NEC, EV and the Olympic Programme:How the NEC and EV were used to deliver the

London 2012 Olympic Park

Lee McDonaghPlanning Manager, MaceRepresenting CLM Delivery Partner

Introduction

The NEC has become not just a Contract, but a framework and a way of working; along with Project Controls it has jointlydriven performance, secure delivery and reduced risk.

NEC and EV, mutually exclusive?

Three Discussion Themes:

Olympic Programme Overview

NEC 3: Different Perspectives

The Earned Value Perspective

4

Timeline of the Olympic Park

Site preparation

Build infrastructure

Build venues

Test events

Olympic/Paralympic Games

Deconstruction / Transformation

2007

2008/11

2012

2008/11

2011/12

2012/13

Legacy2013 -2025

The Challenge – Complexity1

19120

96

869

4,40027,000

1,520

10,490

529

27,300(£m)

1

Programme

Major ProjectsNEC3 Contracts (+ 1 Development Agreement,

184 JCT and 3 concessions)Tier 1 suppliers

Critical Tier 2 & 3 suppliers (Insolvency Risk)

Unique Design Interfaces

Integrated Plan Activities

Linked ActivitiesSite Workers (Daily Average)

Daily vehicle movements (materials)

Site entry points (plus rail head)

Budget (average burn rate of £150m/month, peak £190m)Key date - 27 July 2011

Tie

r 1

Pro

ject

Lea

d D

esi

gn

Lead

Des

ign

Pro

ject

Tie

r 1P

ark

Op

era

tions

(F

orm

erly

Log

istic

s)T

ier 1

London 2012 Tier 1 Supply Chain Map

7

Delivery & Political Environment

Complexity of contractual footprint (and intensity of spend)

Target cost contracts (NEC 3 Option C)

Levels of design maturity at contract award

Change management

Budget constraints – affordability

Time constraints – fixed end date

Public scrutiny (NAO - FOI)

Logistically constrained site

Complex supply chain

Current market conditions

8

The Challenge – Completed

8 Olympic Park Sporting Venues

Stadium and Warm up Track

Aquatics, Waterpolo

Handball, Basketball

Velodrome and Velopark

Hockey

1 Broadcast / Media Centre (1 million square feet) & Multi Storey Car Park

The Challenge

Delivery Constraints

Complexity & Risk

NEC 3 has become a key enabler supporting the London 2012 Olympic Big Build Programme

10

The Contract Structure – The Operational View

The Employer ODA~

The Project Sponsor

The Contractor

The Project Manager – CLM

Manages the contract for the employer:

• Programme• Cost• Deliverables

The Supervisor

‘Check the works ’Quality and Defects

The NEC 3 Contract –The Practitioner's View

An Output focused contract (with the Programme as a central theme)

Requires behaviour change to be successful

- Collaborative not Transactional contract- Joint approach to managing problems, risk and

issues- Align all parties’ commercial interest

11

Olympic Park Delivery Strategy

NEC3 Contract Management: Real Time

Supplier Management

Integration management

Contingency and risk management

Performance and control (cost, time)

- Earned Value- Baselines and Change Control- Trends and Forecasts

ContractManagementFramework

DeliveryManagementFrameworkO

lym

pic

Inte

grat

ed V

iew

TraditionalView

RiskManagementFramework

PerformanceManagementFramework

(Project Controls)

Accepted ProgramContractor Deliverables

(PM Approval)Early Warnings Compensation

Events Payments TargetAchievement

SBH example

70 contract deliverables (one off and recurrent)

• Budget (4)• Schedule (10)• Fatality (12)• Prosecution (9)• Security (2)

Risk ReductionMeeting

CLM/Supplier

Revised Quote

CLM Response

CLM Response

CLM Response

No Response by CLM = Acceptance by Default

Supplier CE

Supplier Quote

2wks

2wks2wks 2wks

2wks

• Incentivisation

• Tier 2 VfM

• Cost Verification

• Prelim Optimisation

• Risk Mitigation

• Final Account Strategy

Contractual Obligations Business Obligation

NEC ‘Real Time’ Contract: Key Aspects

NEC 3Works Contract

Strong GovernanceRigorous change control between client and DP

- Monthly approval of individual ‘business cases’- >5,000 changes processed- Strict levels of delegated authority- Three lines of defence for contingency management

