COST ASSURANCE AND AUDITS ON INFRASTRUCTURE PROJECTS & CONTRACTS
Part 17: Integrated delivery teams on infrastructure projects
In this output, the group explores the advantages and challenges of integrated delivery teams (IDTs), examines commonly used models and assesses the role of audit and assurance in maintaining efficiency, compliance and value creation within these environments.
IDTs bring together professionals from different disciplines to enhance collaboration, streamline processes and improve project outcomes. While they offer advantages such as faster delivery, cost efficiency and innovation, they also present challenges, including cultural differences, groupthink, resource conflicts and complex management structures.
Key benefits:
- Efficiency and collaboration: Enhanced communication and agile decision-making.
- Cost and time savings: Early supply chain involvement optimises construction methods.
- Transparency and accountability: Shared risks foster openness and trust.
Challenges:
- Organisational complexity: Differences in culture and resource allocation.
- Groupthink and risk awareness: Consensus-driven decisions may overlook critical risks.
- Data and accountability Issues: Complex structures can obscure responsibilities.
Audit and assurance in IDTs:
- Audits play a vital role in ensuring accountability and optimising outcomes.
- Holistic audits: Assessing interdependencies to identify inefficiencies and risks.
- Continuous assurance: Real-time monitoring using data analytics.
- Risk-based focus: Prioritising areas such as cost overruns, delays and regulatory compliance.
- Governance and compliance: Ensuring transparency, contractual alignment and adherence to regulations.
Cecelia Fadipe, CFBL Consulting
A number of different integrated delivery teams exist from informally set up supply chain and client relationships that are defined by an incentivisation and behavioural framework to more formal operating models like alliances where multiple suppliers and the client are bound into a formal contract with a shared incentive structure and a more joined-up way of working.
Pros: (1) Opportunity for outperformance through collaboration and bringing capabilities together, (2) a more nuanced approach to risk sharing across all stakeholders, (3) more likely to achieve consistent data standards and reporting across all parties, (4) opportunities to develop innovative assurance regimes.
Cons: (1) Operating model could result in a higher level of administration and cost, (2) requires a delivery approach that keeps all parties engaged throughout the delivery of the programme (to avoid any significant troughs of activity), (3) requires a shift in behaviours which will likely result in additional cost to invest in specialist interventions.
Assurance approaches will generally remain consistent with a standard client/ contractor relationship, however, a more integrated approach will be required to form a robust LOD approach. This may include a demonstrable self-assurance regime and also an independent auditor function that specifically services the IDT (such as an alliance auditor for alliance contracts).
There is a risk that these environments create too many assurance layers so effort should be taken to develop a risk-based approach in line with the key principles of audit standards.
Imran Akhtar, Turner & Townsend
Integrated delivery teams in partnership or alliancing models are common on large capital programmes. There is enough experience of these approaches to understand the benefits and any downside including:
Pros
- Early supply chain line of sight. getting the brightest brains collaborating ‘in the tent’ from the outset.
- Efficient ways of working. Some standard processes from one-off contracts can be cut out in long-term partnership models.
- Economies of scale. Integrated teams in long-term partnerships will cut out some costs otherwise experienced in constant mobilisation and demobilisation.
Cons
- Removal of competition at project level. Long-term frameworks will increase the prevalence of single-sourced solutions.
- Risk of indirect cost escalation. Where the client struggles to ‘feed the beast’, i.e. by not providing the optimal level of project work, the partnership will be stuck with inefficient indirect cost maintaining the supply chains overhead.
- If behaviours deteriorate, the parties will be stuck in a long-term relationship that may be difficult to unfold.
To create greater efficiency, the client may wish to remove some repetitive administration at project level in favour of framework or portfolio-level controls. Where this removes the need for the individual project manager or supervisor to inspect, assure or approve something, a framework-level audit regime can fill the gap. These limited scenarios will require proactive consideration and drafting amendments.
