09 May PwC Report on National Children’s Hospital
The PwC report is really insightful, precise and largely correct in its summation and findings. It clearly outlines failings across the process. Those identified in respect of the procurement process are unsurprising to me – they stem from what I might term a nationally ‘weak procurement infrastructure’.
A poor understanding of the risk profile associated with the procurement and contracting is called out at all levels. Having been involved in several hundred procurement projects in Ireland and the UK, it is unfortunately, but typically the case, that the buying process is flawed. Limited investment in preparing for the procurement process leaves the buyer exposed to changes in scope, cost overruns and unforeseen risk.
The flaws exposed by this procurement process are inherent in hundreds of procurement competitions run annually across Ireland. The Office of Government Procurement has made hugely significant strides in professionalising procurement – essentially enabling buyers to incorporate appropriate risk, governance and cost controls into the buying process. It’s clear that many buyers struggle to adequately protect the desired outcomes of the competitions that they run.
It is also typical that these issues only come to light after the competition has been concluded and on foot of a request for additional budget or presentation of a key project risk.
As highlighted by this report, the risks that arose had not been considered or certainly found their way into the procurement process. Not uncommon, but unfortunate when it results in the scale of budgetary overrun that subsequently emerged.
The procurement strategy did include a mitigation measure in the event that a GMP could not be agreed, but as the report called out, and as should have been obvious at the time of the procurement, this option does not in fact mitigate the risk.
Having just returned from Germany, where large scale infrastructure projects such as this are executed efficiently, with managed risk profiles and adhering to budgetary constraints commonplace, there are lessons to be learned:
- Approach large infrastructure projects with a win-win approach.
- Dumping all the risk on the contractor is not a mitigation strategy. It merely encourages subterfuge and a lack of transparency.
- Do not make the price element of the process so important that it overrides everything else. Guaranteeing a maximum price based on shared risk and fair recompense would clearly have been a better outcome. The Higgins Bill has much to say on this.
Most fundamentally, and important to state because it happens continually, is that the report highlights that “the project was allowed to progress without the control arrangements to keep it on track.” This exact situation, lack of contract governance, was fundamental to the issues that the CervicalCheck (Scally Report) highlighted. It continually happens that services are contracted without an appropriate set of Key Performance Indicators (KPIs).
This report makes no mention of KPIs and it would have been a simple thing to create KPIs not just for risks, but also quality, cost, time and to establish robust procedures to deal with overruns, changes in scope and so on. I’m sure they’ll say that they had all that, but the evidence suggests otherwise!
In short, I think that the initial project was being done ‘on the cheap’ and now the Government are reaping the rewards, when suppliers are not inclined to do work at a loss. Better planning, greater coverage of the risks, better contract management and a realistic view on costs would have created a win-win situation.
Article written by Tony Corrigan 16th April 2019 www.orbidalgroup.com