“Recent failures, bailouts, and excessive costs show that the risk analyses and value-for-money accounting used to justify P3s are clearly flawed and cover up the true costs and risks for the public.”
Such as the one from which the above excerpt has been taken, there are no shortages of articles and papers relating to the unrealized expectations of what were once promising PPP initiatives. The question is why do PPPs consistently underperform?
An April 2012 report titled “Public Private Partnerships in India: Lessons from Experiences” goes a long ways towards identifying at least in part, some of the key problem areas that have caused so many programs to run off the rails. While this report points to many of the issues requiring solutions, it unfortunately fails to offer a real systematic framework for fixing them. The issues to which I am referring include a “static” transactional orientation, how variability of demand and expected changes are viewed and managed, risk/reward allocation, and the effective utilization of PPP procurement as a vehicle to create sustainable economic value above and beyond project bubble.
With UK government taking a hard look at PFI and introducing PF2 as a measure to improve the performance of traditional PPPs, where the public sector partner(s) take an active role and ownership of the “business”, the gap between the promise of P3s and their outcomes may become slightly narrower. However, until a truly holistic adaptive framework is introduced, we will continue to struggle to gain the necessary traction to achieve the hoped for outcomes.
So what is a holistic adaptive PPP framework?
An adaptive PPP, or as I sometimes refer to it as a relational PPP (in keeping with the relational terminology), is a relationship-based Public-Private partnership framework where the focus of the PPP management process is on two integrated dimensions:
a) Establishing the baseline business arrangement from which we will begin a continuous alignment process. This dimension includes all of the usual management, technical and financial planning activities, but without the burden of having to predict the unforeseeable in terms of variability of Demand and PESTL environment; and
b) The establishment of a Relationship Charter within which contractual elements and metrics such as deliverables, timelines, financial obligations, service level quality and performance are jointly managed.
For those who have already read my book Relationships First (eBook ,Hard Copy, and have attended my seminars and training programs, you know that the SRS Relational Contracting Methodology provides a detailed roadmap for managing the process and development of baseline arrangement referenced in point “a”, as well as how to properly structure and operationalize the Relationship Charter.
Consisting of three constructs, the Relationship Charter will also provide the framework that is needed to operationalize the new UK approach to PPPs.
The SRS Relationship Charter consists of:
a. Shared relationship mission and purpose;
b. Joint Governance Framework;
c. Open book financial management offering transparency and accountability in managing public funds.
With the added layers of transparency, openness and objectivity required for public procurements, the SRS Relational Contracting Model becomes an essential enabler and a natural platform to launch and implement successful Public-Private Relationships.
This is due to the fact that the SRS relational model provides the necessary checks and insight mechanisms to ensure the selection of the right strategic partner. In referring to the right strategic partner, I am of course talking about one that can deliver to meet today’s needs, but is also strategically capable of adapting to changing circumstances to jointly manage the delivery of improved outcomes.
When news broke earlier this month that there were major changes being implemented regarding Defence spending in Canada, no one was really surprised. Change as they say was inevitable.
The question is what does it really mean?
Over the next week I will be posting several articles that will provide what I believe will be an unprecedented look at why these changes happened and even more importantly, what we can expect in terms of both immediate as well as long-term outcomes.
In the meantime, and in referencing PWGSC Minister Diane Finley’s comment regarding the need to engage Canadian businesses in the defence spending process, the following video excerpt from my Relationships First webinar series explains the why and how of an effective Industrial Regional Benefit policy.
I was recently asked a question regarding Futuresourcing™ in terms of developing an effective contract governance model. Specifically, what is the best way to structure a contract to ensure that the desired results are achieved when neither the buyer nor the supplier have had any previous experience with the required task.
My answer was simple . . . Futuresourcing™ is an inherent part of all contract relationships in that history is not a sufficient indicator of future success, nor can you anticipate all future events or try to manage them within the framework of a static contract. In short, regardless of whether or not one is dealing with the delivery of a known product or service or looking to source an entirely new deliverable, relying on a contract to ensure an intended outcome will not work.
