enrique ugarte - uts helmsman centre
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C O N Q U E R E DCOMPLEXITY© Helmsman International Pty Ltd 2016
Who is Helmsman
EXPERTS IN COMPLEX ASSET PERFORMANCE
Strategy Contracts Transformation Sustainment
Delivering Outcomes across the End-to-End Complex Asset Value Chain
ACCELERATE VALUE CREATION BRING PEOPLE TOGETHER DELIVER COMPLEX CHANGE IMPROVE ASSET PERFORMANCE
• Large Complex Asset Acquisitions
• Product & Technology Commercialisation
• Outsourcing/Insourcing
• New Market Making Ventures
• Asset System Operations & Expansion
Legal & Social Contract Alignment:
• Organisational Alignment
• Industry Alignment
• Executive Alignment
• Client-Supplier Alignment
• Corporate-Compliance Alignment
Strategy & Funding:
• Corporate Strategy Execution
• Portfolio Execution Capability
• Complex Asset/Infrastructure Delivery
• Merger & Acquisition Integrations
• Mega Project Intervention & Recovery • Sustainment System Transformation
• Asset Management Operating Model
• Corporate Governance Systems
• Shutdown Maintenance Performance
• Asset Performance improvement
Complex Project Execution: Maintenance Organisation Performance:
C O N Q U E R E DCOMPLEXITY© Helmsman International Pty Ltd 2016
Bruce Ferguson, chief executive at Helmsman International, said that much of the $150 billion spent on
infrastructure annually in Australia “is wasted, due to cost blowouts and inefficiencies”.
He gave as examples the Brisbane Airport link and the Chevron Gorgon liquefied natural gas project in
Western Australia.
The former, he said, cost $4.1bn, but suffered from unexpectedly poor geology and problems in sourcing
steel, and experienced $1bn in writedowns as a result.
Gorgon was “another prime example” — with the original budget of $US34bn blowing out to $US54bn
($75bn).
He expressed confidence that “by bringing academia and industry together with government” the
productivity of such projects could be enhanced by 5 to 10 per cent nationwide.
“That’s a potential saving of between $5bn and $15bn a year that can go back into the Australian
economy,” he said.
Organisations and executives needed to “manage the wider complexities” that often caused delays and
cost overruns, he said.
Management consultants Helmsman and the University of
Technology, Sydney, are setting up a centre to improve the
productivity of mega-projects.
The centre — likely to receive about $6 million over five years — will
be based at the university’s business school. It will be part of an
international collaboration with Canada, India, Holland and the UK.
The UTS-Helmsman Centre for Mega Projects
C O N Q U E R E DCOMPLEXITY© Helmsman International Pty Ltd 2016
A measurable difference to the Australian Economy
“Making a measurable difference to the Australian Economy
by improving the performance of Complex Assets and Mega Projects”
C O N Q U E R E DCOMPLEXITY© Helmsman International Pty Ltd 2016
Objective 1: Deliver a measurable improvement to the Australian economyEnabling improved business performance for Industry and improved economic performance
for the Country
Objective 2: Be the Australian reference example for University/Industry InnovationA New Model that will be the reference example of how Australia can innovate via
University/Industry collaboration
The Mega Projects Centre has 2 Objectives
C O N Q U E R E DCOMPLEXITY© Helmsman International Pty Ltd 2016
Fixed InfrastructureSuch as road/rail infrastructure, machine units, bridges, buildings and structures
Fleet InfrastructureSuch as rolling, flying and floating stock
Network Infrastructure Such as pipelines, powerlines, road, rail and telecoms networks
Process InfrastructureSuch as mining/drilling operations, oil & gas refineries, power plants, continuous manufacturing and
production facilities
Information InfrastructureSuch as social welfare, national administration systems, healthcare, telecoms, central control systems
and financial services
The Mega Projects Sector
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PUBLIC SECTOR PRIVATE SECTOR RESEARCH & EDUCATION
MEGA PROJECTS INDUSTRY
Participation – Early Conversations
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In Procurement, the elements of Probity, Governance and Innovation cannot always pull in the same
direction and demand that trade-off decisions need to be made. However, industry believes Innovation is
being unnecessarily compromised for Probity and Governance and this imbalance is having a significant
impact on Project Productivity.
