Highways Agency

• Community Members

Introduction to Construction Management

1. History of CM in the Agency
2. The Construction Management Framework

1.0 HISTORY OF CM IN THE AGENCY

By way of giving a brief history to the current CM framework, it is probably sufficient to refer to an extract from the submission made in 2002 when the Highways Agency were successfully awarded Client of the Year in the Contract Journal Annual awards.

The Executive introduction highlighted below explains the background to the CM Pilots.

It is the intention of all those involved to build on the successes of the Pilot in taking the CM Framework forward over the next 4-7 years.

Extract CJ Award 2001

1. The Introduction
   
   This nomination is made on behalf of the 25 contractors and consultants who have taken part in the Highways Agency's second Construction Management Pilot Scheme (CMP2).
   
   We believe the Agency merits this award because its actions in taking forward CMP2, demonstrate a clear commitment to changing the nature of the construction industry in this Country. By establishing contractual and partnering relationships, which support open communication and good management practices they have:
   
   
   • Harnessed the skills and experience of specialist contractors to develop cost effective solutions.
   • Encouraged the identification, evaluation and proper assignment of costs and risks, ensuring fair remuneration.
   • Provided an environment where all parties can work together improving their businesses.
   • Promoted the need to measure and evaluate the project team's performance.
   
   Contract Journal Awards
   Executive Summary
   Page 4 of 80
   
   
   
2. The CMP2 PROJECT
   
   In 1998 Agency decided to see if Construction Management (CM), in conjunction with partnering, could assist in delivering its procurement. It wanted to open a direct route to the specialist contractors who worked on its renewal and improvement schemes. A 12-month long pilot scheme started in April 1999. Following positive results, CMP2 - a 2-year project involving a £40 million programme of works in 4 Maintenance Areas - was awarded in April 2000. The project involved the 4 existing Managing Super Agents becoming Construction Managers and working with 20 specialist contractors in various disciplines.
   
   
   
3. What has the Agency delivered within the Pilot?
   
   
   1. Leadership
      
      The Agency recognised that the Construction Industry could not change without clients changing. It took the lead
      
      
      • Developing new contractual arrangements, new methods of selecting its suppliers, and new ways of working with those suppliers.
      • Supporting the Pilot throughout, with senior staff helping to "convert" sceptics in all organisations, including their own, and getting involved in "off-line" Community groups - such as the Pilot board, the Pilot Issues Group, the Newsletters & review meetings, and the Measurement Process.
      • Reviewing many of the traditional external controls and replacing them with trust that an empowered team of suppliers would deliver. e.g doing away with liquidated damages and retention - [however, retention is held in CMF]
      • Employing external facilitators and advisors to ensure all parties understood the team's objectives and what was needed from each party in order to realise them.
        
      
      
      
   2. Innovation
      • Being brave in adopting CM, a technique that was hardly used in the UK Civils Industry, the Agency has now established a new procurement option for Highway works.
      • Selecting for the first time its contractor suppliers on a 80/20 quality/price basis, with "quality" including an assessment of the organisation's attitude to the partnering philosophy key to the CM process.
      • Developing the concept of Derived Pricing where prices for work are agreed/derived on resource outputs not on a schedule of prices. Again now being adopted elsewhere in the Agency
      • Allowing the supply chain to be involved in the design and development at an early stage of the end solution
        
      
      
      
   3. Strategic Thinking
      • Whilst recognising the benefits of larger framework contracts with fewer suppliers to the Agency, CM provides opportunities for small and medium size enterprises to enter into direct contracts with the Agency and continue to add value.
      • CM also provides the Agency with long-term opportunities to benchmark conventional main contractor frameworks and directly communicate its standards to firms who may well be subcontractors on these frameworks.
        
      
      
      
   4. Long term Commitment
      
      The Agency has recently demonstrated its commitment to taking forward the initiative developed in CMP2 announcing two of its Maintenance Areas will use CMP with 4 (extendable to 7) year contract durations. This amounts to some £350 million of schemes.
      