Rather than merely providing a critique of existing contracting protocol without offering a viable alternative, I wrote the book Relationships First: The New Relationship Paradigm in Contracting as a means of introducing the Relational Contracting Model.
For those of you who have already read the book you know that within its pages is a practical guide – supplemented by corresponding case studies – for structuring a relationship-centric model that has over the past 20 years, consistently delivered the expected outcome for clients in both the public and private sectors.
In February, we will be extending this knowledge transfer through our new interactive Relationships First webinar series on Udemy.
With more than 2 hours of quality, high impact content, I will personally take you through my new introductory course that will provide you with the basic framework for establishing a truly relational contract.
As part of our series launch, Udemy will be providing one-time special discount pricing, so you will definitely want to take advantage of their exciting offer.
In the meantime, take a few minutes to watch the following video to learn more about the new Webinar and the SRS Relational Model.
The Relational Divide: Why CGI HealthCare.gov experience reflects more about the contracting process than the company itself by Andy Akrouche
I read with interest the January 14th Wall Street Journal article “Accenture to Take Over Fixing HealthCare.gov Website” by Stephanie Armour, in which it was announced that CGI’s contract with the Federal U.S. Government would not be renewed.
Even though the loss of the contract was small in terms of CGI’s overall revenue, what likely stings the most is the perception that blame for the highly publicized challenges with the new website was the sole responsibility of the Montreal-based consulting firm.
But does this conclusion reflect the true story?
One of the biggest lessons I have learned over the years, is that when faced with the opportunity to enter into a true partnership based on a shared mission and purpose there really is no other alternative. You must choose to collaborate. Unfortunately and as repeatedly demonstrated by so many initiatives in both the public and private sector, collaboration is an afterthought when it comes to the contracting process.
In the following excerpt from Relationships First: The New Relationship Paradigm in Contracting, I talk about why initiatives – and more specifically relationships – such as the one involving the HealthCare.gov website go off the rails:
Why Do the Majority of Outsourcing Initiatives Fail?
Despite industry’s best efforts to modernize and professionalize sourcing practices, project management and service delivery methods, 70% of significant business relationships or large projects do not meet their objectives.
This is because organizations in both the public and private sector continue to rely on outsourcing partners who provide services based on a static requirement that is established at a specific point in time. Relationships that are structured around this approach inevitably fail because a ‘single transaction’ approach does not allow for the natural evolution of needs and stakeholder capabilities.
These issues are further exacerbated by ‘futuresourcing’ which takes place when new service requirement capabilities are introduced in the absence of client or vendor experience.
Even with the promise of significant up-front reductions in operating costs, vendor responses to ‘futuresourcing’ bid requests are speculative and often tied to a ‘let’s win the business first and worry about making it work afterwards’ mindset.
As discussed in Section I, the failed relationship between the U.S. Navy and EDS demonstrates the folly of this approach. Yet it continues to be the norm in the industry.
In order to reverse this trend, we must change our mindset around contracting and contract governance. We have to think in terms of being ‘relational’.
In my book I go into great detail in terms of what it means to be relational. For the purposes of this post I will say that without a relational framework collaboration is a virtual impossibility. And this is where the challenges with the creation and launch of the HealthCare.gov website likely originate.
The fact is that this was an extremely complex undertaking, which meant that traditional contract governance models would prove to be ineffective in creating the kind of collaborative framework that would have been necessary to address the website challenges in a timely and cost effective manner.
The real question going forward is simply this . . . has Accenture been set-up for success or failure? If the same engagement process that was used to originally create the relationship with CGI was also used to select Accenture, how can we expect a different outcome? This of course is the real story behind the headlines.
Over the coming weeks and months we will likely learn the answer – at least in part – to this last question.