It creates an adversarial relationshipThe legal cost of avoidable disputes between parties is approximately 2.5% of total expenditure.1
It drives inefficiencyAdministration and Bureaucracy related to procurement and contracting is more than 10% of total cost.2
It stifles innovationThe instructional nature of procurement contracts undermines vendors’ ability to be innovative.
Anecdotal evidence suggests that the loss in value as a result of unfulfilled innovation is greater than 20%.3
Better Procurement Australia
References:
1. ARCADIS, Global Construction Disputes2014
2. Implications for design and construct contractors operating in a PPP environment - Jefferies, M, 2016
3. Constituent Interviews & Two Stage Open Book Procurement in Construction (UK)
C O N Q U E R E DCOMPLEXITY© Helmsman International Pty Ltd 2016
Innovation is born in Ambiguity
Ideas Fluidity
OutcomeFluidity
OptionsFluidity
ApproachFluidity
Triple-C Fluidity
HIGH AMBIGUITY: HIGH INNOVATION LOW AMBIGUITY:LOW INNOVATION
Procurement Innovation Value Chain
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Innovation requires Collaboration
• Left Field (No RFI)• Unique Proposition
• Blue Sky• Strategic Thinking
• Greenfield• Design Thinking
• Blueprint• Critical Thinking
• Schedule & Plan• Planning Thinking
• Non-Competitive• Supplier led Prop
• Direction Defined• Outcome Undefined
• Outcome Defined• Solution Undefined
• Solution Defined• Approach Undefined
• Requirements Defined• Trade-offs Undefined
Ideas Fluidity
OutcomeFluidity
OptionsFluidity
ApproachFluidity
Triple-C Fluidity
HIGH AMBIGUITY: HIGH INNOVATION LOW AMBIGUITY:LOW INNOVATION
Procurement Innovation Value Chain
C O N Q U E R E DCOMPLEXITY© Helmsman International Pty Ltd 2016
Collaboration needs a Mechanism
Unsolicited Proposal
Innovative Concept
Innovative Option
Innovative Tender
Competitive Tender
Mechanism Mechanism
• Left Field (No RFI)• Unique Proposition
• Blue Sky• Strategic Thinking
• Greenfield• Design Thinking
• Blueprint• Critical Thinking
• Schedule & Plan• Planning Thinking
• Non-Competitive• Supplier led Prop
• Direction Defined• Outcome Undefined
• Outcome Defined• Solution Undefined
• Solution Defined• Approach Undefined
• Requirements Defined• Trade-offs Undefined
No Mechanism
Ideas Fluidity
OutcomeFluidity
OptionsFluidity
ApproachFluidity
Triple-C Fluidity
HIGH AMBIGUITY: HIGH INNOVATION LOW AMBIGUITY:LOW INNOVATION
Procurement Innovation Value Chain
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New Innovation Mechanisms
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Requires 3 New Capabilities
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New Innovative Procurement Pathways
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1. Safe Harbour (Legal Construct)The ability to engage openly and candidly with total confidence that ideas, copyright and intellectual
property will remain confidential and protected
2. Apples & Oranges - Option Evaluation & Selection (Business Management)The ability to consider and evaluate wildly varying concepts and ideas; not apples & apples
3. Accountability in Uncertainty (Management Theory)Empowering the team to respond to shifting environments and emergent issues; not set things in stone
Industry needs to adopt 3 new capabilities
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A Penal Colony
Australian Government was originally established as a gaol with an inherent intention to direct and
control….not to innovate. Is this inherent in our DNA?
