Project management and the private finance initiative

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3.3 Project management and PFI 3.3.1 Management structure The interviews revealed that: • All six case study projects had similar management structures that followed the conventional PFI model, comprising the awarding authority, the SPV that employed various specialist consultants, and the funders; • All the organisations had a project sponsor, and this tended to be the Chief Executive in the NHS and a Project Board or Steering Group in the public sector; • The project director oversaw the project manager who headed up the day-to-day detail and was directly accountable to the project sponsor; and, • The traditional boundaries between in-house and external consultants were becoming blurred within PFI structures. Figure 3.1 outlines the management framework for each project. Case 2 was the exception in that the preferred bidder was an holistic PFI provider integrating a wide range of expertise in one package, including finance, design, construction, project management and facilities management. For example, in Case 1 the project manager was internal to the NHS, whereas in Case 2 the project manager was working on behalf of the NHS but was Figure 3.1: Management Structure within Awarding Bodies 1 2 3 4 5 6 NHS (Health) NHS (Health) Central Gov. (Custodial) Central Gov. (Judicial) Local Gov. (Education) Local Gov. (Community Services) Chief Executive Chief Executive Project Board Project Owner Steering Group Project Board 11 chapter three Interviews with PFI practitioners Project management and the private finance initiative 1 Project Director Project Director Project Director Project Sponsor Project Director Project Manager supplied by the construction arm of the provider and therefore described as ‘internal’. The SPV employed its own representatives at various stages during the project. In terms of the central government projects, the custodial project had an internal project manager whereas the judicial project employed an external project manager because they lacked the appropriate skills in-house, including ‘project management and technical advice’. With regard to the projects in local government, each had a slightly different set-up. The project in education had a project director who had experience of three PFI projects, and an in-house project manager who gave the project full-time commitment. The project manager had no prior experience of PFI but had experience of conventional project management. In comparison, the other local government project had an in-house project manager overseeing the project, who employed external project managers for various aspects of the project. In terms of the skills required at the project director level, the role is to co-ordinate the involvement of the various stakeholders and bring in the requested skills at appropriate stages of the project. One respondent (project sponsor in the central government judicial sector) described the key skill as ‘stakeholder management’, because the project director is the co-ordinator and the buffer between the end users, contractors and SPV. Moreover, the project director must ensure that the people on both sides ‘… are being consulted … are having an input’ (project sponsor in the central government judicial sector). In-house PM In-house PM In-house PM External PM 2 In-house PM External PM 3 External Consultants External Consultants External Consultants External Consultants External Consultants Technical Legal Financial Legal Financial Financial Legal Financial Technical Legal 1 Chief Executive’s title in terms of the PFI project was Key Investment Decision-Maker 2 Project Management and Technical 3 Employer’s agent and independent certifier
Other key aspects identified as part of the project director’s role included: • Representing the client in negotiations with the preferred bidder, following involvement in the whole of the procurement process – shortlisting consortia down to three and eventually to preferred bidder, going through negotiation and getting to financial close; • Overseeing the adding to or implementation of the PFI contract through an amending agreement; • Overseeing the construction, making sure the timing was going to plan and picking up any problems along the way; • Overseeing that the project came in on budget; • Controlling changes, making sure that the number of changes were kept to a minimum as the construction went ahead, and keeping the costs down; and • Acting as the point of contact for the client and seeking decisions from the project sponsor when required. Clearly there was always a project manager, project director and project sponsor. In terms of the technical side, the project sponsor relies heavily on its technical team. The project director relies on input from a team including personnel from business development, finance and estates. The various roles undertaken by the project manager are described in detail in the following subsection. 3.3.2 The project manager’s role The interviews found that traditionally four separate project management roles existed and were performed by different people: • Employer’s agent and independent certifier, both traditionally working for the client; and • Technical adviser and SPV representative, both working for the SPV. However, more recently these roles have been combined into one function, which is possible because of the emergence of holistic or integrated PFI service providers. Furthermore, the merging of roles has become feasible because of open book approach to reporting operated by the PFI parties and the protection available from warrantees. Project managers’ roles were therefore changing. Project managers were being required to take on activities for which they had not previously been responsible and required different skills that were not ‘core’ skills for project managers. The interviews also highlighted: • The different roles played by project managers at different stages in projects; • A lack of skills within public sector bodies, leading them to buy in consultants; and • The importance of early involvement in projects by project managers. The project manager’s role varied considerably from project to project. In some instances the project manager would be involved from the initial stage of invitation to tender (ITT), bidding and preferred bidder, through to the operational phase; and in other cases the project manager would just be brought in for the construction phase. Where the project management role was recognised as a formal role, the title would be ‘project manager’. However, when the sponsor did not want a formal project manager because they had in-house project management, they tended to require a ‘project support role’, referred to as a ‘lead consultant’. In this capacity the role included technical advice, helping to co-ordinate and programme the workload, and getting the detailed elements of the output specification finalised. One respondent (external consultant in the NHS) described the lead consultancy role as ‘… an overarching strategic role where the requirement is to provide all kinds of advice except legal and financial, as these would normally be under separate contracts.’ All the parties involved in PFI require a variety of aspects of project management, and the roles that project managers accordingly undertake vary tremendously. For example, in some cases a project manager is employed by the sponsor to assist with developing the outline business case, advertising the PFI project, and helping during the bidding process, with the project manager perhaps being retained post-contract. In other circumstances the appointment is post-contract, where the project manager is required to comment on design and check variation costs, or is simply employed to certify the building on completion. That can vary between a hands-on inspecting role similar to a clerk of works, to merely checking on a monthly basis that the contractor’s quality assurance and checks and balances are being carried out, or providing an opinion at the end of the project as to whether the building is ready for occupation by the public sector. Four distinct project management roles were described by the respondents, including employer’s agent, technical advisor, independent certifier, and the SPV’s representative. Both the employer’s agent and independent certifier sit on the awarding authority side, whereas the role of technical advisor is on the SPV side, in essence the fund’s monitoring surveyor. Project management for the SPV was to assist in a technical and financial capacity, and where the consortium has very little input from the construction company a project manager may be appointed to prepare a cost plan and programme of works. It was also noted during the interviews that the most successful projects were ones where the project manager understood the project and the type of project being undertaken. Moreover, a project manager who was involved from the outset would understand the importance and the evolution of all the various different facets of the project. The less successful projects tended to be where non-specialists attempted to undertake unfamiliar tasks and came late into projects. In other words, the more technically demanding the project, the more specialist the skills, and success depends on matching the right projects with the right project managers. Project management and the private finance initiative chapter three Interviews with PFI practitioners 12
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