The Data-Driven Project: New contract concepts and the demand for data from subtrades
Project controls can achieve an integrated approach in new contracting methods
June 13, 2023 By Barb Hooley and Michelle Throssell
Canada is a well-recognized leader of Public Private Partnerships (P3s) and continues to successfully deliver significant and complex P3s when used on the right projects. The P3 model typically shoulders most of the design and delivery risk onto the supply chain, and recent changes in the market have led to an increase in alternative procurement models being used to distribute this risk more evenly and gain other advantages to enable successful project outcomes.
In recent years, projects have become increasingly larger and more complex, leading to increased delivery challenges. These challenges, when combined with material and labour shortages and the rising cost of goods, have led to alternative contracting models such as Alliancing and Progressive Design and Build gaining popularity in the market. These more collaborative contracts are focused first on building a relationship between the owner and the delivery team. They involve a collaborative “one team” culture, shared risk profile, open book policy and data transparency, all of which lay the foundation for securing mutually beneficial outcomes.
Alliance and Progressive Design Build models have their roots in the U.K. and Australian infrastructure markets where market conditions drove a move towards a more balanced and collaborative approach. Projects like the Thames Tideway Tunnel and High Speed 2 (HS2) are examples of mega-programs utilizing these evolving contracts to build market interest and encourage more successful delivery outcomes. Turner and Townsend have been HS2’s procurement delivery partner since 2021 and have supported the development and implementation of a procurement approach which includes many of the new approaches discussed here, including the requirements of contractors for project management information.
Data management is fundamental to success
These alternative contract models require a shift in data management requirements to effectively support the development and execution of the contract. Significantly more data points will become available that need to be identified, tracked and collated in a meaningful way to effectively support status reporting and decision making through the life of the contract.
Crucial to the successful management of this data and overall implementation of this newer, more progressive way of contracting is to have an integrated project controls function to provide a single source of truth and heartbeat for the project.
The integrated project controls function continually measures, monitors and interprets inter-disciplinary data to meet the requirements of the stakeholders. By establishing an integrated project controls function from the outset, information can be organized and understood to better guide the project strategy, to define the delivery plan and ultimately inform the owner’s decision on how to proceed with the project through its lifecycle.
Due to the more collaborative and “open book” approach in these contracts as well as the shared risk and reward, more data is collected, available and used by all parties to make best decisions for the project overall. Subcontractors like glaziers or fabricators will likely need to contribute to this data collection if they are providing significant materials or services over a time frame where progress measurement becomes relevant.
Although this type of project controls data collection and analysis can benefit subcontractors doing smaller scale work, involvement in mega-projects makes it more necessary. An ability to provide a wide range of data to contractors would be of benefit. Examples of data that could be required include quantities, milestones and percentage-complete for the schedule progress; budget, cost-incurred and forecast-to-go for the cost progress; top risks, P50/P80 and contingency forecasts for risk; and overall performance against agreed KPI’s.
Cutting through complexity
When an Alliance or Progressive Design Build contract type is selected, the chosen delivery team will often be entering into a contract with an immature design, high-level budget and limited understanding of the delivery risk. The first task involves working with the owner to develop the design, schedule and cost, typically on an open-book, cost-reimbursable basis.
During the development phase, the owner will have better line of sight and access to more performance and cost data than would normally be the case under a P3/fixed-price arrangement. To leverage the power of this information, an integrated project controls function can efficiently capture and analyse the available data to support the owner’s role as contract administrator. The project controls team plays an important role as the design is developed and the parties work together to collectively establish the scope, cost, and delivery schedule by providing benchmarked data, data analysis and helping to plan the project in the most efficient way.
Risk and change management
Another fundamental role fulfilled by project controls is to develop and analyze the project risk profile, first identifying and assessing the risks and undertaking statistical analysis to determine the potential cost and schedule impact, which then informs the contingency budget and allocation of responsibilities between the parties. Taking the time to properly understand and assess risk is crucial in a contracting arrangement which shares risk between the owner and delivery team and in some cases rewards the contractor for effectively managing their risk within budget.
Given the nature of these contracting methods, a high volume of change is expected, especially in the early stages, as the project develops. An integrated project controls approach is required to ensure these changes are accurately identified, quantified, reviewed and implemented to maintain a current and accurate position in terms of scope, cost, and schedule.
Looking to the future
This shift in contracting approach is an exciting development for Canada. It presents an opportunity to bring the best elements, and the learnings, from the early adopters of the strategy in the United Kingdom, Australia and elsewhere in the world. Although success with collaborative contracts has been demonstrated in these markets, there are fundamental building blocks required to support that success, and a holistic, detailed and integrated project controls approach goes to the heart of the model and its success.
About the authors
Barb Hooley is communications manager for Canada at Turner and Townsend. Michelle Throssell is a director at Turner and Townsend’s Toronto office. turnerandtownsend.com
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