Reinventing the Works Department

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Reinventing the Works Department looks at how the good aspects of the Government and Council Works Departments, can be reinvented using Collaborative Contracting. The presentation also challenges a number of fundamental aspects of current Alliance contracts being used in the New Zealand Roading Maintenance & Operations industry.

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  • Hi Jeremy, firstly my deepest apologies. I have only just discovered your comments here (and that my email settings were wrong). I would very much like to discuss your questions and will try to get in touch over the next week.

    The idea of the talk was to provoke thought and certainly challenge the current way that collaborative contracts have been used for Roading Maint & Ops in NZ. As an example I don't believe that there are any good Roading Maintenance Alliances setup in NZ yet. This doesn't mean that some aren't performing well, but rather the fundamental structure and setup is flawed for the long term and from the client's perspective.

    I do want to note that my full ideas don't show in the powerpoint. As an example while I mention the idea of having 2 main contractors this was not at the exclusion of having a mix of other contractors supporting the delivery of services. With the establishing and 'owning' the colaborative framework it is easier for them to ensure a better mix of contractors if maintained with the mutual benefit of health of the overall industry and value for money to the client.

    One of my key bottom lines is that the clients in NZ must get smarter and take more charge of operations. While we didn't get to implement my ideas in this presentation when we set up our new Whangarei Maintenance Contracts I would be happy to describe some of the changes we have made that demonstrate this client taking more ownership of their business.