Ministry of Defence privatization plans: Setting up stakeholders for failure or success? by Andy Akrouche
We are all familiar with quotes such as “Insanity is doing the same thing over and over again but expecting different results.”
Even though the announcement that the Ministry of Defence’s plans to privatize its troubled procurement process would be scrapped has been anticipated for the past couple of weeks, when news of the initiative’s demise had finally materialized it was nonetheless noteworthy. Especially with its detractors whose refrain “I told you so,” could be heard clear across the Atlantic.
While I am not one to echo those same sentiments, it should probably come as no surprise to anyone, especially those who have attended my seminars or read my book, that I am all for outsourcing. However, I am also a strong believer that the public sector cannot simply outsource its responsibility and accountability for the delivery of a service it is legally mandated to deliver. Nor do I believe that it can successfully transfer and wash their hands of the associated risks of its duties to a private entity.
Within this context, the outsourcing of these complex business processes to the private sector can work if they are structured as a partnership, and in a manner that maximizes shared insight and learning on an ongoing basis. This is especially true when it comes to establishing the criteria by which success will be measured and modified both now and throughout the life of the relationship.
Unfortunately, and as experience has shown us time and again, said partnerships cannot be borne out of a strategy that is designed around a transactional mindset that is myopically focused on circumstances in the here and now only.
Nowhere is this precept more critical than it is when an organization attempts to outsource the purchasing process.
Procurement affects the whole operation. It is the place where if you apply a change in one area, it will almost certainly have to varying degrees, a dramatic impact on all areas of the organization. As a result, you have to be extremely careful not to misconstrue your objectives and misinterpret the corresponding results.
For example, realizing a lower cost on a particular product is not tantamount to realizing an improved collective or enterprise-wide outcome. In fact, it could mean arriving at a worse outcome for the very same stakeholders you are attempting to satisfy. After all, a gain in one area should not be achieved at the expense of another area of the program.
This is another key point, in that a “disconnect” of this nature – particularly when it extends to include an external partner – will ultimately come back to hurt the entire program and nullify the anticipated benefit. I call this the unintended consequence factor.
In the case of MoD, the desire to address the known challenges with the procurement process is laudable. However, and by relying on the same broken procurement regime to both analyze and source the new arrangement in the hope that it will deliver a different result, is where the program went wrong.
A new more adaptive approach is needed, that takes into account not only the factors that are known today as well as identifying any unknowns through a proper industry analysis, but maintains a relational ability to recognize and respond to future changes.
What do I mean by a relational ability? Quite simply, it means that all stakeholders are a party to both the understanding and establishment of the collective goals and outcomes of the relationship. The only way to accomplish this is through an effective engagement mechanism that focuses on the selection of partners based on strategic fit. Specifically, you must select those partners who are able to work with you to deliver your known set of deliverables and, are also strategically positioned to work with you to manage the known unknown variables that will invariably crop up up down the road.
I completely agree that MoD should retain advisors that can help them innovative/renovate their process. But they need to properly source the relationships that are necessary to fix the present procurement function within the government, instead of simply outsourcing their problems and a set of arbitrary objectives that will likely set their third-party partner up for failure rather than success.
In short, they have to build their capability and capacity to source relationships as opposed to transactions or deals.
Ubiquitous Progression: How the SRS Relational Model is becoming an Industry Standard by Andy Akrouche
I have to admit that I was happy to see that my numerous discussions with IACCM has made an impression on them to the point that they would talk about the core elements of the SRS relational model that we developed and implemented over the past 20 years in their recent “Contract Management Success: The Secret Sauce” webinar.
While this does not surprise me in that other associations and industry pundits are talking about the importance of my Relational approach to contract management – including the creation of a Relationship Charter – with increasing frequency, it is nonetheless a humbling experience. The fact is that this paradigm shift to which I had referred in my new book “Relationships First: The New Paradigm in Contract Management,” is long overdue.
