In this third of our four-part thinking paper series on project transformation in the UK, Steve Rowsell, director of Rowsell Wright, discusses early contractor involvement (ECI) with John Mason – Competency Leader - Programme & Project Delivery, Australia at global engineering and infrastructure advisory company Aurecon. They explore the impact ECI can have on improving supply chain efficiencies and how it improves overall project performance.
John: In our two previous papers, we covered the way the UK public and private sectors have developed procurement over the last 15-20 years, and we touched on the New Engineering Contract (NEC)
As a strong advocate for ECI, could you expand on what you view are the benefits Steve? Could you also touch on some of the evolutionary developments and where you see ECI going in the future?
Steve: In the UK, we introduced early contractor involvement or ECI around 2000. Initially, we called it early design and build but that didn't seem to have the effect that we wanted.
We really wanted to convey that this wasn't only about consultants starting work earlier on the design; we actually wanted to get the contractor and the supply chain involved with each other much sooner in the planning and design process. So we called it ECI, to emphasise that something was changing and it wasn't merely about buildability and getting innovation in at an earlier stage.
As we saw it, there are a wide range of benefits associated with ECI. It’s about forward planning, understanding risks and acknowledging health and safety issues. There is considerable merit in designing health and safety risks out of projects at an early stage, particularly where they relate to construction, maintenance and whole-of-life operations.
John: Presumably a contractor also benefits from being able to better plan the skills and the resources they are going to need to deliver the project; a critical issue when skills are scarce?
Steve: Appointing a contractor two to three years before they need to begin construction of the project allows them to develop and establish the resources they are going to need, which is highly beneficial. Establishing better relationships between the contractor and the stakeholders, perhaps two years before the contract starts is the key. If you start developing procurement strategies when the contractor comes on board, say one to two months before they start work, there is no relationship with the stakeholders and no value-adding input. We have seen the benefits of early engagement directly improving project delivery outcomes.
The key advantage of ECI is in having the contractor on board when the investment decision is finalised. This enables a project team to start work promptly and, in England, employing ECI has reduced the time needed to develop and deliver projects by 30 to 40 per cent.
The practice of ECI is being particularly applied to all sorts of major projects but from an asset lifetime perspective, ECI as a principle can be applied to maintenance contracts as well. In the UK highways sector, the managing agent contractor (MAC) contracts are also based on this principle, so that the contractor is there planning and advising on the maintenance requirements for the project.
John: Does ECI therefore create the opportunity for a closer working relationship between all the parties: the client and the supply chain, the programme and its delivery partners? Is this a critical attribute to these ECI contracts?
Steve: Yes, collaboration is absolutely fundamental to the success of ECI. Having said that, the approach to collaboration has evolved and, as with alliancing, collaboration means different things to different people. When we started off, it was referred to as ’partnering’.
‘Partnering’ in the UK acquired a bad reputation through developing on some projects into relationships, which ultimately weren't in anyone's interests.
The collaboration I refer to is a very firm understanding of the contractual obligations and an extremely robust application of the commercial principles under the terms of the contract. In this collaboration model, you are working together to mitigate risks, but all the parties completely understand the commercial principles and the supply chain has had to ensure that they develop the right approach to collaboration.
I think the UK now has a mature form of collaboration happening. Whereas, perhaps up to 10 years ago, the introduction of partnering was seen by some as a way of trying to take advantage of a client. That was quickly recognised and clients are today protected by proper application of the checks and balances within the contract structure.
John: What are some of the challenges with adopting an ECI approach, particularly understanding how far to develop the design before involving the contractor?
Steve: Selecting and building the right team is absolutely fundamental, because early contractor involvement means that you're not able to get a fully developed price at the contract award stage. How you go about identifying the best team to develop an optimal solution and to deliver that efficiently is part of the overall process.
However, I believe the opportunity side of that is much greater than the risk. You know there are risks and if you're aware of how they can be mitigated, you can then develop the target price during the first part of the ECI contracts.
John: Are there particular industries or client types that lend themselves more to ECI?
Steve: Clients who have long-term programmes of work have the advantage in that they can incentivise against the longer term opportunities.
In the UK, Highways England has been using ECI for some time and Crossrail, which has a UK£15 billion programme, applied it in a slightly different way but still adopted the principle of getting the contractor involved earlier.
Other examples include High Speed Two (HS2) in the rail sector, which is now a long-term client equivalent to Highways England and Transport for London, who look after transport requirements on road and rail across the whole of London's networks. Water companies and utilities are all using ECI programmes.
Some local authorities have applied ECI reasonably successfully on individual projects but, of course, it is more of a resources challenge for them given their fiscal constraints. What we are seeing is greater collaboration between local authorities: they're setting up collaboration arrangements at a client level to look at the requirements across a wider geographical area of the country and combining resources to be able to apply some of these principles.
John: To summarise Steve, you appear to be seeing ECI promoting fruitful collaboration up and down the supply chain and across clients? Are businesses looking to take advantage of improved leverage and improved relationships with their supply chain partners?
Steve: We are and, as an illustration, on HS2, we have now advertised the first seven of the project contracts. The ECI contracts that are going to be used to build Phase 1 have an average value of UK£800 million. This is over UK£5 billion of work out in the industry being tendered under an ECI arrangement.
It is fantastic news for the UK industry and an emphatic endorsement of the benefits of ECI and stakeholder collaboration in general. Reflecting this, there has been a great response from the supply chain to the ECI contract requirements for a project the size of HS2.
Steve Rowsell is a well-known figure in the UK construction industry and has 40 years’ experience in major project delivery. This includes senior roles at the Highways Agency and Crossrail Limited, and procurement related expert witness work.
From July 2007 until 2010, Steve was Head of Procurement for the UK£15.9 billion Crossrail project across London. Prior to that, as the Highways Agency’s Procurement Director, he was responsible for developing and implementing its new procurement strategy for delivery of the Government’s UK£2 billion per annum strategic road construction and maintenance programme.
The success of the Highways Agency’s approach to procurement resulted in Steve leading the new Change Agent role given to the Highways Agency by Sir Peter Gershon in his 2004 Efficiency Review. This involved working with local authorities to help improve their procurement methods and achieve the challenging new efficiency targets. He has now established a procurement consultancy, Rowsell Wright Ltd, and is supporting major infrastructure clients, including High Speed Two.
Steve is the current President of the Chartered Institution of Highways & Transportation (CIHT) in the UK.