In considering the proposal, or business case, put forward by the agency, Treasury – acting on behalf of Government – has had to apply “whole of State” priorities. Its granting the funding for the project essentially deems the agency’s VfM Statement a core agreement between it, as project owner, and Government. The Treasury’s singular objective, going forward, is to hold the agency accountable for delivering on the VfM Statement for a price which is equal to – but preferably less than – the project budget approved in the business case. Tamburro is quick to emphasise that nowhere in this process has there been any requirement for the agency, its business case or its VfM Statement to employ the “cheapest” version of anything. The obligation is, rather, to ensure that – having identified the value elements to be achieved – these are then delivered for the lowest total cost (i.e. quality standards required for best-in-market price) . . . and certainly within the approved budget. On this note, he points out that an alliance team should not take it upon itself to invent new VfM criteria, “outside the business case parameters”. If they do feel the need to propose a new criterion, he says, it should be approved in its own right by the agency/project owner, and if sufficiently major, then by the relevant treasury. A power point diagram furnished by Tamburro depicts a hypothetical VfM proposition for an imaginary motorway interchange. Depicting his point graphically, he uses a set of scales – one side weighing the call on public resources (or costs and risks) and the other side weighing the service benefits of a hypothetical proposal for an equally hypothetical “Big M” motorway interchange. Excerpting from Victorian Treasury’s March 2011-released ‘Guidance Note 4: Reporting Value for Money Outcomes in Alliance Contracting’ , let’s look at the type of crossroads an alliance might typically find itself faced with, and how its decision has the potential to throw the VfM of an agency’s broader portfolio out of balance: ‘Scenario: What’s the Best for the Community? “The alliance for ‘Route 66’ is well advanced in its planning and has taken the initiative to hold a ‘community legacy workshop’. Exciting initiatives have been identified that are supported by the alliance and that will improve community amenity for many years to come. These initiatives are outside the business case, and will cost approximately $5m. The alliance workshop was facilitated on a ‘best for project’ basis. “However, when considering whether to fund the initiatives, the owner decided that a greater public good for the State’s community could be achieved if $5m funding was instead applied to one of the high accident road intersections or railway crossings located across the state. That is, the owner’s decision to take a ‘best for state’ approach in relation to the legacy issue took precedence over the alliance’s ‘best for project’ decision-making.” Tamburro comments: “The whole thrust of the debate from the Treasury perspective is that we need to make investment decisions based on researched, robust and rational thinking. We’re in the business of rationing resources, so we need to consider all the fundamentals e.g.: ‘How can I maximise the benefits of the outputs against the scale of the inputs i.e. the costs?’ ‘What is the value to me of the outcomes in relation to the costs that I face for the inputs?’ ‘How can I maximise what I get for the cost?’ ‘Is there something I value more for the input costs?’ “An issue that is often forgotten in relation to VfM is opportunity cost. VfM assessment is a way of helping us determine where to channel our resources. “At a Government level, the opportunity cost of any portion of capital must be viewed both across the range of sectors as well as across projects. “The Government has finite public resources and needs to balance these against community service needs and also against election promises. “In fact, we’re juggling three balls in any given decision: How many dollars we have to spend. Community service needs. Election promises, and the prioritisation of these. (This, says Tamburro, is a straightforward although detailed process whereby, literally, in the lead-up to an election, different coloured election promise implementation books are compiled – one for the party currently in power, and one each for the other parties competing for Government. After the election, “we destroy the documents of the losing parties, then we present to the winning party, now the Government, the book relating to their promises. This book now contains, for their consideration, a strategy and a budget for delivering on their many and varied election promises.”) “Something that the construction industry by and large doesn’t truly appreciate is this: “At a whole-of-Government level, where our peak investment decisions concern, for example, health, law and order, education, public and private transport, we have several layers of decision to make. If our current priority were improving public transport, then the next layer of decision becomes which mode of transport best meets community needs e.g. should we spend more money on buses, or rail? That needs to be followed by a geographic decision. Then comes the question of exactly which services to improve. “The other thing that’s not often appreciated is that investment in a capital project is essentially a last resort. Infrastructure costs a lot of money not only to build but also to maintain, and so investment in capital assets should be made only when it’s essential to improve community services that are high priority. “Therefore, assumptions should not be made about capital investment; some of the services that Governments talk about might not require lots of capital or infrastructure works. For example, it might be a priority to improve health outcomes for seniors. But it might be that the best away to do that is not to build something, but to employ more nurses to improve home visits. It’s About ‘Outcomes’ “Or we might find that the best way to improve educational outcomes is to invest in more teachers in primary schools, versus building more classrooms onto schools. An assessment of the