All this being said I never expected that similar to Kleenex, which has become the ubiquitous term used for all tissues regardless of make, my terminology and the principles that define the SRS Relational Model would itself become a defining reference point in terms of the evolution of contract management.
However, there is a cautionary element that must be considered relative to the momentum surrounding the use of Relational terminology. Specifically, talking the talk and walking the talk are two very different things.
As we have learned about the long on promise short on results sentiments relating to the “win-win” negotiating approach, simply recognizing the key elements of a model is not the same as actually being able to successfully implement it. Over the past 20 years, and as outlined in great detail in my book, myself and my team have successfully implemented the Relational model in both the public and private sectors.
Our vision is to make the Relational Model the de facto standard for complex procurements and strategic initiatives including outsourcing and Public-Private Partnerships. Sourcing and managing relationships is fundamentally different than sourcing and managing contracts, deals or transactions. Based on our extensive experience and expertise, we help our clients to make the transition to a relationship based contracting model, by way of a full suite of proven advisory services. This includes capacity building (in class and online training) and knowledge transfer services to help them to establish and manage high performing relationships.
Once again, it is fantastic that the industry as a whole is working to reverse the high rate of complex contract management failures by adopting the SRS relational contracting model constructs. Going forward, I see such tremendous potential for organizations to finally address the value erosion to which Tim referred in the IACCM webinar through the use of the SRS Relational model. In this context the coming months and years should prove to be very exciting, and for me personally fulfilling.
Have you ever wondered why there is such a great emphasis placed on learning negotiating techniques? After all, and as a simple search on the Internet will demonstrate, there are tens if not hundreds of books written on providing insight and direction on negotiating deals rather than building relationships. From “negotiating to yes” to “zero sum” and everything in between, the myriad of models all seem to aim at establishing the ever elusive win-win or “we” arrangement.
What is being completely missed here is that the prerequisite conditions for a true collaborative relationship cannot be borne or delivered from a “contract first and relationship second” mentality.
So what is a contract first mentality?
Quite simply, it represents the “you get what you negotiate not what you deserve” mindset that is based upon an adversarial approach to working with your partners. Or to put it another way, you first have to “beat” your partner before you can start to “work” with your partner. Regardless of the negotiating technique you employ, this one-upmanship approach is hardly the ideal scenario for forming a lasting, mutually beneficial relationship.
In my book Relationships First: The New Paradigm in Contract Management, I discuss how there is no real substitute for insight-based decision making in successful long term relationships. Of course the only way to gain the required level of insight for a successful long-term relationship is through an ongoing joint focus on relationship planning, business process improvement, issues management and opportunities development leading to improved relationship outcomes. Again, this is something that is difficult if not impossible to do at the negotiating table.
This is also the reason why in my book and at my seminars, I discuss at length the following three crucial elements and the key role they play in establishing and managing successful relationships:
• Industry analysis – a process of in-depth understanding of related industries, strategic groupings and private sector capabilities that drives the alignment of relationship objectives and outsourcing or partnering strategy
• Strategic Fit evaluation – assessing vendors not just on their ability to meet the known requirements but also the alignment of their corporate strategy and strategic capabilities with client strategic outcomes and key enablement requirements
• Establishing and managing a Relationship Charter within which delivery, performance and relationship is managed and evolved
In the end, what I am really saying is that we need to place less emphasis on the negotiation phase, negotiator skills or tactics, and instead place greater reliance on building truly collaborative relationships throughout the entire procurement process.
Not only will your adoption of the Relationships First mindset ensure that you have the right partner at the table both now as well as into the future, it also means that you will be able to establish a jointly agreed upon collaborative framework that will enable you to co-manage the generation of deliverables, ongoing relationship performance and the inevitable situational changes that occur throughout the life of the contract.
In a recent presentation I gave to a senior government management team I was introducing what I believed to be an innovative yet practical approach relating to cross agency collaboration.
