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Intelligent supply chains – Innovative Contractor Engagement in review

Transport for London has been evolving its contract procurement, aiming to get greater value from its major projects. Jon Masters caught up with TfL and team members involved in the Bank Station project to discuss Innovative Contractor Engagement.

Bank Station is the next to undergo major improvement works through London Underground’s programme of capital investment. Government gave the project the go-ahead in December 2015 after approval of an associated Transport & Works Act Order. This was two years after a £563m design and build contract was procured using a method known as Innovative Contractor Engagement (ICE). The contract was awarded to Dragados, whose lead designer was AECOM up to design concept stage.

Development of the ICE process was driven by Transport for London’s (TfL) programme manager for construction for London Underground, Miles Ashley – a member of the Infrastructure & Projects Authority’s Client Working Group. Like other major clients, TfL has signed up to commitments of the Construction 2025 Strategy, including aims of a 33% reduction in whole life costs and a 50% cut in delivery time.

With construction at Bank now underway, TfL and its supply chain have had time to take stock and consider the pros and cons of the ICE process.

Why was ICE introduced?

Miles Ashley: “Bank Station is the latest project in a programme of capacity improvements, which traditionally have been procured in a very orthodox manner, with designs fixed before they are released to tender. As a result we have tended to learn too late about suppliers’ ideas for how schemes could be done differently to bring greater value. Previously we have defined the scope of projects too tightly. It’s hard to get alternative and innovative ideas if you’re already fixed on a given solution.” 

How does ICE work?

Miles Ashley: “We wanted to market test the product as well as the price, to see if we could get the best overall operational outcome, because we were making an investment against a business case based on journey times.

“We engaged with the market, through a process of protected dialogue, on how to best achieve the scheme benefits and outcomes we were seeking. We still started out with an outline design for the basis of evaluation, but produced tender documents that invited alternative designs, with an open book for analysis, so that all of the different ideas from bidders could be taken forward to form the final design; and we stated that any innovations used from losing bids would be paid for.”

AECOM engineering director for civil infrastructure, Mark Raiss: “London Underground was trying to get creative solutions to solve a problem, to get a better answer to the one it already had.

“Submissions were assessed against detailed criteria including usual parameters of price and quality. But more importantly, we had to consider other outcomes, of capacity improvement per pound spent and the cost of disruption to travel time for the public.”

Dragados project director Danny Duggan: “The client had a scheme design ready for the market to price against, but that proposed solution didn’t quite meet the desired business case. By introducing ICE, instead of releasing that design fixed in a tender for contractors to price against, LU drew breath and said it would go out to the market through a design competition.

Danny Duggan

“At Dragados we then set up collaborative partnerships with seven different Tier 2 delivery partners on the understanding that they would also give up their intellectual property in return for the guarantee that if we win, they win. From then on, each bidding supply chain effectively entered eight to nine months of design and secure dialogue with the client.”

What were the advantages?

Mark Raiss: “The process evaluated things that really matter to TfL, such as value in terms of continuity of customer service within a given budget and actively seeking better ways of doing things. The winning design introduced a lot of variations on the original scheme, but one notable innovation was the introduction of a travelator between the new Northern Line concourse and the Central Line to minimise interchange times and relieve congestion. This added construction cost, but was within what was affordable given the improvement in the service and therefore the business case.”

Danny Duggan: “The client created an innovative procurement model that brought input from lower down the supply chain up to the front, before the design was locked down. TfL asked the intelligent question of ‘can you produce a better whole life solution for the money available, to move people through the station without disruption for the next 60 years?’

“For the first time, we had access to the client’s business case and all of the detail of the original scheme, including the price risk register, which was crucial. It showed us what LU did not want and how much cost had been built into mitigating against the risks of that happening. We were able to work at coming up with a scheme design that reduced the likelihood of these risks and cut the associated costs.

“Consequently we’ve been able to continue improving the project’s business case, which is now at a benefit to cost ratio of 4:1, and we’ve cut waste out of the project by avoiding the common scenario of time and cost being wasted while fighting over design changes after contract award. Overall, ICE has produced a better outcome for all. Procurement done this way, or similar variations, has the potential to fundamentally change delivery of infrastructure schemes for the better.”

Miles Ashley: “We got four completely different solutions. All bidders had to engage early with their supply chains, which was very beneficial. We got a measure of the value outcome from the start, so a definition of how to optimise the desired solution and we’ve had further value improvement since the contract was awarded.

“Dragados/AECOM brought substantial improvements. The benefit to cost ratio rose from 2.4:1 to 3.5:1 at tender, so a 45% improvement in value. The ICE process changed the focus towards outcomes, from transactional relationships to enterprise. This is what drives greater value from infrastructure. We’re now getting more additional capacity at Bank and a better service for customers for every pound spent.”

And the disadvantages?

Mark Raiss: “In hindsight, ICE was a very good process in principle, but in taking over a year instead of four to five months, it was too long and too expensive for the bidders. The compensation element was good in principle. But practically it didn’t work because the Dragados bid was so different, which meant none of the innovations from other bids could be used. I’m sure ICE could be done again and done better, however.”

Danny Duggan: “To be sustainable ICE has to be more equitable. The costs of bidding were about twice as much as conventional for a job of a similar size. TfL did agree some funding to support bidders’ costs, but clients have got to do more to part fund industry bid costs, if they want to get better value solutions.”

Miles Ashley: “The ICE process was a more expensive procurement exercise for bidders and for us, but there are several counter-points to this: We gained a significant increase in overall value and contractors had the opportunity to be paid for their design innovations. Over the long term, the bid costs will reduce dramatically if the process leads to supply chain relationships that are more strategic and less transactional.”

Where are you going next with ICE procurement?

Miles Ashley: “We’ve already repeated use of ICE for procuring contracts for work on the pedestrian tunnel linking the Bakerloo Line to Crossrail at Paddington, with about a 25% increase in value. Now we’re pushing on further with advancing our procurement of capital works contracts.

“We’re talking to the market, seeking long term relationships with specialist contractors and a single integrator, through an eight to 15 year alliance contract, to help us forge close links with different levels of the supply chain. The focus will be on value, because as a client we’re now mature enough with our cost data to know good value when we see it.

“The Treasury and IPA are working on development of new, more efficient, delivery models. On the whole these now rely on a move from transactional to strategic relationships, driven by owners’ or operators’ desired outcomes. The IPA client working group’s Project 13 report due later this year will conclude that infrastructure clients can get more value and efficiency if they engage earlier with the supply chain on the ultimate outcomes they want.”

 

London Underground’s upgrade at Bank has been designed to increase the station's capacity by 40%, improving accessibility and shortening interchange times when it is completed in 2021. Bank is the third busiest station on the Tube network, used by over 52 million passengers per year.

The £563m Bank project – a key part of TfL’s long term plans for increasing train frequency and capacity on the Northern Line – will add a new railway tunnel and platform for the Northern Line at Bank, step-free access to the Northern Line and DLR platforms, three new lifts and 12 new escalators, plus a new station entrance in Cannon Street.

Bank Station

If you would like to contact Jon Masters about this, or any other story, please email jmasters@infrastructure-intelligence.com.