The Bad News - It only seems like this………..!

1. Managing Risks in PPP Project ProcurementClaire PhillipsProject Director, Partnerships UK24 March 2005

2. The Bad News - It only seems like this………..!

3. The Good News -Scale of the UK PFI/PPP programme Over 620 PFI Contracts Signed £40 Billion Capital Value 450 Projects now operational £4 Billion p.a. of new projects in procurement

4. Presentation Structure • Identifying and quantifying risks • Common risks that crystallise • Mitigating risks • Dealing with the unforeseen • Summary and questions.

5. Identifying Risks Not a single shot process; embed procurement risk as a project management concept and continually review for emerging or changing risk factors. • Use the public sectors collective knowledge • Use advisors • Use your own local knowledge • Use the private sector, bidders’ experience is valuable and the top 10 risks that crystallise are………………

6. The Top Ten • Land acquisition, • Existing site ownership, • Planning permission, • Lack of consensus among stakeholders, • Affordability, • Lack of competition, • Project scope unstable, • Bid price unsecure • Commercial agreement , • Due diligence “unforeseens”,

7. Risks that Crystallise in More Detail • Land acquisition • Sites must be in Authority ownership • Planning permission: • Engage with Planning, development briefs are a good way to make clear what is expected of bidders • Consider impact of new sites arising at ITN/ deliverability factor • Consultation and communication has a big role to play • Affordability • Is your affordability target accurate? How do you know? • Manage expectations

8. Risks that Crystallise in More Detail (cont.) • Commercial Agreement. • Rush to appoint preferred bidder at your peril! • PB appointment letter is a critical point in procurement • Security of Bid Price • Have sub-contractors priced on the commercial terms you have agreed with the preferred bidder? • What is price validity period? • What openings are there for the PB to re-open price?

9. Tools for Quantifying Risk

10. Mitigating Risks Have a plan, embed procurement risk in the overall project management planning. Identify, quantify and then consider: • What you can control and how. • What you can influence and how. • What you can only react to.

11. Mitigating Risk – Good Foundations • Review the project scope, the more complex the project, the greater the risks to procurement and deliverability will be. • Establish a clear project management structure, with visible senior ownership and accountability. • Ensure a corporate base for project delivery. • Build corporate inclusion (HR, planning, estates, finance etc should all be built into project management plan). • Take ownership of good communications, • Manage expectations (dare I say it, optimism seldom pays!)

12. The Unforeseen Not everything can be anticipated and planned for, so project management structures should: • Allow for quick action and response, the Authority’s management/ decision making machinery needs to be “light on its toes”. • Sufficient delegated authority is required to manage and make decisions. • Ask yourself why it was unforeseen, what can you do better going forward.

13. Summary • Embed concept of procurement risk into project management planning • Learn from earlier projects • Good project management structures and communications are key to managing risks Managing procurement risk is not a single shot process; embed procurement risk as a project management concept and continually review for emerging or changing risk factors.

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