Can you commission success? by Andy Akrouche

“The act of granting certain powers or the authority to carry out a particular task or duty.” – definition of commissioning

There is – at least in the world of complex project contracting and management, a fine line between the delegation of a project’s lead to a more experienced third-party, and the abdication of responsibility for its success.

With the former, the buyer is looking to leverage the expertise of a third-party to accelerate the implementation process to achieve a desired outcome faster and on a cost efficient basis.

In the case of the latter, this objective is often lost by an overriding desire to transfer risk and ultimately responsibility to a third-party. Ironically, this reflects a similar mindset that one would usually associate with the traditional outsourcing model. It will also produce similar results for the same reasons.

The results to which I am referring are the high rate of outsourcing initiative failures.

The fact is that whether you call it outsourcing or commissioning, adopting an approach that is centered on using contracts to legislate performance through onerous terms and conditions, has never made sense.

However commissioning, if introduced as part of a collaborative or relational framework, has the potential to finally deliver on the promise associated with Public Private Partnerships on a scalable as opposed to circumstantial basis.

Scalable Versus Circumstantial

In the past, I have made reference to the successful rebuilding of the I-35W bridge that collapsed in Minnesota.

The project was an incredible success largely because of the circumstances and urgency to get the job done, while being sensitive to the  needs of the community.

Unfortunately, successes such as the one in Minnesota, remain elusive because the circumstances were so unique. When I say unique, I am referring to the exceptions that were made on the part of all project stakeholders to get the job done. This included operating at a level of transparency that is rarely part of the normal complex contracting process.

This raises the question, do exceptional circumstances or situations provide the only opportunity for stakeholders to truly collaborate?

My answer would be a definite no.

This is where commissioning – if introduced and managed correctly, represents the bridge between an ineffectual Public Private Partnership past, and the realization of the promise that comes from a relational approach going forward.

The Road Less Traveled

It is at this point in time that we have to look at commissioning in the context of a new beginning.

When I say new beginning, I am not talking about the introduction of previously unknown or unproven methods. What I am talking about is a different way to look at relationships based upon the values and methodology that can (and has) consistently produce the best results.

Or to put it another way, the I35-W bridge project, and those like it, no longer have to be the exception to the rule.

Scalability is not only possible in terms of achieving consistently successful outcomes, it is guaranteed through a relational approach that is governed by the creation of a Relationship Charter.

In the coming weeks, I will be sharing case study excerpts from my book Relationships First: The New Relationship Paradigm In Contracting, that will provide you with a roadmap to complex contracting success.

In the meantime, we are on the cusp of a very exciting and productive time, as long as we view commissioning through a revised lens of relationship-driven collaboration and transparency.

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Check out the second edition of my book Relationships First: The New Relationship Paradigm in Contracting . . .

Andy New Book Cover

The Truth About Public-Private Partnerships

“The fact is that the majority of all long-term complex business arrangements underperform or fail because they are structured as a deal or a transaction as opposed to a strategic relationship between key stakeholders. Whatever name you give it, a transaction or a deal is still a deal.” – The (Real) Art of the Deal by Andy Akrouche, Relational Contracting Intelligence Blog, December 23rd, 2013

When I considered the response to a recent Toronto Star newspaper article that talked about the myth of Public-Private Partnerships or P3s, the only surprise was that many people were . . . well surprised.

In calling into question Infrastructure Ontario CEO Bert Clark’s position that P3s are an ideal way to pass off some of the risks associated with complex projects to the private sector, the article while accurate in terms of outcomes was technically incorrect.

What do I mean?

The promise or potential for P3s to deliver significant savings and improved outcomes for governments and the citizen’s it serves is in fact very real. Therefore the myth is not in the possibilities in terms of deliverables, but is in the areas of expectation and execution.

It is this latter point that requires closer examination and the development of an implementation process that is based upon open communication and collaboration.

Communication – More Than Just Talking

In an article written by IACCM’s Tim Cummins he has made reference to the paper “A Conspiracy of Optimism,” by the International Center For Complex Project Management.

The paper identified what it called “the conspiracy that leads executives on both sides of the table to lie to their trading partners and to create a combined version of the truth that leads to mutual delusion over what they can achieve, by when and for how much.”

This I believe forms the basis for the conclusions reached in the Star article, including the misguided suggestion that P3s are “against the public interest.”

The idea or premise of the P3s is not the culprit here, but the way in which we do business.