Tom Leach, Southern Water
Integrated delivery teams are a collaborative approach towards achieving project objectives. It requires collaboration, shared knowledge/risks/rewards and influence from all stakeholders (client, designers, contractors, suppliers) throughout the project in order to be successful. It removes the traditional position-based approach, which encourages separate objectives and siloed working.
There are many benefits to this method of working, including improving collaboration and communication from the very beginning of the project. This can reduce the likelihood of differences ininterpretation, gaps in information, decisions being made that impact a project but not communicated to all parties, which can have significant detrimental impacts on the costs, time and relationship on a project. It can also improve the quality and efficiency on a project simply because there is a broader and deeper knowledge based involved in planning, decisions making and practical implementation.
Implementation of integrated delivery teams is far from simple. While the core objectives of the team may be easy to identify, all parties will have secondary motivations, priorities and interests which will influence how they approach their work
Implementation of integrated delivery teams is far from simple. While the core objectives of the team may be easy to identify, all parties will have secondary motivations, priorities and interests, which will influence how they approach their work and can lead to coordination issues and decisions being made that contradict each other.
Clear and consistent coordination is required, as well as clarity as to the roles and responsibilities of each party. By its nature an integrated team brings together people with different knowledge bases, working practices, communication methods etc., which can be jarring to an individual and cause tension.
This tension can actually be a benefit as it means decisions are carefully considered, challenged and may well be improved, however it requires an open attitude and positive relationships to reap the benefits. If individuals become defensive and closed then this can lead to difficulties and potential conflicts, which can be difficult to correct as such soft skills are hard to monitor.
There is undoubtedly a learning curve associated with any new way of working, however. In an integrated delivery team where you are not wanting to completely reshape behaviours or working practices into one uniform space, but to get them to complement each other and develop and new working culture, the learning curve is continuous and steep.
It requires investment in training, continuous adjustment, new skills and time, which can be a barrier to smaller companies who may prefer a clear scope with limited responsibility/investment.
Without enhanced communication and team working, things can occasionally be missed, such as records of agreements and decisions, ensuring authorising personnel have appropriate authority and ensuring costs are correctly recorded.
Within these environments audit provides a support role to all parties in ensuring the foundations of the agreement and processes are being implemented as they are intended, and are not being overlooked due to other priorities.
Without enhanced communication and team working, things can occasionally be missed, such as records of agreements and decisions, ensuring authorising personnel have appropriate authority and ensuring costs are correctly recorded. This can have a significant impact on the audit trail, and in the event of disagreement leaves parties with uncertainty and difficulties in proceeding. Audit can support in avoiding these situations, identifying where gaps may have developed and addressing the behaviour with protections in process. They can also provide a softer independent support where tensions have occurred and highlight these to coordinators to monitor.
Kathleen Hannon, Scottish Water
National Highways embarked on a shift from simple collaboration to integrated delivery in 2018. It has now let £7bn of work through its various IPD frameworks and alliances. The results from this work are stark. Whilst the procurement models and contracts are sound, the IPT experience of people working in the IPD is very patchy. This has required a serious investment from the client to train new working behaviours, decision making and commercial understanding of the importance of new roles and responsibilities.
The two critical issues to enable IPD to function, after getting an IPD contract in place, is single source of data and switched-on charismatic leadership.
Findings from assurance reviews revealed the need for behavioural change from both the client and the supplier community. Additionally, how appointees under the contract, project manager and supervisor, similarly, have needed to change their approach.
The two critical issues to enable IPD to function, after getting an IPD contract in place, is single source of data and switched-on charismatic leadership. Both these issues enable or stifle effective assurance of the IPD and contribute exponentially to the commercial success for all parties.
