It can only be hoped that the time and effort spent on "Bank bashing" and spending cuts will at a minimum be directly proportional to the benefits to be delivered from the Coalition's new Efficiency and Reform Group (ERG) within the Cabinet Office. My prediction for this is decidedly mixed. First is a concern that implementation of "efficiency and [positive] reform" are tainted by the inevitable mantra of the need for "cuts". This article is not an overview but looks at two very different examples which will have both a positive and negative impact on the public and private sector: outsourcing or shared services, and the trend in construction procurement to the NEC-suite of contracts.
It is a shame that it takes a worldwide credit crunch for both public and private sector entities to focus on efficiency and to put real effort into driving waste out of their businesses and organisations, and processes and projects. A critical assessment of whether or not a "change", a new IT system or a project would (i) improve people's quality of life (whether workers or the beneficiaries of public sector services); (ii) (truly) increase productivity; or (iii) increase profitability or the "bang" achieved by the "buck" spent, has too often been lacking. Too frequently, projects are not killed off early enough, or those conducting gateway reviews buy into the sales pitch of increased productivity, the "everyone else has one" kind of justification, or are caught up in their perceived importance of their project.
Outsourcing and shared services
The current pressure on public sector spending is increasing the focus on "shared services" and/or outsourcing. The structure for shared service delivery, decision making and governance will be key, and anyone who has undertaken projects with multiple clients will be keen to advise on the potential pitfalls. These projects involve massive change management, process change and, inevitably, legal structures and contractual documentation. It is to be hoped those involved in the initial projects, which will set the precedent, get it more right than wrong.
Outsourcings are nothing new. A common issue is that a major outsourcing may be the first outsourcing, or other outsourcings may have been in different sectors, and that can put the public sector at a disadvantage. The partnering ethos can result in too cosy an approach to interrogation at the outset, or policing in the initial stages. Critically, the lessons learned in terminating an outsourcing deal or dealing with poor service provision, are not always available and are invaluable in plugging some potential holes. Outsourcing, like all projects, increases the risks to success if the timetable is concertinaed, or the driver is perceived to be cutting costs as opposed to getting better value services or productivity. Sometimes the advisers can lose sight of how the structure and the process changes can be used to drive continuous improvement and to introduce self-policing functions to protect the developer, but instead focus on the more boilerplate contractual issues.
There are numerous good and bad examples of outsourcing and "multiple-client" deals. A real challenge for developers will be to climb the learning curve on all the potential issues and consider how best to, selectively, benefit from these for their project(s) and organisation before it is too late. With so many public sector bodies looking to move forward initiatives over the next two years there is a decided danger that these projects and developers are all learning as they go and at the same time. The prospect of an audit task force reviewing projects and decisions after the horse has bolted looms large.
NEC suite of contracts
In the construction sector the long-term endorsement by the Office of Government Commerce, which is now part of ERG, of the NEC suite for public and private sector construction projects has started to gain traction. The OGC itself is facing a reduced budget and cuts. There is a vast array of information on the OGC's website to support developers and projects and that is, perhaps, one problem in that there is too much for developers to digest. Critical to successful projects is a project champion and driver preferably from the developer's organisation and with accountability and "something to lose" from the project's success (or failure). Arms length organisations, quangos and Government sponsored "experts" set up to assist developers on projects are rarely accountable or have something tangible to lose.
NEC has many good features: the focus on programme, project management and risk are examples. However, these tools are often used (and should be used on any project irrespective of the form of contract) and many provisions adopted into standard form suites of contracts do not give this sufficient focus. However, to endorse a suite of contract documents as "good" for use in public or private sector projects is dangerous – particularly for the unwary. The discussions should start with what is the optimum procurement route and how might it be delivered. Good procurement rarely stems from a discussion of which standard form suite of contract option to use. That approach to procurement advice is generally for those looking to roll over what they have done before or are most familiar with or those with some other vested interest and, indeed, awareness of the different interests in use of NEC is a basic fact to be taken into account. The NEC suite of contracts, whilst improved in edition 3, still contains a number of major issues for users, both contractors and clients. As use of the NEC continues to gain traction it is likely that Banks lending on projects using NEC will need to undertake greater diligence and consider the acceptability of this at the outset.
Supporters say there is little case law on NEC, therefore, this proves it is good. A bit like elephants are grey, mice are grey, therefore mice are big, this just draws the wrong conclusion from the existing data. It is also likely to prove unfounded over the next five years as greater traction brings further work for those involved at the front end of the construction claims. The problem with "disputes" is that applying the facts to NEC and seeking an answer is often very difficult. This basic requirement for any contract was thrown out with the bath water and the desire to change behaviours and culture of claims by use of "a contract" ignores human factors and shareholder pressures. NEC fanatics have more in common with alchemists.
Opportunities for the future
The inevitable spending cuts and impact upon the public and private sector of "austere Britain" are matters we should rightly be wary of, to say the least, but the changes in procurement bring a silver lining of opportunities to both public and private sector. Looking back in two to five years there will be many investigations into projects and decisions initiated or undertaken over the next twelve months. A number of clients and stakeholders will be left disappointed but where will ERG, OGC, the quangos and advisers be then?