    Anyway I am starting to get carried away so I will stop there and hopefully we can chat soon. I am really interested to hear your ideas for a new paradigm.
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  • Hi Simon. Thought provoking presentation. I have a few questions.
    1. Do you have any statistics on the percentage of senior personel from Consultants and contractors who stay in the same role and location for more than 3 or 4 years - long enough to reap and maintain the benefits of a relationhip dependant process that does not mature for 8 years or more?
    2. Is there any evidence that demonstrates the overall financial benefit to reducing competition to two suppliers over a long period of time (8-40 yrs?) vs capitalising on existing competitive tension from having multiple suppliers in your local supply market?
    3. Is there any empiricle evidence that a large firm is more innovative or flexible or has the ability to provide improved quality of outcome? (does a local contractor who has built a business with his own effort and capital have more or less motivation and ability to provide these things than a mid level manager in a large national business?)
    4. How does the client maintain competitive tension when he swaps between two suppliers? what dynamic will emerge from this over time?
    5. What is the real underlying problem that needs to be addressed here? I agree that collaboration is the right thing but I am not sure that tweaking the current paradigm in the way you suggest is the answer - I think a new paradigm is necessary.
    I'd be happy to discuss with you - Jeremy Sole, CEO NZ Contractors' Federation
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  • So we are all clear a works department is a client’s in-house resource for both physical works and professional services. The best example in NZ was the Ministry of Works.In my talk to day……..Why would we want to Reinvent the Works Department?Brief History of some key aspects of the Ministry of WorksWhy elements of what was lost with the closure of the MoW are still importantHow Collaborative Contracting can help to repair those gapsCurrent Issues with Collaborative ContractingNot an education session on AlliancesLooking at 5 key problems with current Alliance Models and makes some suggestions for improvementWhile I will predominantly talk about Alliances, they are not the only type of collaborative contracting possible.Next: [Why Me]
  • Who is Simon Gough & BackgroundOver 17 years in the roading industry6 years network management contracts5 years running the live Auckland Traffic Management CentreAlliance Experience: Involved with the Auckland Motorways Alliance during the tender and some aspects of the setup phase and worked with the Northern Gateway Alliance on some of the Tunnel Operations aspects.But more importantly today’s talk has mostly come from my journey over the last year and a half as the Roading Asset Manager for Whangarei District Council where I have been developing contracting and operating models.History before me …. Started with Alliance – Small Contracts – Now Somewhere in the MiddleContext: This is based on my work for Whangarei which is a relatively isolated industry with 3 to 4 main contractors and a reasonable variety of smaller contractors.Next: MoW Brief History
  • A very Brief History of MoW1876 abolishment of the provinces and national road boards system established and centralised planning1988 abolishment of Ministry of Works, mainly due to a belief that better value for money could be achieved by using the private sector.As a Training & Development Ground for Engineers18070’s boom US & UK engineers migrated to NZTo them were attracted a large numberof cadets who learnt and eventually became engineersAfter WW2 when the degree became the normal path for an Engineer, MoW became a type of fininshing school providing a diverse experience to help engineers become registerd quickerSo over 100 years MoW trained or provided experience to approx ½ of NZ’s civil engineer.Maybe the bad ties in this photo was the real reason they abolished the MoWNext Slide: A Looming Problem
  • A Looming ProblemThe top graph shows the birth rate peak just after WW2 which is the baby boomer generation.The bottom graph shows this generation living longer and increasing amount of them entering retirement.So what’s the problem? (next slide)
  • Top line shows metalled roads and you can see a increased growth rate in road building till about 1940.(click) Of more interest to this talk is the increase growth in sealed roads that occurred during the 60’s and 70’s.As an example in Whangarei 70% of all of our bridges were built in that 20 year period.This means that that as the Ministry of Works generation that built this infrastructure continues to retire over the next 10 to 15 years we will loose the engineers that we currently lean on heavily for knowledge, data and the breadth of experience that allows more informed and balanced decision making.Next: What Should we Reinvent
  • Mostly recapping…. What should we reinvent?: Read out 4 and expand.So the question I pose today is ..… (Click) ……”Can collaborative contracting help to rediscover these lost elements?”Interesting Example:At a conference last year I hear first hand of a young engineer that was put in an Alliance by the consultants that she worked for. After working on the Alliance with the different teams she found that she actually was more interested in the contracting side so came out the other end of the Alliance a contractor. This is a fantastic result for the industryand would most likely only happen on collaborative contracts.So lets put these in context with a fuller set of objectives for Roading Operations & Maintenance (next slide).
  • I developed these objects while I was developing the Alliance model. At an early stage I felt that we needed clarity on what we should actually be trying to achieve:1. Value for Money – usually the #1 objective2. Healthy Industry – fair and healthy distribution of work3. Collaboration – sharing information and ideas for better decision making4. Outcome & Performance Focused – looking at the end outputs and performance for meeting the customers expectations.5. Skills & Knowledge - development and retention internally and for the industry as a whole6. Innovation – to help drive continual Value for Money improvements7. Middle & End – look at how your operation will work in the middle and the end of your contractsThose highlighted in green are the ones linked with the missing elements from the works departments that we have been talking about.These obviously aren’t mutually exclusive as most of them contribute to the success of other objectives.So if these are a good set of objectives and we the works department gave us a number that are missing today, then why do we need contractors and consultants? NZTA allows RCA’s to do their own professional services and minor and ancillary works. (next slide)
  • I believe this is a question we don’t ask often enough. It gives us a clarity on why we are engaging contractors and consultants.So…….If we now believe that we need contractors and consultants and we have a set of objectives that include trying to reinvent some of the missing elements of works departments, then lets take a closer look at collaborative contracting as a potential solution.First a definition (next slide)
  • You could shorten this definition even further to (click)…..“Working as one seamless team with common objectives while sharing the benefits”I would like to have shown you some comparisons between collaborative contracting and other procurement models but time doesn’t allow. This is included in my paper that should be available with the presentation after the conference if you are interested.Also I need to highlight that while I will talk about Alliances today as main form of collaborative contracts they aren’t the only type. For example in Whangarei we are looking at a model that doesn’t have Alliance but there is an expectation of getting the advantages of collaboration. Without going into too much detail; we have reasonable sized in-house team and they will be the collaborative glue between the separately procured contractors. We are also looking at using computer system that all parties can access to improve knowledge and data sharing and common workflow systems (eg:- RAMM Contractor)The client must be driven to make this work though.Next: Current Problems
  • In my development work I have identified 5 areas that I feel can be improved upon to better meet more or all of the roading operation’sobjectives set out earlier.Next: Collaborative Framework
  • The ProblemThis is issue is partly a perception one. How often do we talk about procuring an Alliance? This may be ok for projects but not for maintenance. Maintenance & operations go on for ever.It is important to understand that the Alliance is not being procured from contractors.The SuggestionThe Council is setting up an Alliance and then procuring the partners to support them in the running of the Alliance. This ensures that there is a focus on setting up the framework on a permanent and long term basis on not purely focused around one or two contracts.The Council would provide the core operating environment, tools, systems and facilities to reduce the long term risks and avoiding the need to pay any partner a margin and corporate overhead for these systems and purchases. This way systems, processes or operational risks are minimised if a partner was to leave the Alliance.
  • The Difference between a Project & Maintenance Alliance:Project Alliance: Budget / Scope / Time all fixed and agreed. Then performance then measured against these key markers.Where as a Maintenance & Operations Alliance:Budget – fixed, usually by others though budgets within that total vary considerable depending on demands during the year.Scope – varies throughout the yearTime – forever, every decision usually has a medium to long term impact
  • Is the client’s knowledge & skills enhanced over the life of these normally 10 year contracts?PSMC Northland example of loss of client knowledge and understanding
  • What happens at the end of the 10 years when the contracts have to be retendered?
  • Surely if they aren’t fighting for control Then they will be competing to see who can get all the moneyBut….. protection can be made to enough of their commercial sensitivities split by geographic areas but…. use a common dummy schedule that gets independently audited…..Next Slide: Summary
  • There is often a strong focus on trying to measure value for money. I believe that ultimately we have to believe in the processes and environment that we have built to deliver the best value for money.
  • So have we reinvented the works department?(Click) …..Kind of by using the collaborative contracting model we can certainly reinvent most of the missing benefits of the Works Departments.While this wasn’t what I set out to do,it was as I was developing up a model that would answer the objectives that I had determined that I had a dawning realisation that we had almost made it back fully to a works department……click….. Just with some commercial tension built in!Thank you.
  • Reinventing the Works Department

