London 2012 Olympics, Managing and controlling contingency


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London 2012 Olympics, Managing and controlling contingency

  1. 1. London 2012 OlympicsManaging and controlling contingency18thApril 2013
  2. 2. What we wanted to achieve• Control of change – limit theamount of change that affectedthe programme and no surprises• Greater understanding and clarity– make decisions based on thebest data possible• Promotion of activity – activelylook at what could be done tolimit change• Release of contingency – thegreat prize is not to spendRisk management overview
  3. 3. •Ensure sufficient contingencyavailable to complete the job•Limit the amount of free funds atproject level – Milton Friedman?•Strictly control the use ofcontingency•Low levels of delegation butprocesses for emergencies•Re-calculate requirement regularlyand measure performance•Clear guidance on the expectationfor the return of contingency•Make it a programme objective toreview contingency levelsPrinciples
  4. 4. The three lines of defence• Detailed project level identificationand management of individualrisks• ODA Programme Assurance –oversight of the process andcompliance with it and the qualitycheck of the data• ODA Risk and Audit – Setting ofpolicy, audit of outputs andprocess and reporting to the AuditCommitteeThe three lines of defence model
  5. 5. Control of contingencyContingency is controlled through a series of regular governance meetings• Funders – Held by the Government fundingdepartments•QRA calculated quarterly & contingency adjusted•Available quarterly by application to the Funders• Programme - Held by the ODA•QRA calculated quarterly & contingency adjusted•Accessible with approval to Funders• Project – held within the project budgets•QRA calculated quarterly but trended each month•Available with approval of change board, alsodelegation
  6. 6. • Risk management is part of the change control process• Governance rules that required authorisation for all changes• Senior management reviews at various stages of the change lifecycle• Risks migrate through the process until they become certain and arerequests for change with budget authority or milestone changeRisk management context
  7. 7. • Two parts1. Assessment1. Identification2. Analysis3. Evaluation2. Treatment – Formulation of mitigationplans and actions• Repeat regularly based on needRisk management activities• Hold risks centrally and monitor through assurance• Ensure risk are recorded consistently with clear accountability• Report key risks and overall risk status at project and programme level• Escalate key decisions to higher authority levels for resolution• Monitor risk management process for compliance and report• Periodic review process for improvement
  8. 8. • Risk management must be part of the project or progress process• Risk management carried out within the project or function• Assured by the central team for review, update and compliance• Risks reported by the project team as part of the process• Consolidation of programme risks by the central teamRisk management implementation and assurance
  9. 9. Risk management integrated with core programme• Risk management integrated with core programme activities• Reported as part of monthly cycle for implementation reviews etc.• Part of commercial reporting
  10. 10. • QRA was used to calculate the contingency required for the budgets as part ofthe Baseline Report published in November 2007 – Yellow Book• QRA was part of the ongoing calculation of Anticipated Final Cost - the basisfor programme performance• QRA was also used to calculate programme risk contingency• Schedule QRA was used to determine schedule risk on the complex projectsand against interfacesQuantification of risk - QRA
  11. 11. Review of risks• Risks, trends and issues reviewedmonthly with the project team and atimplementation reviews withProgramme Executive• Key programme risks reviewedmonthly with SROs• Programme risks reviewed by ODAassurance group monthly• Programme QRA and key programmerisks review at the Funders QuarterlyRisk Working Group• Key programme risks reviewed by theAudit Committee of the ODA Board
  12. 12. Reporting of risks• Project risks, trends and issues reportedas part of Project Status Report• Project QRA results included in calculationof AFC (Anticipated Final Cost) andreported on Project Cost Report• Key programme risks reported as part ofthe Monthly Progress Report• Programme QRA reported to theGovernment Olympic Executive andFunders as part of the Quarterly Report• Key risks reported to the Audit Committeeof the ODA Board• Programme risk assurance report tomonitor performance of and compliancewith risk process
  13. 13. Contingency reporting• Dashboard showed the current status of contingency each period• Contingency remaining, forecast requirement and variances• Changes from last period, key risks• Headroom and potential savings identified for re-cycling
  14. 14. Key messages for success• Ensure sufficient contingency isavailable• Limit the amount of free fundsavailable – un-let scope?• Ensure strict controls to managecontingency are in place• Assure the process, have regularaudits for compliance and report atthe highest level• Have clear open reporting thatshows how the values have beenderived• Have lots of opportunity forexecutive investigation, challengeand engagement• Use contingency as a performancemeasure – cost to go, drawdown,profiling
  15. 15. Benefits of the approach• Sufficient resources are available tocomplete the project to its timescale –time is always the quiet victim• Scope creep is minimised as contingencyis only used for those things that• It is clear how much contingency hasbeen used and how much is required tocomplete• Un-needed funds can be re-cycled forfurther investment• Performance is easier to monitor as it isnot clouded by the inappropriate use ofhidden funds• It doesn’t matter how much contingencyyou start out with but how much youspend along the way.
  16. 16. •Developer deals intended tofund the IBC/MPC andAthletes Village•Deal might be difficult tofinalise•Private funding would comewith additional requirementsthat might not be acceptableIn the event the credit crunchmade the deals unattractiveand they collapsed•What happened?•Re-design to reduce cost•Funded from contingencyand savingsRisk: Credit Crunch and funding of IBC/MPC and Village
  17. 17. •High number of interfaces andcomplexity•New bridges, roads, sewers,utilities connecting to Venues•Venues and infrastructure are inareas of changing topographyWhat did we do?•Try to minimise the interfaces•Understand and manage theinterfaces•Procure in larger packages andtransfer the integration risk to thesupply chainRisk: Programme interfaces and integration
  18. 18. •Currently about 6,500 employees on the park and afurther 5,000 on the Village•3 major unions represented•The Olympic Programme is high profile and is atarget increasing as the games approached•Some demonstrations but no real industrialdisputes to dateKey risk: Industrial relationsWhat do we do?•Agreed with the unions key principles of employment including:•All labour directly employed and local where possible•Pay to Working Rule Agreement rates•Union representation on site•High standard of welfare, training and employee facilities•Active and regular discussion with all the key unions•Enforcement of agreements
  19. 19. Risk: Security, considerations, changes and authority•Security is key during games andconstruction•Security includes perimeter guarding,CCTV, Fencing etc.•Changes in security scope are alwaysliable and to some extent unknowable•Change in threat can mean a scopechange such as:•Building resilience•Hostile Vehicle MitigationMitigation•Close relationship with the security community and identification of possiblemeasures required•Developed scope to be flexible and signed of by security stakeholders•Transferred cost of risk to Funders
  20. 20. •Village comprises approximately16,000 bed spaces during Games•And 2,500 flats in Legacy•11 Plots of which 5 were CM and 6tier 1•Large number of flats in one go inthe UK to a strict deadline•Supply chain risks for componentmanufacture and deliverysuch as:•Bathroom pods•Cladding panelsWhat we did•Negotiated with constructors toaccelerate and buy off delay anddisruption claimsDelay to completion of the Athletes Village
  21. 21. Risk: Health and Safety•Up to 10,000 workers on site during peak•Complex, constrained site involving:•Working at height•Hot working•Heavy machinery•Tunnelling and underground works•Temporary works•Demolition•Railway workingWhat we did•High focus on safety culture with ‘Safe Start’ and toolbox talks etc…•Made senior managers responsible for safety performance•Stopped work when safety was compromised•World beating safety performance•So far the only Olympics without a fatality
  22. 22. Questions?