Survey
* Your assessment is very important for improving the workof artificial intelligence, which forms the content of this project
* Your assessment is very important for improving the workof artificial intelligence, which forms the content of this project
Knowlege, expertise & contract failures Athol Yates , Senior Policy Analyst Institution of Engineers, Australia 1 Content of this presentation • What went wrong? • Examples of a lack of expertise • Lessons learned 2 What went wrong? • • • • • • Canberra Hospital implosion HMAS Westralia ship fire Collins class submarine Amphibious transport ship project ACT Bruce Stadium redevelopment IT Outsourcing Initiative 3 Royal Canberra Hospital Implosion • A 1kg fragment of steel killed a spectator who was 430 metres away among the watching crowd of over 30,000. The Explosives sub-contractor has been charged with manslaughter by gross negligence. 4 HMAS Westralia • 1998: Fire in the main machinery space. 4 dead. • The fire was caused by diesel spraying from a burst fuel hose. The original rigid hose was replaced with a flexible one. 5 Collins class submarine contract • $5 billion project to build 6 submarines. • Project cost blowout and time overruns. • Myriad of design deficiencies include engine noise, propellers, periscopes and combat systems. 6 Amphibious transport ship project • Convert 2 old US ships into amphibious transport ships • Original budget $125 million • Final cost $400 million • Nearly 3 year project time blowout 7 ACT Bruce Stadium redevelopment • 1996 total cost of $27 million of which $12 million to come from taxpayers • Auditor-General found it would cost taxpayers $45 million 8 The IT Initiative IT Outsourcing Initiative • $5 billion program to transfer IT work to the private sector from 100 Commonwealth agencies • Debate over level of savings • Initiative was behind schedule and over budget in its management • Risk management inadequacies 9 Are competent people employed? 2 skills required •contract management expertise •subject matter expertise 10 “None of those persons possessed any knowledge or experience in the implosion technique and [they] were unqualified to prepare a true risk assessment of the demolition. The so-called risk assessment plan was a failure.” ACT Coroner, Hospital Implosion, 1999 11 “Key personnel within the RAN, and more particularly ADI Limited, were not adequately trained or qualified for the responsibilities placed on them.” Naval Board of Inquiry into the fire in HMAS Westralia, 1999 12 “The Committee understands from Navy personnel that more extensive submariner assignment to the project at the specification and procurement stage might have prevented some of the submarines' problems.” Parliamentary inquiry into the submarine project, 1999 13 “there was insufficient appropriately experienced Defence staff in the shipyard or the project office to coordinate and control repair .” Report on the Amphibious Transport Ship Project, 1999 14 “not allocating sufficient appropriately qualified staff to the redevelopment was a contributing factor to the difficulties encountered during the redevelopment.” Auditor General’s Report into Bruce Stadium 15 “reduced in-house staff numbers to manage the contracts create an increased risk to the Commonwealth.” ANAO Audit of the Defence Estate Organisation, 2000 16 “there have been concerns that some agencies lacked sufficient in-house expertise to manage transitional arrangements” Humphry Report, 2001 17 Cost of uninformed buyers Issue Government- Contracts lacked adequate input of technical expertise Industry - Charge a risk premium if the government appeared to not be an informed buyer Average risk premium charged engineers IT 26% 24% 64% 42% 17% 21% IEAust, 2000, 2001 18 Lessons learned Lesson 1: Be an informed buyer • Contracting expertise • Subject matter expertise 19 Lesson: Be an informed buyer (cont) 1 Examine the good or service to be procured to determine the level of technical expertise required to be an informed buyer. 2 Evaluate the relevant existing level of in-house and external technical expertise available. 3 Undertake a cost benefit analysis of in-house versus contracted-in expertise at each stage of the contracting process. 4 Obtain and where appropriate, retain the expertise. 