Changing Attitudes and Behaviours in an Integrated Services Provider

Bill Taylor

Managing Director Ringway Jacobs

Changing Attitudes and Behaviours in an Integrated Services Provider

• Integrated Services – the solution ?• Cost and motivation• Shared objectives and risk • People and relationships

Evolution of Integrated Services in Highways Sector

• Contracting behaviour of 1980’s unsustainable• CCT Legislation imposed on Local Authorities• 1990’s first externalisations• Sir Michael Latham 1994 - Constructing the Team• 1996 First integrated contracts in Scotland• Sir John Egan 1998 - Rethinking Construction• 1999 Mac’s introduced in Highways Agency• Sir Peter Gershon 2004 – Releasing resources to the front line• Consistent Message that the industry is not functioning in its own best

interests• Economic Crisis – DfT sponsor HMEP

What are Integrated Services?• Maintenance Contracting• Design services

These are expected but there is much more in

• Network Management• Programme/Budget Management• Asset Management• Professional Advice• Customer Services• Transportation/Public Transport/DC

Why have Integrated Services?• Value for money in procurement• Single relationship• Efficiencies in delivery• Service Provider role clear• Client becomes strategic• Risk more easily defined• More effective LEAN service

CIHT/HTMA Workshop on More Effective Public/ Private relationships

Survey results showed two thirds believe public and private sectors don’t work well because:

• Lack of outcome based solutions• Lack of trust• People and relationships• Lack of shared objectives • Understanding of risk

The effect of payment mechanisms on behaviour

Cost and Motivation

Private Sector Motivation • Protect the owners interests

– Safety

– PR

– Legal requirements

– Society obligations

• Enhance reputation

• Respond to client demands and tone of contracts

• Driven to make a return on investment

• Individuals are generally incentivised to meet shareholder requirements

Is cost/value relationship understood in traditional payment mechanisms?

• Value is cost of project to client

• Value mechanisms are estimates of potential cost for providers

• Indirect mechanism for reward

• Providers concerned with resource costs

• Claims/compensation events are about costs

• Assumptions on contracts have to be realised or relationship is distorted

Focus is far too much on managing value rather than cost

Conflicting Requirements?

Clients want lowest apparent price (value)

v

Contractors need to recover actual costs (using value based mechanism)

TfB Model – Changes Traditional Behaviour

• Fee capped• Profit at risk based on performance• Completely Open Book arrangement• Annual Targets with pain/gain on base delivery• Incentivised to deliver further efficiencies• Focus on ensuring value is achieved not just by

procurement but throughout• Market Testing

Reimbursement of cost only not an acceptable outcome for private sector

Shared objectives and management of risk

Shared Objectives

• Clients need to decide what outcomes are important• Providers payments need to be linked to achievement

of these outcomes• Performance framework continually assessed• Need to include indirect measures– KSI’S– Satisfaction Surveys

• Relationship measures• Measurements shared with managers

Risk Management• Clients set the tone• Risk allocation– Requires strict definition

• Risk Transfer– cost certainty

• Risk Sharing– Potential best value

Never transfer or allocate risks with inferred or implied terms

I would have expected an experienced contractor to…….

Key risk considerations for clients

• Create the behavioural culture you expect to be replicated

• Allocate risk explicitly at tender stage or consider complete sharing

• Develop an understanding of base cost and the factors which influence cost

• Sharing risk allows completely open discussion about service delivery

• Utilises skills of public and private to best advantage• Act decisively when changes occur

People and Relationship Issues

Change Management• Culture change for management• Organisational design• Integration of roles• Joint or unique branding• Cascade by example• Externally measured

People Development

• Support through change process• Opportunity for wider experience• Training for career development• Look for opportunities to change roles• Publicise and reward initiative• Feedback on performance

Governance• Strategic Board• Ownership of all aspects• Business Management Systems• Clarification of policy decisions• Independent Audit• Financial Scrutiny

Flexible Delivery• Open approach – Service Information Centre• Restructuring and service re-design• Continual innovation• Adapting to client/political/budget change• Question whether we are delivering value• Expanding services

Communicate and Celebrate Success