      Steve Rowsell, the Agency's Director of Procurement, commented:
      
      

      "Thanks to the Pilot we are learning more about how to manage the supply chain. We are also getting a better idea of costs, which we don't get if we are dealing through a main contractor. It is learning that we will use elsewhere with other forms of procurement"
      

   5. Fostering Relationships
      
      In the CM Pilot the Agency encouraged its suppliers to form a self-supporting "Community" to resolve difficulties, promote best practice and bring "peer pressure" to bear on any individual company who was in danger of failing to meet its obligations. The Agency has throughout opened its doors to Community members to share and discuss its objectives and explain how its organisation works and listened to how its performance is viewed by the Community.
      
      
      
   6. Measurement
      
      At the outset of the Pilot the suppliers wanted to know what represented "value" to the Agency and how their performance was to be measured. In early workshops Key Performance Indicators (KPIs) were agreed together with how they should be measured and used. A comprehensive set of measures was devised and applied across the project.
      
      Although still in its development the process, including benchmarking, has led the way on other measurement processes within the Agency.
      
   
   
   
4. The Results
   
   Together with the Agency we have:
   
   
   • Delivered projects at competitive prices despite a steep learning curve.
   • Equalled or bettered conventional procurement in 90% of the measure.
   • Delivered projects in a way not possible under traditional forms of procurement e.g. A556 Cheshire.
   • Set standards of supply chain management that are being adopted in other Agency framework agreements.
   • Established a process whereby "clean" base cost data can help the Agency evaluate other forms of procurement.
   • Delivered £40 million value of works in 25 schemes and not had one contractual letter.
   • Set up a measurement process that drives improvement through partnering.

End of Abstract.

2.0 The construction management framework

The companies involved in the Construction Management Framework formed a Construction Management Community (CMC).

The following outlines the CMC into the following headings:

• 2.1 What is the Community and its Purpose?
• 2.2 What are the reasons for forming a CMC?
• 2.3 What are the specific Objectives of the "community"?
• 2.4 What is the structure by which the community is managed, and how does this function including any financing?
• 2.5 What are the Community Values, how will these be seen in action from its members?
• 2.6 Who are the members?

2.1 The Construction Management Community and Its Purpose

The Purpose of forming the Community is:

• To create a supply chain that is aligned and committed to a singular set of Objectives and to working together to achieve these Objectives
• To create a means whereby the foundations of the specific procurement route, i.e. the Process, the Culture and the Performance Measurement are developed in a controlled and co-ordinated manner

Hence the definition of the CMC is:

A collection of companies and organisations, bound together by a series of collaborative processes and principles that have formed a unique community delivering a service to the Highways Agency under the route of Construction Management in Areas 9 and 10

In creating the community in effect we are trying to create an identity to which organisations within the CM Framework can relate.

A "club"

In the Construction Management Community comparisons have been drawn to the community being a type of club, where members want to take an active role because of what it offers, but also a club that wants to grow and be inclusive, in that it wants others to join and integrate with them, in particular the next tier of supply chain and various third parties.

2.2 THE REASONS FOR FORMING THE CMC

If a Community is to be formed then certain "ingredients" need to be in place, as undoubtedly people and companies will only give a commitment to something that firstly can be seen as being practical, but then also offering benefits that will potentially enhance their own businesses.

In the case of the CMC the "ingredients" in favour of forming a Community are:

• It is Practical:
  • There is a commitment by the HA to establish the Community in the first place, having seen the benefits from the CM Pilot.
  • The CM Contracts have been set up for 4-7 years with the same players, and therefore there is a long enough period to justify the development of a Community to deliver mutual objectives.
  • There is a significant workload for all the specialists involved which substantiates a level of investment to improve performance
  • There is a responsibility by all those involved in the Contract to adopt a "partnering " ethos, and therefore it could be expected by the HA that some form of collaborative working across its supply chain is warranted.
  • A change in culture is required by Industry from an adversarial to a more collaborative approach, and the community concept provides a proactive forum to achieve this.
• There are Benefits:
  • This is a relatively new form of procurement, new to many, and the Community approach provides a better forum for developing the processes involved and minimise the "reinventing the wheel scenario"
  • It will offer a better framework for learning and subsequently sharing best practice. It should certainly reduce wastage.
  • It provides the HA a better means of establishing the capability of its supply chain
  • It is hoped that organisations will find that through this approach their own performance will improve above what it otherwise might achieve.
  • A recognition that the "voice" of 24 companies influencing change would be a lot stronger than one or two in isolation, and the Community provides this opportunity
  • The opportunity to create something special that industry will recognise, and as such could lead to recognition and opportunities for all involved

2.3 CMC OBJECTIVES

A fundamental is for the CMC to agree its ultimate Objectives and to do this in a way where the ownership of the same is shared by its members.