Fortress Australia
Border security is appropriately rigorous and effective particularly when it comes to flora and fauna.
Have we transported these procedures across to other departments and agencies?
No Board of Directors
Private sector organisations generally have a Board of Directors who take accountability for innovation risks.
And learn from mistakes. Will an organisation without Board accountability tend to avoid mistakes?
Projects and Procurement is a Distributed Capability
Projects and Procurement don’t have a dedicated agency, department or minister to lead the way. As a result
are approaches and methodologies being developed at an operational level rather than a strategic level?
4. Drivers of this (procurement) behaviour
C O N Q U E R E DCOMPLEXITY© Helmsman International Pty Ltd 2016
Policy LayerNew probity frameworks and controls to be applied to both procurers and vendors.
Process LayerA new way of thinking and behaving at procurement control centres across.
Supplier LayerNew supplier capability as part of their bidding, proposition, design and innovation approaches.
Knowledge LayerConsumable education and professional development offerings for Industry
Solution Dissemination and Adoption
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The Office of Government Commerce (OGC UK)The Office of Government Commerce (OGC UK) was established as
part of the HM Treasury in 2000. It was a 10 Year initiative and was
closed in 2011.
The OGC was set up to become the Government's centre of excellence
in procurement for up to 200 Government Departments, non-
governmental bodies and agencies. It had the remit of improving the
efficiency and effectiveness of the Government's £13 billion annual civil
procurement budget.
Overall annual budget for the initiative was AUD$80 million (total) to $20
million (conservatively – external consultancy cost only). So over 10
years this equates to somewhere in the order of a AUD$200 - $800
million investment.5
As at 2006 the OGC was able to claim annual savings of AUD$29 BN.
Of this, direct productivity annual savings of $17Bn (conservatively –
procurement & time only) delivered a conservative return of 35X times
the total investment each year.
References:
Deloitte Access Economics – Large capital projects report for the Business Council of Australia (BCA), April 2012
ABS 56250.0 data series – 12Yr Average 1999 –20011
UK House of Commons Treasury Committee, 2007 Budget
Precedence (UK Government)
Two Stage Open Book Procurement in Construction (UK)The Government Construction Strategy (GCS UK) published in May 2011 stated
an intention to reduce the cost of public sector construction by up to 20% by the
end of the parliament, and to stimulate growth in construction.
The Government Construction Strategy: Final Report of the Procurement/Lean
Client Task Group, published in July 2012, developed three potential new
strategies to help achieve this aim:
• Two Stage Open Book.
• Cost Led Procurement (CLP).
• Integrated Project Insurance (IPI).
By 2014 a number of trial projects were established to assess the two-stage,
open-book method had been completed and achieved the desired benefits
• Ministry of Justice, Cookham Wood – achieved a 20% cost saving
• Surrey County Council, Project Horizon – achieved a 17.4% saving over 5yrs
• Hackney Homes and Homes for Haringey – achieved a 14% cost saving
The UK construction industry represents some 7 per cent of GDP. Around 40 per
cent of this - more than £40 billion worth of work - is delivered for the public
sector with the government acting as the industry’s largest customer.
References:
Government Construction Strategy: Final Report of the Procurement/Lean Client Task Group. July 2012
UK Cabinet Office, 2014
C O N Q U E R E DCOMPLEXITY© Helmsman International Pty Ltd 2016
Better Procurement Australia’ Governance BoardThe Governance Board will set direction and also act in the capacity of Design Authority.
Implementation Partner Service providers with the desire to support solution implementation.
Solution DesignerOrganisations are invited to participate in facilitated boardroom Co-design sessions.
Research ContributorAccess people and information for the purposes of data collection and analysis.
Solution Signatory (obligatory)Observing organisations may wish to support the initiative without being direct contributors.
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Contact
Enrique UgarteUTS-Helmsman Centre for Mega ProjectsM: 0413 942 808E: [email protected]