In his paper titled How to make your outsourcing & PPP initiatives successful, Jon Hansen made reference to the “transactional mindset” associated with most P3 initiatives.

While I will let you read that paper at your convenience, the key take away is that a transactional mindset means that the relationship between the primary stakeholders is viewed as one time interaction. This leads to what Hansen called a “win the business first, worry about making it work afterwards” approach, that ultimately undermines the relationship and eventual outcome.

To move beyond the misconception of P3 promise, we have to change the way in which we approach complex projects. In short, we have to adopt a relational as opposed to transactional mindset. This means that the public sector can work with the private sector to better manage certain risks, however said risks cannot be totally transferred or allocated to the private sector as the public sector ultimately remains accountable for outcome realization. There instead must be a sense of shared risk ownership and reward when working towards a mutually desired outcome. In other words, we must view our interaction with key stakeholders from the standpoint of embarking on a new and long-term relationship, in which all concerned parties work towards an outcome that is rewarding both individually and collectively.

It is only within this framework that open and honest communication can take place.

Collaboration Is An Act Of Will

In his book The Procurement Value Proposition, Robert Handfield wrote “integration across the business is not the responsibility of a few but rather a challenge that must be embraced company-wide.”

These are incredibly powerful words as they speak to the fact that collaboration takes a conscientious and concentrated effort on the part of all stakeholders both within and external to the buying organization. Or to put it another way, one cannot simply hope to become collaborative. There has to be a tangible and coordinated effort to create the means by which stakeholders can work together towards a shared outcome.

P3 connectthedots

This is where the creation of a Relationship Charter comes into play.

The Relationship Charter provides the strategic and operational framework for working together. It is within this charter that metrics, timelines and financial obligations, as well as quality are jointly managed.

Consisting of three parts: Shared Mission and Purpose, Joint Governance, and the SRS Open book financial management framework, the Relationship Charter is based on six foundational principles, which are as follows:

  • Act of Relating – and this is where “relational” comes from.  Connecting and linking in a naturally complementary way
  • Mutuality – Having the same or similar view or output each to the other
  • Respect – Recognizing each other’s needs, requirements, contributions, abilities, qualities and achievements
  • Innovations – Use of combined strength and synergies to deliver improved outcomes
  • Continuous Alignment – Making necessary adjustments to improve and achieve relationship objectives
  • Empowerment – Introduction of Joint management structures and processes at the strategic and operational levels to manage the realization of relationship objectives.

As highlighted in the above text, there is a methodology through which a P3 project can be effectively managed towards the desired result.  A vehicle if you will that enables stakeholders to proactively deal with both known and unknown variables that ensures the project remains on track and meets stakeholders expectations.

The creation and introduction of a Relationship Charter, will eliminate the purported secrecy and lack of public accountability, higher financing and consulting costs, and implied profit making on massive scale that was bemoaned in the Star article.

The introduction of a Relationship Charter also makes far more sense than the suggested throwing out the baby with the bathwater abolishment of P3 projects.

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How to make Outsourcing and PPP Relationships Work Webinar Series Launched on Udemy by Andy Akrouche

In response to the steadily increasing number of requests I am receiving from senior managers of both public and private sector organizations regarding the Relational Model of Outsourcing and Public-Private Relationships, I have created an on-line webinar series.

Utilizing a frank, conversational style format, the 4-Part video series on “bridging the gap between expectations and successful outcomes” will provide senior managers with an executive level briefing on how to make complex Outsourcing, FutureSourcing™ or PPP initiatives successful.

In this series, in which I talk with host Jon Hansen, I focus on providing answers to the following five most frequently asked questions:

  1. Why do Outsourcing and Public-Private Partnerships fail to meet expectations, and more specifically what are the fundamental issues?
  2. What is a relationship based approach and how can it solve many of the root problems?
  3. How can you introduce effective consumer protection constructs and create the conditions for sustainability?
  4. How can you use procurement framework and industrial policy to create a strategic supply chain and economic value beyond the project bubble?
  5. How can you establish and operationalize a relationship charter representative of all stakeholder interests and goals?

Available on the Udemy platform I invite you, as well as others who are contemplating any form of strategic procurements including Outsourcing, FutureSoucring™ or Public-Private Partnerships, to view the series.  My ultimate goal is to provide you with the insights that will help to guide you towards achieving improved outcomes with lower risk.

Up until the 28th of April I am pleased to offer you a 50% discount off the regular course price.  Simply enter Coupon Code COMP503W where indicated using the following link; https://www.udemy.com/outsourcing-and-ppp-relationships/

 

Bridging the gap between PPP promise and successful outcomes by Andy Akrouche

“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.

