The Pickle with Procurement

When I reach any section on procurement in one of my courses, I regularly ask the question “What is procurement?”. The answer I am often given is “buying stuff”! In programmes, we often need to procure something from an external company. The more complex the programme the more likely you will need external help or materials.

Recently, Crossrail has been in the news again as timescales have gone back yet again – from the original December 2018 to “October 2020 to March 2021”. Any programme where there are time increases usually experience an increase in costs and Crossrail is no exception, rising from 2010’s figure of £14.8 Billion to the current funding figure of £17.6 Billion. 

The National Audit Office (NAO) has produced an excellent report into the current state of affairs and the findings in the report are interesting. Quotes in this article are taken directly from the NAO’s report.

The aspect of the report that drew my eye the most was the section on how Crossrail set up the contractual relationships necessary to deliver such a complex programme. 36 main contracts were needed to deliver Crossrail. That number of main contracts is not surprising given the complexity of the work. 

Crossrail is a seriously complex undertaking as programmes go. 73 miles of railway and 10 new stations tell only part of the story. 26 miles of the railways require new tunnels – beneath London – basically complex hard to reach places under a major world city. When Crossrail was set up, the “sponsors set the requirements for the programme, including the scope, budget and timetable”. However, they acknowledge that Crossrail was granted a large amount of autonomy, giving the sponsors “few effective contractual levers”.

Crossrail did not require individual contractors to manage their dependencies with other contractors. Instead, they hired a specialist contractor to provide support in managing the programme, which included managing the integration of multiple contractors. This is a complex undertaking, and bringing specialist assistance was a sensible decision.

Later, Crossrail merged these other teams providing support into their own management teams – which had the impact of Crossrail taking on the responsibility of managing the dependencies themselves. A large number of the cost and time impacts have come about as a result of compensating contractors for delays occurring on other contracts.

There are numerous other ways of setting up a large programme in terms of procuring the services required to deliver it. It is rare that there is a right way and a wrong way – even with the benefit of hindsight. It is possible that another way of procuring the services would have been worse – the NAO report does not say anything either way on that matter.

There is more in the report (and lots more in the large report), but the issue with the contracts which resulted in costs expanding shows a truth. Nothing in project or programme management can be considered independently. 

When procuring services, the way you set this up affects how the programme runs. When I teach procurement, I stress the importance of Project and Programme managers working closely with the procurement teams. As I ask my delegates, “who wears the immediate consequences of procurement not meeting our needs?”
 

The NAO report can be found here: https://www.nao.org.uk/wp-content/uploads/2019/05/Completing-Crossrail-Summary.pdf