Gold standards

6 October 2011 | Rebecca Ellinor

With its new approaches and methods of best practice, the Olympic Delivery Authority (ODA) has delivered a range of firsts during the procurement of the park for the London 2012 games. Rebecca Ellinor meets the winners

You would expect an organisation associated with elite competition to achieve a number of firsts – and that’s what the Olympic Delivery Authority did with the procuring of the park. And some of the new approaches and standards of best practice it has applied during the process are already being followed elsewhere.

“Only the legacy will prove this, but I think we have changed the construction industry,” says John Fernau, deputy head of procurement, procurement and commercial at the ODA. He was speaking to SM directly after his team scooped both the award for the ‘best public procurement project’ and the overall prize at the CIPS Supply Management Awards.

The ODA is the public body responsible for delivery of the venues, facilities and infrastructure for the London 2012 games, one of the largest regeneration initiatives in Europe. The ultimate test will come when the event opens on 27 July next year and millions of visitors are welcomed to the capital.

After London won the bid to stage the games, key stakeholders came up with a wide range of ambitions for the ODA to achieve, beyond the fundamental requirements of delivering the Olympic Park itself. Everyone wanted this project to do something new, better and different than before. The ODA reviewed these wishes and came up with key objectives covering delivery, sustainability, health and safety, equality, inclusion, employment and skills.

The first was to deliver facilities and infrastructure on time and within budget. “If there were challenges to the ODA around how it conducted the procurement process those could end up being causes for delay on delivery of the programme,” says Mike Cornelius, ODA head of commercial and procurement. “Having transparent, defendable processes from the outset was important because it was programme-critical. There was no time to go back and look at procurement.”

In order to ensure processes ran smoothly, the ODA used a number of electronic tools to manage efficient tendering and evaluation of suppliers. It also had a clear procurement code that ensured everyone was working to same standards, governance and approvals within the ODA.

Construction is now 90 per cent complete. The Velodrome was completed in February after 23 months of construction, on time and on budget. The Olympic Stadium was completed in March, three months ahead of schedule and £10 million under budget. Much of the success of ensuring work was delivered on time and to budget comes from the suppliers the ODA chose and the process used to select them.

Cornelius says: “We decided early on that we would contract at first tier level with a limited number of suppliers and get best value out of them. This was in terms of their supply chain, their procurement, them driving commercial tension through the process and getting good value back through the supply chain – so you get the best of both worlds.”

Furthermore, the team ensured the objectives of the first tier suppliers were in line with their own. “All our tier one contracts required contractors to procure using our balanced scorecard. We pushed our procurement approach down through the supply chain,” says Fernau. Cornelius adds: “A supply chain that accepts it needs to work in such a way that meets the ODA’s broad objectives and takes on board some of the tools and systems we were using to evaluate suppliers – that’s probably different from some organisations.”

The balance scorecard endorsed evaluations based on best value rather than lowest cost and meant suppliers were judged not only on time and cost, but measurements of safety and security, equality and inclusion, environmental factors, quality and functionality and legacy. “Everyone’s always been sceptical about trying to influence lower tier contracts because they think, legally, they’re unenforceable. We thought we would make the requirement and see if it worked. Trying to push that kind of best practice through the supply chain is unique,” Fernau says.

Chain reaction

Most tier one suppliers were already doing many of the things the ODA required of them. The challenge was for them to ensure these things happened further down the supply chain. “It’s about getting the best out of the tier one supply chain, and the supply chain we have on the Olympics is exceptional. We’ve got some tremendous suppliers who have committed to delivering the programme to schedule, they’ve worked relentlessly to control costs and the quality of the product – the venues and infrastructure – speaks for itself,” says Cornelius. “Good procurement is fundamentally about getting the right suppliers. The procurement process has delivered that.”

Fernau adds: “We were always very upfront with the market about what we were trying to achieve beyond the obvious, so contractors knew what we were about as a client, they knew what we’d expect and that wasn’t for everyone.”

The procurement team packaged a number of areas into ‘clusters’ to ensure it controlled some elements centrally. “We decided to centrally procure some things to help us achieve our sustainability objectives – like collection of waste, reuse and reprocessing of construction material, centralised procurement of transport of material in, and security, which we needed to control centrally,” says Fernau.