school sector, for example, might have shown up that more effective communications aids, rather than smaller classrooms, is the best way to improve educational outcomes. “If you look at improving health care outcomes, you might investigate improving IT systems, or providing better management and utilisation of existing capital resources, rather than investing in new capital resources. While the cheapest thing about the health industry is the buildings, if you opt for that route you are also then faced with the associated cost of the doctors, nurses and the medical equipment – ongoingly. You also have to maintain the building itself. “We use the term, ‘enabling assets’ in Victorian Government,” says Tamburro. “It essentially means that we don’t build a bridge because it’s an object of beauty, we build it to serve a community need. The message there is that it’s not just about building things, the message is that you can improve community services in ways that don’t necessarily mean you have to build something.” He explained that many Governments around the world own an asset base that they struggle to maintain and service. After the UK’s Thatcher years, he says, the British school system was reportedly in an advanced state of disrepair due to lack of maintenance funding. “Maintaining capital assets comes at a huge cost, and can become a huge burden on the public purse. “Treasuries need to be careful about the long-term implications of our investment decisions. And for the contractors and designers that participate in alliances or other joint delivery forms with agencies, there needs to be an understanding that investments in capital assets is not a win/win. In fact, investment in capital assets needs to be thought out very, very carefully in the context of the associated long-term budgetary demands.” Tamburro says that, as a rule of thumb, only one in 12 business cases submitted to Treasury for funding is approved. Once the funding is approved, the decision has thus been made with regard to which sector – e.g. law and order, health, education – the public funds will be invested into. The next level is the sector-specific world of the infrastructure delivery agency. “What the agencies do is to say, ‘We understand what the Government is interested in, we understand their election promises, and we’re interested in addressing our sector’s involvement in that agenda.’ “So, for example, the Government wants to reduce travel time between points A and B. The agency’s business case will detail the community services they intend to target and draw a link to the relevant election promises associated with these objectives. Election promises are taken seriously today, and all political parties produce a very clear agenda of undertakings for the forthcoming term in office. “So the business case is all about the best way of providing these upgraded community services. Let’s assume I’m a road authority. The best way might be to turn a particular four-lane highway into a six-lane highway, or it might be to build a new road, or it could be to put part of the existing road underground. The critical role of the business case in this scenario is to identify the best way of making this travel time saving between A and B. (Incidentally, an agency will table multiple proposals outlining the different ways things can be achieved and the different levels of solution for the different levels of budget). “The next thing the agency will articulate in the business case is the cost. “So the agency has now said, ‘If you give us this much money we can achieve these travel time savings between points A and B.’ At this point, Treasury will be considering the proposal or proposals from that road agency, against other proposals for other projects from the same agency. “The Victorian Government outlays in the order of $40 billion a year across all sectors; that’s our total State budget for all Government activities. So we get a lot of funding proposals. “Let’s say that Government approves this business case i.e. $100m of funding to reduce travel time between points A and B. “So the agency has a $100 million project. This kicks off the detailed planning and construction phase and, with that, a whole new level of VfM. This is the nuts and bolts level where engineers get to employ their smarts and creativity. “The problem is, that many Non-Owner Participants don’t see anything else but that level. That’s all they comprehend, in terms of the whole value for money picture.” More on Prioritising & Apportioning the Taxpayer Dollar Also interviewed for this book was Richard Mann, Executive Director of Strategic Projects for Western Australia’s Department of Treasury & Finance, who gave his own take on the investor-level perspective. “VfM, in its broader sense, is achieving the best possible balance in ‘triple bottom line’ outcomes for the particular project/program/operation in question. “That blend of what’s more important in the triple bottom line will obviously vary from project to project. From the Government perspective, the blend is decided at the time the Government takes the investment decision, and is an integral part of it. “Government effectively decides that, for a specified funding allocation, it is going to receive a series of defined outcomes and benefits. “If we are following good asset management practice, these should be articulated in a business case, which culminates in a recommendation of the best investment option for Government. What we want to see is the basis for that investment decision translated into project procurement . "This is where we have traditionally not performed as well as we might: If we don’t communicate to the private sector the basis behind Government decision-making and the outcomes that we’re seeking to achieve through the project, then we run the risk of inconsistency in the understanding between the parties with regard to what VfM represents. “Let’s illustrate that: “Assume we have a significant building project: a hospital. “In justifying the need for investment in a new hospital, Government will typically identify the scope of clinical and non-clinical services it needs to provide – the volume of those services