Monthly Trend Reviews

- Assess maturing risks / contingency burn - AFC glide path to achieve affordability targets

Monthly Performance Reviews

- Status and progress (time, cost, quality, priority themes, risks and issues)

- Independent assurance using robust, consistent performance information – focus on the issues, NOT data integrity

- Underpinned by back-to-back contractor reviews

Strong Governance – Strong Controls

Programme Controls - FrameworkStable but flexible delivery-driven WBS created

Original Baseline Budget (OBB) or ‘Yellow Book’published (November 2007)

Baseline modelled in systems & reconciled to OBB

Management subsystem links established via the WBS and procurement codes

Robust change control process implemented

A ‘control culture’ and trust in reporting accuracy built up

Forecast dataset created in P6

All contracts included Project Controls requirements

Earned Value – Programme Strategy

A Single data collection structure implemented through project teams and into Tier 1 contractors

Fully integrated budget-loaded programme

Earned Value (£) as the common means of reporting progress over a diverse programme of projects

Various funding sources and strict budgetary and change governance

17

18

Delivery Platform - Performance Measurement & Commercial Management

CLM Level 1 Schedule

CLM Level 2 Cost Loaded Schedule

P6ProductionDatabase

Tier 1 Contractor Cost Loaded Schedules

Labour (hours and cost)EquipmentMaterialsSuppliesContracted ServicesTransport and TravelOther

P6External

DatabaseN o. A ct i vi t y Jan Feb M arch A pr i l M ay T arge t Ac t ual Ch ang es

10 1 Pr oj ect M an £10 £10 £ 10 £10 £10

10 2 Desi gn £12 £40

10 3 Tender s £30

10 4 Subst r uctur e £ 15 £20 £ 40

10 5 Super st rucut r e £ 50 £70 £ 80

10 6 Snaggi ng £10

CLM Commercia l M anagementTier 1 Contractors Submission Under NEC Contract

Resources & NEC Activity List

Schedule Performance & Cost Performance

Reports etc.

Detailed EVand %

Complete

Reviewed by CLM - Summary

Submitted

Actual Cost(via CLM

Cert)

COBRA

Earned Value

Actual Cost

ODA Finance (Oracle)

Reporting

One week to turn around month-end results

Flash reports to remove data anomalies

Project Cost Performance Reports

Programme Cost Performance Report

Project Status Report

Monthly Programme status report -Dashboards used for communicating key performance trends to senior management

Monthly/Quarterly Project Reviews

Quarterly Funders Report

Governance Framework

Mature Programme Controls Schematic

Tailored reports to support

Governance decision points

Key Meeting

Key Meeting

Functions (Design, Town Planning, SHQE, etc) and Stakeholder

defined priority themes

Contract Admin (inc Procurement)

Change Control

Risks, Issues and Trends

Schedule &Integration

Cost Engineering

Enterprise Accounting C

ontro

lled

Perfo

rman

ce

Man

agem

ent B

asel

ine

WBS

WBS

Approved Changes

Contractor Project Team

Contractor Project Team

Contractor Project Team

Com

mon

pro

cess

es &

tool

s de

fined

in

Con

tract

Wor

ks In

form

atio

n

Perfo

rman

ce

Dat

a

Contractor Project Team

Performance

Data

Reporting hub for analysis

Data with

Narrative

Dat

a wi

th

Narr

ativ

e

Benefits

EV was pivotal in the successful programme controls used for London 2012.