    1. 1. Reinventing the Works Department?Collaborative Contracting for Roading Maintenance & Operations Simon Gough – November 2011
    2. 2. Reinventing the Works Department?Collaborative Contracting for Roading Maintenance & Operations
    3. 3. Reinventing the Works Department?Collaborative Contracting for Roading Maintenance & Operations
    4. 4. Ministry of Works Ministry of Works Touring Car 1918 NZ’s Ministry of Works Bad Tie Competition -1984 Nelson Photo News 1961 First Motorway Johnsonville Motorway 1950 Haast Road Construction c1959 Works Camp - North Island Main Trunk Line c.19081876 – 1988 (incl Public Works Dept)
    5. 5. A Looming Problem Statistics New Zealand
    6. 6. Impact of Ministry of Works1000009000080000 Kilometres of70000 Metal Roads6000050000400003000020000 Kilometres of Sealed Roads10000 0 1920 1925 1930 1935 1940 1945 1950 1955 1960 1965 1970 1975 1980 1985 1990 1995 Statistics New Zealand
    7. 7. So what Should we Reinvent?1. Training & Development Ground2. Variety of Experience3. Knowledge Continuity4. Closer working relationship between the contractors, consultants and clients Can collaborative contracting help to rediscover these lost elements?
    8. 8. Objectives1.Value for Money2.Healthy Industry3.Collaboration4.Outcome & Performance Focused5.Skills & Knowledge6.Innovation7.Middle & End
    9. 9. Why do we need Contractors& Consultants?1. Specialist skills and equipment2. On demand resources3. The ability to spread the costs of under-utilised resources.4. Access to a wider network of expertise, experience and knowledge sharing5. Creating a commercial tension and focus (the missing ingredient for the Ministry of Works)
    10. 10. Collaborative Procurement isAn umbrella term forclients, contractors and consultantsworking together in a seamless team tocommon objectives that deliverbenefits to all, but most importantlythe project outcome. Source: U.K. Constructing Excellence
    11. 11. Current Challenges withCollaborative Contracting
    12. 12. Who owns or controls theCollaboration?1. Perception exists that the Alliance is the contract2. We limit our selves by thinking in terms of the length of the contract1. The client should establish and own the collaborative framework2. The client will then procure partners to assist with delivery3. On this basis the client should provide the day to day business operations to reduce the end risk and cost
    13. 13. How do you Create Incentiveswith Fixed Budgets?1. In today’s financial environment clients usually work to fixed and declining budgets2. Maintenance & Ops collaborative contracts very different to Projects1. Need to focus on cost productivity to calculate improved performance and create the bonus pool2. Performance metrics then used to determine how the bonus is shared
    14. 14. How do you Maintain HighPerformance?1. A new well performing collaborative team will take 5 to 8 years to optimise their operations2. The commercial model is only the catalyst for creating a high performing team1. The incentives need to be added to and updated to ensure they encourage the team to keep performing at a high level
    15. 15. Is the Client’s Knowledge &Skills Enhanced?1. Significant long term risk is associated with the deteriation of knowledge and skills in the client organisation2. Current Alliances often don’t have enough client staff in them to mitigate this risk1. Clients should aim to build their staff’s skills & knowledge over the contract duration
    16. 16. What Should the End LookLike?1. A smooth transition and continuity of services2. No impact from knowledge loss3. No large costly tendering process to select the incumbent who has all the track record, experience and resources1. I suggest using two main contractors and staggering the retendering to create a perpetual service delivery
    17. 17. Two Main Contractorsin a Collaborative Contracting Arrangement
    18. 18. SummaryClient establishes and owns long termCollaborative FrameworkUse Cost Productivity to determineefficiency gains & focus behavioursContinuously monitor performance &modify incentivesInclude more client staff in yourcollaborative teamsUse 2 main contractors in yourcollaborative team
    19. 19. “Kind of” “Have we reinvented “Yes, but with a commercial the Works focus” Department?” Works Department Conclusion
    20. 20. Questions? More Information? Simon Gough simong@wdc.govt.nz Whangarei District Council

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