and the quality standards to which they must be delivered. “Obviously, associated with that will be an estimated cost. “Then there’s a whole range of related benefits and objectives out of the project: sustainability requirements, environmental targets, other social benefits. These will vary from project to project but will combine to provide a set of outcomes that are to be achieved within the allocated funding. “Then we move through to delivery. We might, for example, through the procurement process, deliver a significantly higher level of service within the original budget. But that does not necessarily represent value for money, because we might not need that higher level of service. “Or say, for example, that we’re building a secondary hospital and, while we require a designated level of clinical capability, we end up providing a higher level. That is not necessarily a better solution than the required original level of capability at a lower cost. “It works in reverse as well. Reducing scope to save dollars does not necessarily represent VfM, if that results in a lower level of service than was assumed when Government decided to fund the project. “In summary, what I’m saying is that right through the planning and delivery of any project, we need to continually keep revisiting the original basis for doing it.” What does that continual re-visitation look like in practice? “It applies not only to the NOPs but also to the Owner Participants, who also often lose sight of the whole-of-Government business perspective, and instead of looking outwards from the project, they look within and they only think about the internal project environment. So they lose the focus on that over-arching triple bottom line VfM justification that the business case is based on in the first place. “There are responsibilities in both camps for continual review. To enable that review, the agency must make sure they have a robust business case upfront. Then those business case objectives need to be clearly communicated to whoever is responsible for project delivery.” VfM . . . An Agency Perspective Graeme Newton, Queensland’s Co-ordinator General, says that to effectively translate whole-of-government objectives at project level “takes the right people on the team; people who can see and interpret the big picture goals and then translate them into actual project specifications.” However, in his interview for ‘Cracking the VfM Code’ , he stresses that he speaks more from the perspective of an owner participant in project alliances than from the perspective of his Co-ordinator General role. “Two members could be sitting side by side, with the same backgrounds, the same qualifications and even the same experience, and yet one might have that very special talent and ability, while the other is stuck at the purely technical level and doesn’t have the ability to think at that elevated, helicopter-view level at all. “Having alliance experience is helpful, but possessing a commercial mindedness rather than being purely a technician is integral to milking out the full VfM potential of a project. “The real skill set or talent of value on an alliancing team is the member who sees past the technical issues and understands, for example, which aspect of a project needs the gold plating, and which aspect requires a more moderate approach based on issues that, from the client’s perspective, go far beyond the actual specifications and immediate delivery-related conversations. “It’s about being able to see past what’s presented in the scope; understanding the nuances and the intent of the specification rather than just what’s specified; identifying what the agency is really endeavouring to achieve through its specifications. Collaborative contracting allows you great flexibility, so you want to extract the full value out of that flexibility by having people who can see the wood for the trees.” Common Understanding Central to VfM In his interview for ‘Cracking the VfM Code’ , John King, Queensland Rail’s General Manager – Capital Delivery Program, said a common understanding between the parties is a fundamental plank of actually achieving value for money. “ An area not done well in alliances to date is to ensure a common, working understanding of VfM. “From the client’s perspective, he determines the outcome he wants to achieve in a project as part of his business case . . . basically, his reason for doing it. That should then form a framework of what value he wants to receive out of the project. “But as clients, we’re not used to articulating that to the contractors. We’re just used to translating it into technical specifications. So they know we want to build a railway from A to B, but we don’t tell them why we want to build it. “There will be a number of reasons why we want to build that piece of infrastructure – and the value we want out of it is directly related to those reasons. Therefore, if we don’t clearly articulate that reasoning, contractors will tend to see value for money as ‘how can we provide extra stuff’. Because that’s their world. “In my experience, I see contractors saying, ‘The community needs a bike path. We’ve got some builders here, so let’s build one.’ But it’s spending Government’s money and Government’s got a framework from which to decide whether that represents value for us or not. “So the client should be spelling out what the business objectives of the project are, and the value is then dictated by how well – i.e. how cost effectively – the alliance achieves those objectives. “And if they can achieve the objectives at a lower cost, that’s adding value. But it’s not necessarily adding value to simply go and add scope that may or may not be enhancing the Government’s core objectives for that project.” Community Value vs Team Value: Potential Divergences Gary Liddle, Chief Executive of the Victorian state road authority, VicRoads, also has concerns over potential divergence between what the alliance team considers value and what represents true value to the community. “These aren’t necessarily the bigger items or considerations that Treasury involves itself in. Some examples of this sort of debatable item would be ‘skills transfer’ and ‘independent branding’ of an alliance team. “The project team might see the potential for increased knowledge or skills transfer (up-skilling of agency personnel by NOP experts). But the team might rate this far more highly than the community would. In fact, I think there has often been too much emphasis placed on this supposed alliance benefit. “The value might be there philosophically, but it’s very hard to demonstrate it in a tangible way. It’s very hard for an agency to prove that this increased knowledge is of direct benefit to the community it’s doing the project for.” Liddle also says he doesn’t accept the importance of independent branding of the alliance team. “It’s certainly hard to demonstrate the VfM of that to the community. Logos and new clothing all cost money and, from an agency’s perspective, that money could have represented a reduction in the price of the project. “There needs to be other intrinsic value that project members can see themselves getting out of the project; like knowing they’ve been part of an organisation (be it Thiess, Abigroup or VicRoads, or whoever) that has contributed to and had a connection with an important public infrastructure project. That’s a mindset that can be achieved without going to the expense of creating a new visual identity and all the furniture that goes with it.” Liddle clearly sees a further dimension to VfM: the “value of demonstrating value” for the project’s community. “Too often the focus is on the project team’s insular thoughts about VfM. “Let’s take one of our own alliances as an example. On the Springvale Road Rail Separation Alliance, the project team supported the local community to do an art display. While the immediate-vicinity community was delighted because it received tangible benefits, those benefits didn’t necessarily translate into anything for the broader community. From its perspective, that was simply money that could have been spent on providing another set of pedestrian signals. “So it’s weighing up the cost of providing those broader legacy items on a specific project versus what other things that money could have been invested in. I think that maybe there should be a limit on the funds put into that sort of ancillary item.” VfM & the NOP As a bid strategist, I have seen alliancing bid teams really struggle with the concept of VfM. Reading all the preceding, the bidding NOPs might well ask why Request For Proposal (RFP) documentation has so often asked them to demonstrate the “value for money” they will deliver on the project in question i.e. since they’re not in possession of the business case, and rarely in possession of anything that represents a complete and authoritative VfM Proposition/Statement. Until they’re privy to the detail of the business case and fully fleshed out, authoritative VfM requirements from the agency, then past whatever their research has revealed and whatever clues they find in the RFP, the best they can do is parrot the agency’s own words or engage in guesswork. One could argue that they should have had ample discussions with agencies in the lead-up to the project hitting the market – and indeed this is the very minimum business development activity they should have been engaging in. But until an agency’s thinking is clear – and clearly articulated – they are still, to a degree, mind-reading and taking punts at saying the right thing. A bidding team in this territory resorts to all manner of definitions of value for money. I’ve seen everything from the most imaginative and largely irrelevant bell and whistle thrown in as the bidder’s own “value proposition”, to a basic assumption that “certainty of delivery” somehow constitutes “added value”. Which begs the question, if it didn’t deliver this “added value”, would the project “certainly” be delivered? The ground for achieving real VfM is created by the NOP understanding the project as well as the client does – and applying its specific strengths to the achievement of actual hard dollar value in aspects where it knows something strategic that the agency does not. A classic example was an Early Contractor Involvement (ECI) bid I worked on: This bid was for a major Queensland roading project. The drivers for this project (which included unacceptable accident statistics) rendered its (successful) delivery particularly urgent. The characteristics and unpredictable elements associated with the project, however, were such that speed of delivery would, for most contractors, be either difficult to achieve, or difficult to achieve economically. In putting together a detailed picture of the competitive landscape for the bid, we drilled deep into the advantages of the specific characteristics, and operating and commercial policies surrounding my client organisation’s plant and equipment. We identified the critical enabling factors provided by these aspects of the equipment, aligning each with the specific challenges of the project, which we invested the time, resources and effort to quantify and qualify in considerable detail. (In this light, it could be seen that these elements would be the lynchpin factor in its success or failure.) In conducting this research for the bid strategy, we pulled in more “on the ground”, delivery-associated personnel than would typically be involved in a bid. This also enabled us to anticipate the essence of each competitor’s likely response, and in many instances also the detail each competitor would likely put forward in its bid. This, in turn, gave us the further opportunity to provide an informed and insightful range of alternative scenario-based calculations, for the benefit of the client. If our research, (tested) assumptions and calculations were indeed correct, our efforts thus far knocked out all but one other competitor. We continued on, identifying and quantifying risks and benefits at a yet more detailed, albeit cumulative, level. Again, taking the project owner’s perspective, we then performed and documented our actual calculations with regard to each competitive advantage our solution offered, and highlighted each risk arguably associated with the type of alternative that would be offered by the competition (we did