Foundation of Results.

The model that underlies the approach taken by the CM Community, in determining its Objectives is called the Foundation of Results.

In summary it simply states that any success in achieving any desired Outputs and hence organisations Outcomes will driven by the Inputs of the Culture adopted, the Processes used, and the Performance Measurement of each.

2.3.1 THE CMC VISION

In the early days of the Framework the CM Community Members agreed a single overall vision:

"To deliver an industry leading performance through partnership, co-operation and commitment"

3.3.2 THE CMC SPECIFIC OBJECTIVES

Supporting the Vision and referring back to the principles of the Foundations of Results, the real focus comes with the "community" determining its Objectives in three key areas:

The Culture

I.e. The creation of the right relationships of partnership and collaboration within the organisations that will deliver the Vision

Processes

I.e. the clarity and efficiency of the work done at each supplier level, HA included.

Performance Measurement

I.e. a robust system that will enable and support the delivery and ongoing improvement of both of the above.

Under each of these headings, the members agreed upfront, what are the specific Objectives (i.e. what will we see in a few years hence).

Once agreed corresponding Strategies to deliver these objectives were established and together became effectively the "business plan" for the CMC.

These will be found in the corresponding sections of the Procedures Manual

The above forms the remit of the various "offline groups" that have been set up within the Community to drive them forward - see Governance Structure below.

2.4 THE CMC GOVERNANCE STRUCTURE

A core principle of the Community is that only by setting up dedicated "offline groups" to take ownership of driving the Strategies to deliver the Objectives, will any serious progress be made.

What it looks like [See Section 1.3]

When anyone is considering joining a club, the better it can be described the more attractive it might seem. Pictures help.

In the CM Community we have elected to draw the Community, and this helps explaining it to all staff and operatives, rather than some just words in a paper like this.

2.4.1 OFFLINE GROUPS

The following Groups currently exist within the CMC:

• The Community Steering group
• The Solutions Group
• The Culture Group
• The Process Group
• The Measurement Group

Each of the above has clarity in its:

• Terms of reference linked to the Objectives
• Methods of functioning
• Membership

These are described in the corresponding sections of the Manual.

In all cases the groups will be measured by the Community.

Briefly:

• The Culture, Process and Measurement Groups are empowered by the Community to identify Strategies by which the Objectives in these three areas will be delivered, and then to implement actions to deliver these strategies. They are accountable to the Solutions Group and hence obliged to keep it informed and where required seek approval to take forward proposals.
  
  Membership is from a cross section of the Areas, and should be of people who can best add value to the particular groups work.
  
  Functioning and Chair to be agreed from within the groups.
• The Solution Group is a forum whereby any issues that potentially could prevent the CMC achieving its objectives are identified and actioned, as well as providing a forum to regulate the activities of the other off line group
• The Steering Group gives an overall strategic view on the Community ensuring priorities are dealt with in a managed way.
• Sub Groups may be formed as necessary to drive any particular initiative/issue that might arise from any of the principal groups. For example in the CM Community there is a Communication Group with objectives and strategies (and which has so far produced a Community web site and newsletter).
  
  Other groups include the Innovation group, the Safety Group, the Training Group and the Supply Chain Group. All the above are linked back to the main core Groups

2.4.2 CMC FINANCING

Within the CM Community the members agreed that it was not appropriate that the HA finance all Community initiatives or administration etc.

A Community Budget has therefore been set up that finances things like administration, (there is a Community Administrator), workshops, and various initiatives, and to which everyone contributes on an agreed basis.

Members from the specialist contractors contribute their time to the offline groups at no charge.

2.5 CMC VALUES

Like any "club" there are certain rules and practices which members are expected to adhere to. Similarly with the CMC our Values have been agreed by which members are expected to evidence in their dealings with others in the community.

Most important is that these values albeit "soft" are measured and openly reviewed.