Martin Perks, National Highways
Pros: If set up well, IDTs lead to shorter delivery programmes, cost savings, better outcomes, interims of quality and increased productivity. Common models of IDTs – alliancing approach usually performed at the start of project delivery where the client contracts with one organisation creating a single point responsibility. The other approach is a partnering-type arrangement, where the IDTs are all equal partners and collectively enter into a contract with the client to deliver a programme of works over a relatively long period of time, like 5-10 years. Another approach is a joint venture type model in which the client enters into contract with JV partners to deliver the works. In all these arrangements the contracting organisations take on responsibilities to design and build and at times this is extended to cover maintenance as well. Audit and assurance, when set up correctly, will work well just as in any other environments. If they are not set up well, there may be perceptions of conflict of interest, which may compromise the quality and outputs from any audit and assurance process in place.
Cons: High set up costs, legal challenges and complexity, slow startup, difficulties in maintaining a high-performing team with the required job-site experience needed to begin and complete projects maintaining a win-win; lose-lose, type mentality. Also difficult to have aligned goals/objectives across different organisations with different business models and values.
Dr Anywhere Muriro, BAM Nuttall
Pure alliancing is a novel contracting model that has recently been introduced to the UK from Australia, where it has been in existence for many years. Network Rail, for example, has used the pure alliancing model to deliver their East West Rail Phase 2 programme of works. National Highways has also used integrated delivery models. The contract arrangement is for one unified agreement, delivered in accordance with the agreed alliance core principles such as:
- All participants share risks and benefits equally.
- Each alliance member has an equal say in the decision process for the programme.
- ‘Best person for role’ approach – irrespective of alliance organisation.
- The alliance is led by an alliance leadership team (ALT), which is wholly empowered by the respective firms. The ALT appoints an alliance management team that is empowered to deliver the project in accordance with alliance principles.
So-called key result areas (KRAs) are used to incentivise performance in areas other than cost, and this addresses the concern that quality and scope may be sacrificed to achieve cost savings. Typical KRAs include community and stakeholder management, operational railway performance, quality, HSE, sustainability and milestone completion. Benefits of a pure alliancing model include: aligned objectives, solution-oriented, empowered project teams to drive down bureaucracy, in efficiency and waste and adopting a ’one project, one organisation’ mentality, removing the barriers associated with traditional contracting.
The integrated contract has a mechanism to enable independent peers who are not part of the project to audit and assure the project sponsor and the delivery team that:
- Suitable skills and experience are deployed on the project.
- All stakeholders understand the project status and issues.
- There is assurance that the project can progress to the next phase.
- Time and cost targets have a realistic basis.
- Lessons are learned.
- The project team are gaining input from appropriate stakeholders.
External cost auditors are normally deployed to provide assurance on the contractual entitlement of costs relating to staff, suppliers and expenses. Financial reporting audits ensure the accuracy and reliability of financial statements, which is important for investors, creditors, and other stakeholders who rely on this information to make important decisions.
Elliot Patsanza, Ridge & Partners
The Steering Group on Cost Assurance and Audits on Infrastructure Projects and Contracts: Cecelia Fadipe (chair), CFBL Consulting; Imran Akhtar, Turner & Townsend; Claire Randall-Smith, Eversheds Sutherland; Ian Heaphy, INCC, NEC Board; Gary Bone, Blake Newport; Darren Ward, The Orange Partnership; Tom Leach, Southern Water; Kathleen Hannon, Scottish Water; Shy Jackson, Bryan Cave Leighton Paisner; Jennifer Varley, Bryan Cave Leighton Paisner; Charlotte Edwards, AtkinsRealis; Jim McCluskey (CICES representative), Kier Group; David Worsley, Transport for the North; Elliot Patsanza, Ridge & Partners; David Sharp, Matt Macdonald; Michael Bamber, WSP; Justice Sechele, Currie & Brown; Chris Leach, Balfour B B Beatty; Victoria Hill-Stanford, Network Rail; Lisa O’Toole, Network Rail; Martin Perks, National Highways; Chris Richardson, Colas; Charlotte Hughes, DLA Piper; Tony Cave, Croftstone Management; Dr Anywhere Muriro, BAM Nuttall.