this in a manner that did not refer to the competition or any elements of its solution specifically). We took every opportunity to provide the client with insights directly relevant to the on-the-ground delivery of such a project, which they might well not have previously possessed. This made crystal clear the connection between our solution and the client’s specific project challenges, and provided an accompanying level of clarity around our solution’s time, budgetary and other distinct advantages when stacked up against the competition. Having undertaken and provided, in detail, these deep insights “from the coalface”, detailed background explanations, multiple scenario-based calculations, and very specific, comparative risk and benefit analyses, the project owner was immediately able to see from the macro perspective, and from the numerous micro perspectives, the many ways in which my client organisation’s solution offered very real value for money. The moral of the story is: The bidding NOP applied its researched understanding of the agency’s needs and challenges to identify the path of greatest client value at a technical level. It then lined up its own corresponding competitive advantages and explained these (complete with detailed calculations) to the project owner in the bid. So, supplementing an agency’s business case and VfM proposition with its own research – both at the project and the “bigger picture” level – can help a switched-on contractor/design team or other form of NOP be incredibly effective in achieving value for money for a project owner. Once on the project, though, the Treasury departments have a strong message for NOPs: As the project investor, Government retains full right of sanction throughout. Says Victorian Treasury’s Nick Tamburro: “If you’re part of an already in-action alliance, and you have a great ‘VfM’ idea (e.g. something of substantial social, economic or environmental value), first analyse its costs, risks and benefits. Then you must – before implementation – seek approval from the owner, who must in turn seek approval for it from the Government.” The message is clear to all: Seek to understand, and then never lose sight of, the big picture. And always remember whose money it is.
One aspect of collaborative contracting processes that poses a potential threat to bid participants is the security of their Intellectual Property (and, in the case of price-competitive collaborative bidding processes, the quarantining of the project-specific innovations they develop). Quite clearly, losing control of competitively valuable Intellectual Property (IP) (or having its investment in developing competitively superior innovations negated), doesn’t represent value for money for the Non-Owner Participant (NOP) . . . in terms of the resources it deploys towards winning a bidding race. How far a service provider should go when it comes to disclosing proprietary information and tabling competitively sensitive strategies or suggestions is an enduring bone of contention in most industries and in many forms of proposal. However, the issue of Intellectual Property rears its head in the context of collaborative contracting bids arguably more often than in any other type of bid . . . and most especially in the case of “dual TOC” (i.e. owner and non-owner out-turn comparative costing) bidding processes. With “innovation” the catch cry of collaborative contracting, tier one law firm Clayton Utz’s Marko Misko says an infrastructure project owner must disclose upfront, in its procurement documentation, the extent to which it wishes to use for its own benefit, the ideas or any “smarts” included in the proposals of the various bidders. Agencies Have An Ethical Obligation to Bidders Misko says an agency’s first obligation is to obtain a clear form of consent from bidders, and to seek to identify and communicate with certainty the types of innovation being sought. It should also consider whether payment should be made, if significant effort is required of bidders e.g. in the case of a design competition. He says “an agency has to also be commercially realistic in assessing whether it will extract any meaningful innovation during the early procurement stages, or whether it is more likely to get generic statements and a few broad-brush ideas.” On that specific note, he puts forward, for the consideration of delivery agencies, a potentially different approach to the norm, with regard to seeking innovative suggestions from bid teams: “An alternative is to conduct a market sounding ahead of the procurement process – not only to gauge levels of industry interest/capacity, but also to invite any preliminary suggestions for innovation.” He advises that the Australian Department of Defence (for which he has been involved in numerous projects) has, in recent times, conducted this type of exercise on a regular basis on its larger projects. He also advises it is an approach being considered by State and Territory Governments on their Public Private Partnership (PPP) projects to invite innovation strategies of a very basic nature. In these specific instances it is seen, he says, as a means to gauge industry enthusiasm and capacity, without needing to commence a full-blown competitive procurement process where the project owner might not have otherwise progressed to this. “This sort of market sounding is conducted on the clear basis that the respondents retain no IP in their submissions, and this is typically because only reasonably generic responses are being sought at this preliminary stage,” Misko points out. “This can be a relatively straightforward way of gleaning industry smarts in a manner that doesn’t threaten or alienate the contractors. Because it’s generic and preliminary, it’s not realising industry concerns about the disclosure of organisation-specific competitive advantage. 'The Project Owner is Asking the Market for Its Opinion' “It’s an interesting option to consider in the context of bidding costs; that’s why it’s being looked at increasingly in the case of PPPs, with the very high cost of competing for these contracts. In essence, the project owner is simply asking the market for its opinion. “For the private sector, their input might be accommodated in a two-page letter,” he says. “And it’s not competitive, so people don’t feel like they have to go into full song-and-dance mode to win the job. They’re simply saying, in a very neutral fashion, ‘These are my ideas.’ “The contractors are very happy to participate in this type of market-sounding process because it gives them a chance to potentially shape the delivery method structure. At the same time their participation is not heavily competitive and does not require significant investment.” Policing Probity & IP in the Price-Competitive Alliance With the arguable exception of Public Private Partnership projects, there are few other tendering processes to rival the price-competitive / dual TOC when it comes to risking transmission of innovations between competing bidders. That statement isn’t in any way, shape or form intended to infer that every effort isn’t made nor every protocol exercised to prevent this from happening; but the process, regardless, does render this a risk for participants. Jim Millar (speaking from his previous perspective of Commercial Manager with the contractor then known as Abigroup) comments on the issue of Intellectual Property and innovation input in the dual TOC context: “The difficulty in that environment is that, for an alliance to be successful, you have to have owners’ personnel in the team,” he points out. “During the development of the two TOCs, the owner has to split his team so that he can put some into Team 1 and some into Team 2. “The concern – and the challenge – is that ideas thought up by Team 1 have got to be protected from being given to Team 2, because Team 1 might come up with great ideas, and it would be unfair for those ideas to be given to Team 2. “So the owner’s people have to be prevented from cross-fertilising ideas between the two competing teams.” The Project Owners' Perspective VicRoads’ Gary Liddle injects both a note of reality and of respect: “Protecting IP in price-competitive alliances is a very difficult thing to do, in reality,” he says. “But we certainly do need to be careful, in the competitive TOC environment, about the need to protect the IP of the NOPs. “It’s important to respect the innovations and the proprietary thinking of the individual NOP teams – although preferably it would be done without introducing the expense of having two separate project owner teams. “Realistically, I don’t think it’s possible to afford proper protection without having two quarantined client teams. I know of one price-competitive alliance where they are using the same client team and introducing signed declarations that that information will not be shared between the NOPs. I think it’s almost impossible to achieve that, though, with the same client team. So I guess we are looking at the possibility of introducing a significant new cost into alliancing.” But, for the moment at least, certainly many agencies consider that option (i.e. two client teams) impractical.
With more and more non-price-based tender formats hitting the marketplace (as when the Australian government sector’s Market-Led Proposals / "MLPs" format was released), the pressure is on to ensure delivery team members’ Curricula Vitae garner maximum points on the evaluators’ score sheet. So why are the vast majority of organisations insistent on placing such low priority on this critical bid-supporting mechanism? Why are they relying on woefully generic, multi-purposed CVs . . . when a superior performance in this central component of their submission stands to catapult them streets ahead of the competition? The Issues Let’s look at some of the problems and then some of the potential solutions, and let’s take – as a case study – one of the toughest industries in which to create differentiation between key personnel. In civil engineering’s major projects sector, players fish in the same (often international) pool of talent for their key personnel. They compete fiercely with each other for the “best” people for a project. Below are some of the problems that sector faces as they pertain to the production of bid-supporting Curricula Vitae. Being Forced to Hire Without Certainty In a high-profile Government-funded major infrastructure project that relies on the strategic selection and offering up of key personnel, industry players are forced to seek out expertise (both at the hands-on project management level and also at more the academic, oversight level) that relates as closely as possible to the key characteristics of the contract in question. That expertise doesn’t come cheap. And it certainly doesn’t come cheap when there’s a pre-bid bidding war for the same talent. If a company manages to secure the crème de la crème, specific talent they want to arm themselves with to bolster the smarts in their project delivery teams, they then have a real pressure to win the bid. No savvy construction or design company wants someone earning that sort of salary sitting around idle. (It’s also demoralising for the talent they hired in, who would have been looking forward to adding the prestige of that particular project to his or her personal CV.) It All Happens Too Late One of the issues closely related to this scenario is that, ironically, the competitive run on the targeted talent happens late in the bid process . . . meaning that CVs are often the last components off the submission production line. And we all know how much time is left for the last components off the submission production line. That’s one of the primary reasons the opportunity to highlight the intensely advantageous, highly relevant strengths of such key personnel is let go to waste. Here are some of the other reasons: Multi-Purposing of Curricula Vitae Creates Generic Blah The CV owners (i.e. the key personnel themselves) are asked to furnish their existing CVs, which will then be given a bit of an edit – or a “massage into shape” – by a generic “bid writer” or someone playing the role of editor. No-one actually interviews these key assets . . . or if they do, they don’t drill down deeply enough to flush out the most project-specific strengths of this particular asset, and why those strengths matter