Stage Gate approach towards
project management
Training event on PPP programming and process management
27 May 2008
Twinning Project CZ/2005/IB/FI/04
Mikko AJ Ramstedt
Senior Project Adviser
Financial Partnerships Unit
Introduction
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Background
Stage Gate approach
The need for Process discipline
PPP vs. conventional projects
Resource planning
Background
• Why is PPP different?
– Contracted outputs
• Fixed
• Performance & availability requirements
– Concession
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Longevity
Contractually defined obligations – limited flexibility
Mutual liability
Incentives
Background
• PPP programming and process management
– 6 stage process:
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Conception
Development
Procurement
Construction
Operation
Handback
– Each element has a number of sub-stages
Background
• PPP process
– Resource intensive (at all levels)
– ‘Front loaded’ inputs
– Long lasting consequences
• Accountable bodies need an effective way
of tracking projects and monitoring risks.
Stage-Gate approach: Principles
• Self-assessment tool
• Expert independent review
• Guard central government investment
– Mandatory for Scottish Government Departments &
Agencies & PPP projects receiving central funding or
requiring central approval.
• Maintain local accountability
• Accumulation of sector specific & market
experience
Stage-Gate approach: Purpose
• Establish clear and transparent criteria for
project evaluation
• Audit projects at key stages
• Consistency of review / control
• Reassurance to public sponsors
• Reassurance to market: minimum standards
• Develop best practice
• Share lessons learnt
Quality Assurance
Stage-Gate approach: Context 1
Top 10 risks that have materialised during
PPP procurements:
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Land acquisition
Site ownership
Planning permission
Lack of consensus among stakeholders
Stage-Gate approach: Context 2
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Affordability
Lack of competition
Project scope unstable
Unsecure bid price
Commercial agreement
Due diligence “unforeseens”
Stage-Gate approach
Process - at each review:
1. Submission
2. Clarifications & Independent review against
set criteria
3. Independent recommendations
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Essential vs. desirable
4. Response / action to recommendations
5. Central Government review of actions taken
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No action –> HOLD / STOP
Positive action –> GO
Stage-Gate approach: Focus
Outline Business Case
Sound fit between need, policy and project scope:
• Clear demonstration of need, full options
appraisal, comprehensive VfM assessment over
procurement routes, project is affordable within
relevant sensitivities and key deliverability issues
have been identified.
Stage-Gate approach: Focus
Gate 1 - Pre-OJEU notice
Readiness to go to market:
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Governance
Scope
Stakeholders
Competition
Procurement Risks
VfM Assessment
Stage-Gate approach: Focus
Gate 2 - Pre-Invitation to Participate in Dialogue
Readiness to go to start dialogue and conduct
negotiations which will secure high quality, sustainable
bids, with minimal bidder qualifications:
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Affordability
VFM
Commercial Issues
Deliverability
Data Room and background Information
Stage-Gate approach: Focus
Gate 3 - Pre-Invitation to Submit Final Tenders
Is there sufficient technical and commercial certainty to end
competition?
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Affordability
VfM
Risk transfer
Commercial / Legal Funding issues
Technical solution
Deliverability
Stage-Gate approach: Focus
Gate 4 - Pre-Preferred Bidder appointment
Ensure projects have minimised opportunities
for ‘deal creep’ and reallocation of risk:
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Affordability
Financial / Risk issues
Commercial / Legal issues
Technical issues
Deliverability
Stage-Gate approach: Focus
Gate 5 - Pre-Financial Close
To assist Authorities in considering what
needs to be put in place in terms of staffing and
resources ahead of the construction and operational
stages of their PPP projects, to support and manage
their PPP contract going forward:
• Contract management & Governance
• Payment Mechanism
• Stakeholder management
Stage-Gate approach: Focus
Post Occupation Evaluation
Has the project delivered its strategic project
objectives?
• Reflection
• Documenting & disseminating lessons
learnt
Stage-Gate approach: Options
• Peer review
• Independent review
• Ownership
• Central requirement & local accountability
• Avoid conflicts of interest
The need for process discipline
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Maximise VfM
Market confidence
To counter external pressure
Minimise procurement cost & time
– Time = money
– Every change requires resources and time
• Individual responsibility to meet the critical
path really is critical!
PPP vs. conventional projects
• Differences process controls are necessary
because:
– New forms of project delivery require a higher degree
of scrutiny
– Fixed risk transfer impacts on available mitigation
strategies resulting a need to manage future liabilities
– Public-Private relationship regulated through a single
contract resulting in a greater interdependency within
the public sector
– Projects often negotiated with a highly developed and
competitive market requiring an increased level of
delegated authority.
Resource planning 1
Get it right from the start!
• Each of the 6 stages have different resource
requirements
– Conception – technical, financial
– Development – management, commercial (L/F/T),
specialist input
– Procurement – management, specialist commercial
– Construction – management, monitoring, specialist
technical
– Operation – management, monitoring
– Handback – monitoring, specialist technical
Resource planning 2
Competitive Dialogue issues:
– A number of separate but parallel negotiations
– Each bidder may come up with different
technical solutions needing specialist advice
to the authority
– Financial, legal and technical input
requirements increase inline with the number
of bidders
Resource planning 3
• Resource Planning is key for successful
project delivery
• Upfront investing into a long term
partnership
• Continuity is key for successful delivery of
benefits and continuous improvement
• Project Management requirement does not
end at FC!
Summary
• A well structured Stage Gate -type review
process in an invaluable project
management & monitoring process and
can help in market creation.
• In order to deliver successful outcomes all
PPP projects should prepare a resource
management plan covering the period
from project development to handback.
Questions?
Mikko AJ Ramstedt
mikko.ramstedt@scotland.gsi.gov.uk
0131 244 4940