“OUR SUPPLY CHAIN IS KEY TO OUR SUCCESS”
NR Infrastructure Projects Commercial& Development Director Matthew Steele tells Paul Stephen how improved relationships with suppliers, greater transparency and careful project planning will increase efficiency over the coming years.
As the UK’s largest provider of infrastructure, a strong and mutually beneficial relationship with the supply chain is critically important to the operational success of Network Rail.
When spending more than £6 billion per annum with more than 3,000 mainly UK-based suppliers, the stakes are incredibly high for both the client side and for NR’s contractors.
Having a robust supply chain strategy is key to not only unlocking innovation and value for money, but also for the sustainability and health of the nation’s construction sector. NR’s supply chain supports more than 117,000 jobs in the UK.
NR must provide its suppliers with a fair return for the projects they deliver and sufficient visibility of its long pipeline of tendering opportunities while, at the same time, advancing its commercial ambition to safely deliver growing volumes of work in an increasingly cost-efficient way.
The challenge of striking that balance falls to NR’s Commercial and Development Director Matthew Steele, who switched from the organisation’s Crossrail Programme in June.
At the top of his in-tray is the development of NR’s new supply chain strategy for Control Period 6 (April 2019-March 2024), due to be published in early-2018. This strategy will not only need to satisfy the outcomes mentioned above, but also position NR as the client of choice in an increasingly competitive marketplace. By the end of the decade multi-billion-pound packages of work are expected to be procured to build a third runway at Heathrow Airport and a new nuclear power station at Hinckley Point, not to mention HS2, £6bn of contracts for which were awarded in July, with construction due to start on the London-Birmingham Phase 1 in 2018.
Dynamic Relationship
But, in Steele, NR has someone well placed to understand the dynamic relationship between the supply chain and NR, and their often-conflicting needs. This comes from his time at Crossrail where he had the unique experience of delivering the project on behalf of his client, Crossrail Ltd, but also fulfilling the client role by procuring up to £2.3bn worth of work from a network of subcontractors to build the route’s surface sections.
He explains: “It’s extremely important that our contractors understand what we’re trying to do and how we’re trying to do it, because we know that we can only be as good as our suppliers.
“We also want to make NR an exemplary client because there are many more large infrastructure providers beginning to emerge.
“I was fortunate to have worked very closely with Crossrail Ltd, but also to deal with ten of the largest sub-contractors in the UK including the likes of Balfour Beatty and Carillion. I was able to learn the ways how they worked and what contractual arrangements delivered the best outcomes. I’m bringing those lessons back to the centre of Network Rail.”
To support his own experiences and to further inform the development of the new national supply chain strategy, Steele and his team are working to decide how best to procure NR’s renewals and enhancements in CP6.
It is a consultative process and Steele is working hard with his colleagues at route level to understand what improvements they would like to see, but also other internal teams such as the Digital Railway programme to understand what changes will be needed in how signalling is procured in the future.
Externally, Steele is engaging with small and medium enterprises (SMEs) by talking to the Rail Supply Group (RSG) and the Rail Industry Association (RIA), and he has formed a steering group with his Tier 1 suppliers which will meet every six weeks.
He adds: “We’re working really hard to understand what worked in CP5, and what didn’t. I’m having good quality dialogue and I’ll be going to the suppliers in November with an update before publication of the strategy early next year.”
Steele’s work includes market analysis to better understand what the impact will be on capacity and availability of resources in the supply chain during CP6 given the competing demands of HS2 and other major projects.
He also has to take account of the uncertainty over what volume of work NR will require during CP6, in advance of its Statement of Funds Available (SoFA) being published by Department for Transport on October 13.
“We have a responsibility to deliver maximum passenger benefits and best value for money on behalf of the UK taxpayer”
Nevertheless, it remains within Steele’s control to identify the most effective means of procuring that work, for all parties concerned.
“It’s unlikely that I will be able to deliver everything the supply chain wants because we are governed by European law and we have to spend taxpayers’ money efficiently through competitive tendering, but we are listening.
“I can’t guarantee these companies any work, but I am working to maximise visibility and to stagger national tenders to make it easier for them to bid for a large quantity of renewals, and large scale enhancements as we commit to them on a case-by-case basis.
“We will also consider where we can use SMEs, develop local skills and bring local economic benefits, and that means taking down some of the existing barriers for SMEs.”
Alliance Model
The new supply chain strategy will also contain NR’s future contracting arrangements, including how alliancing models will be used. There are good examples which have been behind some of CP5’s big successes.
Steele is an enthusiastic supporter of alliances for schemes where they have produced good outcomes such as the removal of a notorious bottleneck at Norton Bridge in Staffordshire, the construction of the Ordsall Chord and NR’s various switch and crossing alliances.
But Steele says there is no one-size-fits-all model; the environment, the contracting terms and the scope all have to be right.
“We’re looking very carefully in CP6 to make sure we build alliances where appropriate and where there are big risks and complexity, but not for the sake of it. Forced alliances don’t work, and the supply chain has to choose its partners where possible and put themselves forward.”
Steele has also been busy supporting recommendations made by the Hansford Review to consider increased contestability and third party funding and delivery of projects. Although this will not directly affect existing procurement of projects that NR’s Infrastructure Projects (IP) team is selected to deliver, Steele has written to IP’s 60 largest suppliers to explain what the review means for them. His team will also be arranging seminars to provide an opportunity for them to seek further clarity. IP will also provide specialist procurement support if required.
Steele is responsible for programme management and quality assurance, for example by providing internal peer reviews and scheduling cost control. He is also helping to develop the skills of people in the IP team, including providing greater support for development and administration of future projects.
Project Development
A large part of Steele’s project management function concerns how IP manages its Guide to Rail Investment Process (GRIP), which encompasses the full project lifecycle from development (GRIP 1-3) through to delivery (4-8).
He explains: “GRIP 1-3 is where you’re looking at options and considering how you’ll solve problems. That sets the whole tone for the rest of the project so we’re putting a lot of effort into improving that upfront planning segment.
“[IP Managing Director] Dr Francis Paonessa’s instruction to me when I started in June was to make sure we get the governance around what we do today absolutely right, and that means getting GRIP working effectively and making sure we’re well prepared with a robust supply chain strategy in the short and longer term.
“For us, it’s about making GRIP as user-friendly as possible, something we continually review, and secondly to make sure it’s used properly because, if you jump between stages too quickly, projects can end up late and over budget.”
Steele is a keen advocate of GRIP, which emerged more than a decade ago from a Government developed system for administering large projects named PRINCE2. Its eight stages react the full lifecycle of a project and provide a more disciplined framework around a project.
Steel points to the Great Western Route Modernisation and the electrification of the Gospel Oak-Barking line as two projects where early development was not given enough priority, and where significant difficulties were then encountered during project delivery.
“GRIP is a good system; you would see something very similar if you went to any of the major car manufacturers, for example. We know that where GRIP has been followed well, we get a successful outcome, and where shortcuts have been taken, we haven’t.
“They say imitation is the sincerest form of flattery and we’ve seen that Transport for London has also adopted GRIP for its own projects. It works because it allows you to stop every now and again and ask if you’re doing the right thing, and getting best value for money.”
And that has to be a good thing.