so much to the project’s success. Together with the above scenario, this is the No. 1 reason for the half-baked, non-compelling, unconvincing examples of thinly-veiled multi-purposed, generic boredom-in-print currently submitted in most organisations’ bid documentation. Every item below has its roots in the above. Poor Bid Strategy Processes Result in A Lack of Guidance The bid’s strategy development processes have either failed to fully identify, or capture and communicate, the client’s and the project’s most immediately pressing pain points, fears, desires, limitations, sensitivities and so on . . . such that the most relevant skills and strengths (other than simply the technical) of the CV owner can be compellingly presented. The Whole Has Not Been Presented As ‘Greater than the Sum of its Parts’ In yet a further wasted opportunity, the CVs of the individual personnel aren’t taken as a “whole”. Where personnel have been asked to largely author their own CVs, it goes without saying that these will have been produced in a vacuum. The “1 + 1 + 1 = 7” opportunity otherwise afforded by producing the CVs as a whole, and the team and its collective strengths and skills as a holistic solution, has been completely wasted. Lack of Interest by (Some, Not All) CV Owners (Sometimes being the case and sometimes not) CV owners are more focused on getting on with the project and doing what engineers and construction project managers do . . . which, by preference, would not include writing CVs and other bid-related activities. These are neither their strong suit nor their interest. Consequently, even when a professional writer is involved in the production of a CV, the time and focus that is nonetheless a required contribution to a successful output, is just not there on the part of the individual in question. (Again, please note that this final point doesn’t apply to all CV holders; only some. But when you’re relying on milking every last point out of the evaluation team for the collective of your CVs, one lukewarm CV is one too many.) If you want to make a quantum leap in the quality of this vital component of your submissions, avail your team of my course, ‘Operation CV: Formulating On-Target, Bid-Specific Curricula Vitae’ - coming soon. It’s for bid strategists, bid managers, bid writers and editors, and subject matter experts and other specialists within the delivery team . . . along with anyone else who wants to acquire mission-critical insights and skills like: How to identify the skills and strengths the prospective client organisation will value most highly. How to closely align the CV owner’s experience and strengths with the prospect organisation’s / procurement agency’s hot buttons. How to formulate CVs (both individually and as a consistently themed, content co-ordinated collective) to mitigate the client’s fears / perceived risks / concerns. What activities to conduct, in order to ensure the production of solid, detailed and purpose-specific CVs. How the bid manager can inspire the enthusiastic and diligent input of CV owners. How to demonstrate the logic behind each CV owner’s inclusion in the delivery team. How to edit to ensure strategic value and maximum point-scoring potential in the face of tight word count constraints. And a whole lot more.
"VfM (Value for Money) Reports" are now an expected norm following the delivery of any major civil infrastructure project through any form of collaborative contracting methodology – and, increasingly, also in hard dollar contracting. The following are my recommendations for producing a highly readable VfM Report. Keep in mind that these suggestions are offered by an information professional, not an engineer – and are therefore based on general principles. That said, if you are an engineer, don’t be tempted to disregard their value. Like any other document you invest time in producing, you no doubt desire to have a certain impact on your readership. Clear and savvy articulation will assist you in achieving this. ‘War and Peace’-Style Detail or A ‘Very Vanilla’ Template? Get clear – before you start assembling your content and putting pen to paper – whether your intention is to produce the engineer’s version of ‘War and Peace’ , the Very Vanilla Version of a VfM Report, something in between those two extremes, or an industry-standard template. To some extent, you’ll obviously allow yourself to be guided by the number of interim reports you’ve produced thus far in your project. Also, logic would suggest that the more progressed your project, the more you will have to measure and report. The Devil May Be In the Detail . . . But Don’t Lose Sight of the ‘Big Picture’ Messages To ensure you don’t bury your main messages, provide an Executive Summary. This should be a prioritised distillation of the peak conclusions from each of the Report’s major sections. Choose your language and terminology in this particular section with great care, in light of the fact that some of your readership will be “non-engineers” and will rely on a plain English summary to provide them with the “guts” of the story. Provide Value for Money in your VfM Report. Don’t bother with the “consultant speak”. In other words, don’t waste space and reader attention span by indulging in lengthy and detailed descriptions of the project itself. All parties should well understand the actual project they’re working on. Get straight to the point i.e. value for money. Explain the process you’ve used for your VfM analysis . . . but briefly . That bears repeating: Briefly! One of the VfM Reports I recently witnessed devoted half its pages to discussing the project per se , and a great deal of the rest of them to discussing the methodology for assessing VfM. Don’t produce a textbook. Stay attuned to the reason for the exercise: To report on the degree to which VfM has or hasn’t been achieved against the business case and associated client and project objectives, and in the various component areas. Cater for the Non-Engineers Where highly detailed, technical explanations on any one subtopic have run to more than a few pages each, precede these with a summary that is understandable to any non-engineers within your