“A lot of the logistics elements were ones that started at T5. We expanded it and used it on a more congested, complicated site and applied it to more areas. I think we’ve proved it can work on large-scale contracts and projects. That model allows the client to have direct control over the main strategic supply channels.”

Logistics service

The ODA’s procurement approach made sure all venue contractors used a centrally sourced logistics service. A total of 80,000 lorry movements to import bulk loose construction materials were avoided by using a logistics centre based on existing railhead infrastructure at Bow East.

The packaging strategy and contractual requirements ensured venue contractors shared an on-site material re-processing facility (the ‘soil hospital’), which resulted in 98.5 per cent of demolition material being reused, which is at the forefront of good industry practice (95 per cent) and exceeded the ODA’s objective of 90 per cent reuse. This also saved over a further 20,000 lorry movements, which significantly reduced impact on the local community, as well as CO2 emissions.

Despite over 50 million hours worked, there have been no fatalities and although the accident frequency rate of 0.1 has not quite been met, the ODA has a safety record at least twice as good as the industry average for a similar programme, with a rate of 0.19 against the industry average of 0.3–0.4.

Under the inclusion and employment heading, the ODA has placed 1,473 people into work on the Park, of which 57 per cent are BAME (Black, Asian and Minority Ethnic), far exceeding its 15 per cent target. At March this year, 12 per cent of the park workforce had been previously unemployed, well above the goal of 7 per cent. And 428 apprentices have worked on the programme, topping the target of 350.

Firsts also included the use of a delivery partner, which at the time was unique in a programme of this size and complexity. The delivery partner procurement was one of the first to be let under the Competitive Dialogue procedure. The ODA used this approach to ensure the contract was designed to allocate risk and to ensure delivery.

“Procurement was set up in such a way that it was an integrated team. It’s quite novel to have a delivery partner who would then take on the contracts in terms of programme and project management. That’s proved to be a good approach and it’s delivered a good result,” says Cornelius.

This model enabled the ODA to quickly mobilise best-in-class private sector resources and expertise to act on its behalf, including an 80-strong procurement team, in addition to the 20 buyers based at ODA at the peak of purchasing activity.

Cornelius says they were concerned at first about how it would work and getting the cultural fit right was crucial. “The way the ODA set up the initial process using competitive dialogue was really about getting to know potential organisations and less about the transactional procurement process, more on what type of organisation they are. The people in the organisations – are these people you can work with?”

Fernau says potential delivery partners were subject to simulations to see how they would respond to testing scenarios. “The risk is they pitch with an A team then send you the B team, so to prevent that going wrong we ensured their contractual objectives were aligned with ours around delivery on time, cost and priority themes, so under all the good words and bonhomie they were contractually bound.”

Cornelius adds: “There’s been a real team approach to driving performance. On the stadium project, the team is actually called ‘team stadium’. That’s key to success – getting the teams to work in an integrated fashion.”

The delivery partner approach has subsequently been adopted and developed further by Crossrail, which has two delivery partners.

Another first for a project of this size has been clinical and preventative teams working alongside each other to protect workers’ health. And the ODA is the first games delivery authority to be accredited to the OHSAS 18001 occupational health standard. Cornelius says: “The Olympics is such a high profile programme that everybody wants it to be successful. There’s quite an appropriate emphasis on reputation and we’ve benefited from that.”

As Fernau points out, it wasn’t always that way. “It was difficult at the beginning, we were a new client, no one had ever worked for us before so they didn’t know if we would pay on time or be forever changing things. That restricted some of the market appetite and bear in mind there was still a booming private sector construction industry at that point. Once we’d started letting contracts and delivering, things turned the other way. Everyone knew their own profile was at risk if they did not deliver and their share price would go down, so everyone put their A teams on the park and has taken great pride in delivering and that’s been a significant factor.”

ODA chairman John Armitt says: “Procurement has been fundamental to our success, not only in terms of budget and construction delivery, but also to support our wider objectives on health and safety, sustainability, and equality and inclusion.”

And Ian Todd, commercial manager at the Government Olympic Executive, adds the ODA team has delivered a “significant volume of complex procurement in a limited time and pushed the boundaries of best practice”.

☛ Watch the post-award interview at http://tinyurl.com/overallwinner