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.

Andyès book Cover2

Click to purchase Relationships First . . .

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The truth about Public-Private Partnerships by Andy Akrouche (Part 2 of 3)

In yesterday’s Part 1 post (The truth about Private Public Partnerships) Colin Cram provided some much needed insight in terms of both the promise and the failings associated with Private-Public Partnerships or PPP-driven initiatives.

Cram, who has served in the public sector at the senior executive level for more than 30 years, is obviously familiar with PPPs.  As a result, he adeptly points out the unquestionable benefits in terms of the public sector getting facilities, hospitals, roads or prisons built without upfront investment.  The challenge however is not in the promise of an end result but in the management of expectations, returns and ultimately relationships.

This last point has proven to be the major stumbling block that has derailed many PPP-driven programs.

The problems according to Cram originate with the process for negotiating what he refers to as being complex and inflexible “consortium” contracts.  Then through what he considers to be the ineffective decentralized management of disjointed objectives, PPP relationships usually denigrate into a self-serving abyss of unrealized outcomes.

In other words, in the rush to capitalize on complementary strengths and individual gains, PPP stakeholders overlook the most important elements of a successful partnership, which is the Relationship governance model.

This is why recent announcements of relationship-based PPP legislation in states such as Florida are very interesting.

While I applaud Florida’s Governor for seemingly walking away from the traditional transaction oriented mindset that governed past initiatives, I cannot help but wonder how the new legislation in and of itself will foster a more collaborative or relationship oriented approach.

Certainly the intent for a practical and manageable governance model exists as demonstrated by the following legislative requirements associated with Florida’s HB 85 PPP Bill:

·         The legislation requires that the responsible public entity ensures that provisions are made for the private entity’s performance and safeguards the most efficient pricing.

·         The legislation provides for protections that will ensure that provisions are made for the transfer of the private entity’s obligations if the comprehensive agreement is terminated or a material default occurs.

·         Additionally, there is an assurance that the public entity must perform an independent analysis of the proposed public-private partnership that demonstrates the cost-effectiveness and overall public benefit.

Once again, the above requirements or elements of the new Bill   ̶   if read correctly   ̶   are laudable, as they actually reflect the insight versus oversight process associated with the SRS relationship-based model.

For those who may not be familiar with the SRS relational model, it is a model that advocates an evolutionary approach to relationships by ensuring that stakeholder expectations, priorities and needs are properly aligned with present day realities on an ongoing basis.

In the previous post Colin Cram pointed to the importance of this ongoing adaptability when he made reference to the inflexibility of traditional contracts and the difficulty in seeing many years into the future.  The fact is that attempting to structure a deal based on an initial set of assumptions and plans limited to what we know in the here and now is a recipe for disaster.

What is required is a dynamic model that is responsive to change, as opposed to a rigid and inherently adversarial static transactional model.  This of course is the key to creating a truly collaborative and adaptable governance framework in which all stakeholders benefit according to their different yet inextricably linked objectives.

As the Florida Bill is likely to be used as a reference point for other states, let’s examine the key elements or requirements in greater detail.

With regard to the first point, when we talk about the need for ensuring that provisions are made for the private entity’s performance and safeguarding the most efficient pricing, what we are really discussing is the need to pursue dynamic relationships as opposed to transactional engagements based solely on present day assumptions.  More specifically, this means that the legislation requires a continuous alignment throughout the entire relationship, and not just at the beginning by way of the traditional “carved in stone and signed in blood bankable” P3 agreements with which we are most familiar.

In terms of providing the protection referenced in the second point by way of provisions which ensure the transfer of the private entity’s obligations should the agreement be terminated or a material default occur, this quite simply refers to an executable “off ramp.”   An executable off-ramp provides the means by which the relationship would be terminated in the event that the strategic fit between stakeholders ceases to exist.  Interestingly enough, the likelihood that a strategic fit will endure over the life of the contract should be established as part of the original sourcing process utilizing the certainty score evaluation methodology associated with the SRS relational model.