readership. Motherhood statements and vague statements like “proactive stakeholder engagement” have no place in a VfM Report . . . if, indeed, they have any value anywhere. Refrain from showing off in a VfM Report e.g. the development of new and overly complex VfM assessment methodologies requiring the help of a statistician to decipher. If you must show off, the context for it is in the substance and impressive results reflected by your content. Keep it meaningful. Keep it factual. And where a comprehensive, clear and meaningful business case and VfM Statement were tabled for the project, keep it closely tied to the key components of these. Constantly Re-Visit the Business Case & VfM Statement Continually align your VfM Report’s content with the priorities articulated in the project’s supporting business case and VfM Statement. That’s the default benchmark in every element. Use language and terminology which is consistent with these documents to make the alignment of content clear for your readers. Quantify the ‘Soft’ Wherever Possible Determine a way to put a tangible form of measurement to the “soft” benefits being generated by the project team. Find a credible way to value non-monetary KRA and KPI performance, innovations and any special Intellectual Property that has resulted from the project team’s efforts. Again though, don’t get clever and complex to the point of the ridiculous. Don’t Save the Best for Last A message specifically for Non-Owner Participants in collaborative contracting teams: The VfM Report is an ideal vehicle for defusing cynicism over collaborative contracting’s “value for money” performance. Be sure, therefore, to maximise the opportunities it presents for understandable communication and explanation, especially where a project has demonstrated variance from budget. Where interim progress can be reported against project objectives, take the opportunity. Don’t save up the commentary for a final blockbuster VfM Report. Demonstrate actively that you are well aware where you’re on course and where you need to re-strategise or correct. It’s a critical part of demonstrating awareness, control, good governance, and the readiness to strive for enhanced value.
Within the public infrastructure space, I’m known for my specialisation in collaborative contract bidding – in which non-price-based "project alliancing" is the premium delivery format. When responding to Requests for Proposal for this type of contract, price – literally – cannot be used to win the deal . . . because price is formulated in collaboration with the client only after award of the project. In that type of bidding environment, you sink or swim based on your ability to develop a bid strategy with no reliance on price – but with total reliance on value delivered . With “value” the focus of every element of the research and strategy formulation effort, the quest becomes firmly focused on exactly what it is that constitutes “value” and “value for money” in the context of the project being bid for, and in the context of the client’s world. How is that relevant to tendering for a logistics or transport contract? The key point of relevance is this – and it’s consistent with the core message of all my columns to date: If you can determine, with precision, what it is that’s most important to the client, above and beyond all else (and sometimes, the answer to that lies buried deep in the collective subconscious of the client organisation) , nine times out of ten, you’ll have the foundation for your strategy. And nine times out of 10, it will be “ non-price-based ”. If you come in with the keenest price, but somehow manage to trash the client’s reputation within its marketplace, of what benefit is your low price? If you cause grief and aggravation through unreliable delivery times or poor materials handling, what is the true cost of your “service” to the client? These are clearly extremely basic and obvious examples of “cost” versus “value”. However, if you drill down into all the ways a low price might be irrelevant in the face of poor performance on any particular contract, you’ll find a vast list of potential pain points that company will want to avoid. And faced with the prospect, its decision-makers will usually readily concede these aren’t worth putting up with for the sake of a low-ball price. On the same hand, a bid team that does its background research, and that also finds a way and takes the time to drill deeply into the psyche of the client, is generally rewarded with the insights into exactly what it is that constitutes “value” to that organisation. And, again, nine times out of 10, the primary point of value will be non-price-based. There are too many bidders out there – in all industries – whose automatic response to a loss is to attribute it to “being beaten on price”. Some years ago, a survey of UK construction company executives was conducted. These executives were asked why they though they lost bids – and why they thought they won them. In almost every instance, these seasoned industry representatives believed their tendering victories were due to the outstanding job they had done when it came to understanding the client and the specific requirements of the project. But these same respondents believed the only reason they ever lost a bid was because they came in too high on price! This flawed logic stems from a reluctance by bidders to admit that maybe they lost to a competitor not on price, but because that competitor had done its homework more thoroughly. It’s a very simple equation: The more thoroughly you’ve gotten to know the client organisation, and its working environment relevant to the contract in question, the more chance you have of lining up your strengths with the (often intangible) requirements of that client and that contract. And it’s there that you’ll find your core value proposition .
Some time ago, I wrote an article about the fact that, as I saw it, engineers have been done a grave disservice by consultants who intimate they ‘can’t sell’. That article has been published in numerous different professional journals and other publications, and continues to prompt feedback . . . and I’ve yet to receive […]