While there seemed to be no disagreement as to the merits of what I was presenting, the inevitable first questions were not unexpectedly centered on what I call the “let Mikey try it first” mindset. Specifically, where has this be done previously, did it work and, what were the results?
On the surface, they are reasonable questions. However, it is not so much the actual asking of the questions themselves, but the reasons behind their being asked that leads one to wonder if we Canadians have lost the ability to think and the ingenuity to innovate without the tacit approval garnered through the previous experience of other governments such as the United States, UK, Australia or New Zealand. Logic and overwhelming evidence to the contrary we have for all intents and purposes become fixed on an innovative entry strategy of between fourth and second in.
Speaking of being fixed, let’s examine more closely the Fixed Wing Search and Rescue (FWSAR) project.
In its 8th year, the project to purchase new aircraft to replace our aging CC-115 Buffalo and CC-130 legacy Hercules aircraft is reminiscent of the number of years that have passed since the Toronto Maple Leafs last won Lord Stanley’s Cup or for you movie buffs, the 31 years that the animated film “The Thief and the Cobbler” was in production before it was finally released.
Okay, the examples may be somewhat extreme in terms of actual time, but the point is pretty clear . . . why is it taking so long to replace rapidly aging equipment?
Perhaps this is the reason why the Canadian Government has created a secretariat to oversee the FWSAR procurement similar to what had been done for the shipbuilding program. Although it is worth noting that in the latter instance, the framework for the shipbuilding project lacked critical relational elements that have plagued its progress from the get go.
Challenges notwithstanding, the FWSAR team is using its best efforts to select the replacement aircraft from an existing array of capable technologies ̶ a summary of which is available on the following website; http://www.journal.forces.gc.ca/vol12/no4/page58-eng.asp
Interestingly enough, and as reported by The Ottawa Citizen’s David Pugliese in his July 22nd article Team Spartan Finishes Cross-Country Partner Tour For Fixed Wing Search and Rescue, one of the manufacturers competing for the contract recently concluded a cross-country partner tour under the name of Team Spartan. I am of course talking about the C-27J team who embarked on the tour with the “twofold objective” of gaining a better understanding of the aerospace and industrial capabilities of each Canadian region as they relate to Team Spartan’s FWSAR offering, and to identify new Canadian partners who match Team Spartan’s platform and Industrial Regional Benefits (IRB) needs.”
While the outcome of the tour was deemed to be generally positive, it still failed to answer what I consider to be the most important of questions; why do we want to own and operate the equipment in the first place? Would it not make more sense to procure them as a service?
The idea is certainly not out of the realms of being a sound strategy worth pursuing. In fact when I used the FWSAR project as a case study during my July 10th and 11th seminar in Toronto on Public-Private relationships, every senior executive in attendance indicated that they would pursue the outsourcing strategy as opposed to their owning, maintaining and operating these aircraft themselves.
After all, and being mindful of the importance of the “who’s done it first” viability test, the British not that long ago made the decision to outsource their SAR requirements to a third party (see Colin Cram’s July 24th article Outsourcing of UK Air/Sea Rescue). This decision according to the Defense Industry Daily is part of a global trend toward public-private partnerships to perform some Coast Guard and SAR functions, including Australia’s billion-dollar Coastwatch program.
So what’s holding Canada back from becoming part of the above trend ̶ or perhaps creative contracting evolution would be a better term? The way I see it, there are many benefits relating to outsourcing our SAR operations including:
- Gain a major step change in service coverage and quality that cannot be gained organically by means of evolution or incremental change.
- Manage fluctuation in demand for SAR services.
- No capital investment – relieves Canada from the task of having to decide what plane or combination of planes can do the job properly and from making huge capital investments and upgrades on an ongoing basis. In essence, Canada will pay for the service at the quality levels it deems necessary at any time today and into the future.
- Under a relational procurement approach, the outsourcing option provides ongoing alignment with Canada’s needs versus the needs at a particular static point in time.