20 Conclusions Questioning of accepted management wisdom Generalists managing technical activities Specialist numbers being reduced due to arbitrary benchmarking Reliance on contractor's quality assurance rather than supervision 21 Lesson 1: Have effective risk policies, risk management and competent people Contract managers had carried out initial monitoring visits to CWCs but then limited monitoring to ad hoc visits to some CWCs and desk based monitoring. However none of the offices visited had completed a formal round of monitoring since the commencement of the CWC contracts. ANAO report into Work for the Dole Program 22 Lesson 1: Have effective risk policies, risk management and competent people “the main reason citied for the lack of monitoring activity is that contract managers have not had time”. This led to the obvious ANAO statement that it “is concerned that the department is exposing itself to considerable risks by not monitoring the progress of CWCs”. ANAO report into Work for the Dole Program 23 Lesson 2: Undertake comprehensive competency assessment of contractors 24 Lesson 2: Undertake comprehensive competency assessment of contractors To minimise the risks to public safety in future public works projects "any claims made by the tendering body as to their ability to meet any special requirements must be independently and objectively checked before the letting of the contract". ACT Coroner, Hospital Implosion, 1999 25 Lesson 2: Undertake comprehensive competency assessment of contractors “Defence should ensure that the prime contractor and the subcontractors have the technical, financial and managerial expertise to carry out the project and to respond to likely risks.” Report to the Minister for Defence on the Collins Class Submarine, 1999 26 Lesson 3: Follow proven engineering, contracting & safety processes Proven processes are invariably developed after years of experience and improvement. Bypassing them or rationalising them by eliminating cross-checking and supervision to save time and money can have exactly the opposite effect. 27 Lesson 3: Follow proven engineering, contracting & safety processes ACT WorkCover did not follow established safety processes. It failed to: • ensure that the explosive workplan required by the Demolition Code of Practice was met, • scrutinise departures from the original demolition workplan, • issues appropriate prohibition notices in accordance with the OH&S Act to ensure the methodology was safe. ACT Coroner, Hospital Implosion, 1999 28 Lesson 3: Follow proven engineering, contracting & safety processes The decision to replace rigid fuel lines with flexible hoses should have been processed through the Navy's change process and approved by Lloyds Register. However "both processes were bypassed, largely as a result of ignorance and incompetence". "The formal RAN configuration change process is circumvented at times, generally by well intentioned personnel, and this can have a severe impact on safety.” Naval Board of Inquiry into the fire into HMAS Westralia, 1999 29 Conclusions Contract risk is increasing • Projects are becoming more complex. • Projects are involving more partners. • Contracts are becoming larger and therefore the penalty for failure is becoming more significant. • Risk management is being used as the basis for engineering design rather than risk avoidance through over-design. 30 Conclusions Contract failures indicate management practices are inadequate + Risk management is becoming more important = Greater attention needs to given to risk management 31 Risk Management & IT Outsourcing • "this review has identified significant risks in the transition and implementation process of outsourcing", • "some risk areas have not been as anticipated or actively managed as they would have been had there been more buy-in to the process by agencies", and • "priority has been given to executing outsourced contracts without adequate regard to the highly sensitive risks". Humphry Review 32 AS/NZS 4360 Risk Management 33 Step 1: Establish the context Policy objectives which lacked indicators were •"leveraging access to private sector technology and know how" and •"improved potential for staff career development in an environment where IT&T is the core business 34 Step 2: Assess Risks Materialised risks: • lack of senior management buy-in which "is by far the most significant risk factor for implementation management", and • there was "no general acceptance that smaller agencies will have their service requirements adequately attended to in the context of a larger group or cluster 35 Step 3: Implement treatments Humphry treatments include: • reducing the power of the Executive Agency, encouraging buy-in by giving power to agency heads, •allowing agencies to utilize the most efficient form of outsourcing and •by putting outsourcing outcomes in the employment contracts of agency heads. 36 Step 4: Monitoring & Review Program unchanged until 2001. 37