Finally, Florida’s Governor wants to make certain that there is a high degree of accountability in terms of whether or not the public-private partnership is actually delivering value.  This is why the third point is so important.  Traditionally, and for those familiar with the P3 planning process, a public sector comparator case or PSC is initially used to financially justify an acquisition or initiative that excludes the private sector “partner” element.   Once the PSC case has been built, a Value for Money or VfM assessment is undertaken to determine the impact that the introduction of a private sector partner would have on the same acquisition or initiative.  The hope is that the outcome of the VfM assessment will justify a Public-Private Partnership.  The inherent flaw with the above assessment process is that it attempts to get an accurate read on the nature of the relationship 20 to 30 years down the road based solely on assumptions in the here and now.  As Colin Cram pointed out in Part 1 of this series, many fail to recognise beforehand or erroneously believe they have the expertise to effectively see into the future.  Unfortunately they do not, which ultimately results in a sub-optimal project or even worse, a near disastrous one.

The only way the Governor and the State of Florida can realize the true and full value of a Public-Private Partnership, is to ensure that the VfM assessment is linked to an ongoing or continuous management and realignment process.  As allude to earlier, an insight as opposed to oversight process that is focused directly on improving the outcome and performance of the relationship.

In the third and final part in this series, I will share with you a set of practical steps to form and manage a dynamic public-private relationship.

Remember to also check out the advanced publisher’s eBook and hard copy versions of my new book Relationships First! The New Paradigm in Contract Management (see below).

Click to purchase Relationships First!

Click to purchase Relationships First!

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The truth about Public Private Partnerships by Colin Cram (Part 1 of 3)

NOTE: This article was originally published in the Procurement Insights European Union Edition.

In Part 2 I will provide a detailed commentary centered around Colin’s post as well as the recent news that States such as Florida have just signed into law Public-Private Partnership legislation, including what it means on a go forward basis – Andy Akrouche

There was much debate when the current UK government came to power in 2010 about whether PPPs provided value for money. PPPs are a means whereby the public sector can get facilities built, such as hospitals, roads or prisons, without upfront investment. That means that infrastructure projects, that might otherwise have to wait many years, can be built quickly. The private sector provides the funds and is then paid to run the facility for a period of, say, 25 years. At the end of the contract period, it hands back the facility to the contracting authority.

PI EU P3

Click to access Seminar Information

The contractor recovers the costs of building the facility over 25 years. So, contractors are usually part of a consortium – a finance provider, construction company and facilities management company. Negotiating the contracts is complex and many public sector organisations do not possess the skills. They therefore rely on private sector consultants, who also often fail to possess the skills that they claim to have.

PPP (originally called Private Finance Initiative – PFI) was ’invented’ in the United Kingdom – to get infrastructure built quickly, but with the rationale that private sector contractors would have an incentive to build to higher standards than would happen if the public sector commissioned a building project. This is because the private sector supplier would want to minimise running costs. Perhaps surprisingly to those who advocated the policy on financial grounds that prediction turned out to be correct.

There have been several issues with PPPs. Firstly; it is argued that government’s can borrow more cheaply than the private sector. Therefore, it doesn’t make sense for them to contract with a private sector provider of finance. Secondly; contracts can be fairly inflexible. If the contracting authority starts to run short of funds during the life of the project, oh dear! Also, if demand varies from that which is predicted – up or down, there will be financial consequences. The contractor will still want to recover its upfront investment plus profit. For hospitals where, in the UK, much of the PPP effort has gone, 25 years requires some pretty good crystal ball gazing, particularly given medical advances and attempts to reduce the length of stay in hospitals. Also, will the structure of the building be suitable for new technology in 10 years time?

Another issue is that the specification should be right. Should the facilities management include cleaning or should it focus on infection reduction?

Health authorities in the UK have been criticised over PPP contracts that worked less well than they should. Problems have been partly because each one let its contract independently, whereas had the contracts been let by a single centralised team, the expertise of that team would have been available to all.

Other potential issues are that creating a competitive market is difficult. Inadequate competition or the same bidders each time creates condition ripe for making excessive profits. The uncoordinated approach in the UK to letting such contracts has made this easier. This can render PPPs ideal for corruption. It is difficult to rule out that some may take place in order to provide a commission to someone as who will argue against a new hospital? That is a further reason why one needs an independent procurement team to manage the contract negotiations and be prepared to blow the whistle either if the business case does not stack up or if there appear to be irregularities in the amount of competition.

So what is the verdict on PPPs? From the hospital patient point of view, they are a great success – new facilities instead of out of date and unsatisfactory old ones. They are also great for the medical profession – much better working environments. However, they can be a major financial headache and lack of contracting and specification expertise in the contracting authority – something that many fail to recognise beforehand or where senior people in the hospital believe they have the expertise, but do not – can create a sub-optimal project – or even a near disastrous one.

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