All 32 criteria specified in ANSI / EIA 748 and APM were applied, the most influential being:

1. Define authorised work and resources via WBS

3. Ensure management subsystems support each other, the WBS and the OBS

8. Maintain Performance Measurement Baseline at Control Account (C/A) level

15. CBB = approved project budgets + contingencies

17. Prohibit multiple accounting as direct costs are summarised through the WBS

22. Produce monthly performance measurement data at C/A level

27. Develop monthly AFC’s and compare to CBB

28. Incorporate all authorised changes in a timely manner

21

London 2012 EV System v ANSI and APM

1. Implemented and used in checks and balances

2. Implemented and influential when required

3. Implemented, enforced and very influential over the programme

Criteria Ranking Criteria Ranking Criteria Ranking1 3 12 2 23 32 2 13 1 24 13 3 14 1 25 24 1 15 3 26 25 1 16 2 27 36 2 17 3 28 37 2 18 1 29 28 3 19 1 30 29 2 20 2 31 310 2 21 2 32 311 2 22 3

Key Learning: Generic Lessons

Accepted Programme – regular updates, quality of information and staff capability

Defined Cost – clear definitions, recognise importance of Cost Verification

EWNs – two-way process PM/Client and Contractor

Close Out – Start mid-contract

Supply Chain – back-to-back Tiers 1 and 2

Resources – intensive to administer (all aware, but often ignored)

Key Learning: Client / Employer

Procurement, creates the start point only

- does not guarantee the required results- too much one-dimensional thinking

Administrative Burden (resource intensive but worth it)

Lock down AFC after completion / takeover quickly and collaboratively

Need a holistic approach to Commercial Management -Contract, Programme Controls, Delivery and Risk

Right Governance and Assurance structure is vital

Create common employer / supplier understanding (training & more)

Large quantities of change can be handled

Works Information is key (build in flexibility)

Key Learning: Suppliers

Disconnect between corporate and operational understanding of NEC3

Need to improve quality of Quotations!

- “Price of Everything”, “Cost of nothing”- ability to truly understand cost / quote build-up- Lack of programme impact in Quotations

Greater recognition of ‘Public Sector’ demands

- traceability of costs- visibility of decisions (particularly Tier 2 awards)- the role of Project Manager v Employer

Pre-completion takeover / handover management

Spend the time and resources to get your Baseline right (and minimise heartache down the road)

Keep Baseline high level and ensure Forecast is dynamic

Everyone must work within the WBS structure

Cost collection system fully keyed-in by coding

Contractors keyed in at lower levels

Provide right level of alignment, training and assurance to include:

- Customer’s and stakeholder’s organisations- Early engagement with Contractors teams

Run Services and Operations on Level of Effort (with performance measured against milestones and KPI metrics)

Keep checking fitness-for-purpose

Key Learning: Project Controls

Be FlexibleAdjust the systems deployed to suit the phase and nature of construction

Keep it SimpleSimplified terms Clear, concise and graphic reportingData analytics but report on the issues

Aim for ‘No Surprises’Comprehensive BaselineSpotting risks and issues early enables early mitigationLeads to effective management of scope, cost & schedule

Key Learning: Final Thoughts

ODA Learning Legacy

Set challenging targets, well above industry norms – these have largely been achieved

Learning Legacy project to capture lessons learnt, innovations and best practice as a showcase for UK plc

Comprises academic research papers, peer review studies, case studies, micro-reports and template ‘champion products’

Outputs disseminated via:

- Learning Legacy website www.london2012.com/learninglegacy

- Events in conjunction with ICE, CIOB, HSE and the UK Green Building Council

Summary

Over the last five years, over £7bn has been spent delivering the platform to host the London 2012 Olympic Games

120 NEC3 Contracts have been managed in the spirit of mutual trust and cooperation, handling over 40,000 formal contract communications to date

Construction was on time and under budget and we had the facts to prove it

NEC3 has been a facilitator of performance

Project Controls have demonstrated performance

The construction of the venues and infrastructure for the London 2012 Games is funded by the National Lottery through the Olympic Lottery Distributor, the Department for Culture, Media and Sport, Greater London Authority and the London Development Agency.