- Focus on core business – the business of SAR delivery management through relationships and not SAR delivery itself.
Once again, we have to stop and take advantage of this unintended 8 year pause to ask why we are continuing to go the buy route.
Even though I would not consider outsourcing the security and defence of our country, when it comes to non-military services, we owe it to ourselves to examine this option in an objective, forward looking manner.
I firmly believe that if we consider our goals and expected outcomes relating to SAR operations we will, like a growing number of other governments, come to the conclusion that a service based relationship with a private sector provider and partner will deliver a high quality service at a lower cost.
Further, and with the right outsourcing strategy we can create significantly more sustainable economic value in Canada when compared to the current options on the table.
Last week , the Procurement Insights European Union Edition was one of the very first blogs to report on the news that the Minister of Justice Chris Grayling had announced that the Serious Fraud Office (SFO) had been called in to investigate G4S and Serco. Grayling indicated that there was evidence that both companies had overcharged the UK government by 10s of £millions for contracts related to tagging criminal offenders.
As the news of the investigation began to spread globally, the Obama Administration announced that they had awarded a contract worth as much as $1.2 billion to a British company to help them sift applications for health insurance and tax credits under the new health care law. That company is Serco.
This apparent disconnect in contracting sensibilities led me to seek out Andy Akrouch who is the President of the Centre for Relational Outsourcing and Strategic Management.
Similar to the questions raised in Canada relating to the SNC-Lavalin scandal as a result of the introduction of this government’s new integrity policy, which stipulates that “companies can be blocked from bidding on government contracts if the company or one of its directors has been found guilty of offences such as fraud, bid-rigging, money-laundering, tax evasion, bribing a foreign official, drug dealing or being involved with organized crime,” one wonders if it is fair to penalize an entire organization for one or two bad apples.
For example, with the Canadian policy, “Companies can escape the provisions of the federal government’s tough new integrity policy for procurement if an official under a cloud leaves the company before conviction.”
Even if you are inclined to accept this sifting of the bad apples to preserve the entire barrel approach, an even bigger question that needs to be answered is how something like what happened at SNC-Lavalin as well as with G4S and Serco in the UK, could occur in the first place? This is where Akrouche’s insights come into play.
The following is from a comment that was posted by Akrouche relating to the July 11th, 2013 article BREAKING NEWS: Evidence of fraud on the part of government suppliers G4S and Serco reported by Minister of Justice by Colin Cram:
First let me say that in no way I would attribute this behavior to G4S/Serco company policy or to a management directive. Colin is the expert on this, but I would assume this is always done by individuals who do not conform to policy, ethics and good governance. I would suspect that there many more instances and cases similar to this than we know. We just simply don’t know and had no way of knowing.
Why am I not surprised by this? Until the SRS Relational model came along, public sector organizations structured business arrangements as deals or transactions and employed layers over layers of oversight to manage these contracts. This UK- Serco-G4S finding confirms what we have been saying all along that it is not possible to achieve optimum contract performance and minimize risk (all risks including fraud risk) by means of oversight mechanisms only. The only real way you can truly mitigate risk is via insight.
Insight, however, is gained through shared purpose, active management, joint governance and open book financial management framework. It also means that we employ different methods of sourcing and managing these contracts – relationship based methods. I just finished delivering a two-day course on relational contracting and had extensive dialogue with public sector leaders on exactly this same issue. The Relational Model OBF provides the means for complete financial transparency and accountability in the management and effectiveness of funds throughout the entire relationship life cycle.
What are your thoughts regarding Akrouche’s comment? Are events such as what happened with SNC-Lavalin here in Canada and G4S and Serco in the UK going to serve as the impetus for changing the way in which government contracts and related risks are managed?
Finally, and perhaps this is the most important question as it can certainly fuel the desire to make any necessary changes to the contract management process ̶ should companies who are under investigation for fraud be allowed to bid on government contracts both domestically as well as internationally?