Spring 2014 newsletter

Introduction

Welcome to the third edition of the APM Governance SIG newsletter.  The objective of the newsletter is to keep SIG members up to date regarding the activities of the SIG and related developments in the world of governance.

MilesDixon

In this issue: an update from the Chairman; reflections on some recent events and some tasters of up and coming events and diary dates.

This is your newsletter – please keep the feedback coming and help to shape the content, style and focus - if you have any comments on the topics covered, would like to contribute an article to a future edition, or raise an issue please contact us.

Miles Dixon – Editor and Committee member

Stay connected with the Governance SIG



Update from the chairman

MartinSamphire

Welcome to the first newsletter of 2014 – and albeit a bit late - I wish you a healthy and happy 2014. I look forward to meeting many of you at our GovSIG events during the year. And please do persuade your colleagues to join the SIG so they can get a copy of this newsletter and advice of events – to express interest just contact us and ask to join - or join the group on the website here.

What a start to 2014! First, the sad passing of two project management heavyweights and former colleagues of mine at the Nichols Group, Mike Nichols and Alan Harpham – both were inspirational in pushing project management to the fore of the business agenda. And second the wet start - we look forward to the spring and hopefully some dryer and warmer weather. For those involved in governance of flood defences the cry for more projects and investment is deafening – but how much is “enough”? Third, the UK economy is accelerating and increased investment and activity in projects is there to be seen from construction through to IT and organisation transformation in many sectors – long may it continue.

So far in 2014 the GovSIG has hosted two memorable events:

First in January we put the governance of the Universal Credit programme “under the microscope”. Sadly we see that the “same old dirty water” circulating – poor application of PPPM methods and framework, overambitious timescales, lack of realism in expectation setting, failure to adopt an incremental approach in what is a very complex and technically demanding social transformation programme, focus on the technology at the expense of the business /process and people issues. More about this event later in this newsletter.

Then in February PwC shared the evidence for the current state of governance maturity from their global survey of organisations. This showed that governance is recognised as one of the most important levers for project success, but there is still much to do. As Andrew Bragg is often heard to say “there is no such thing as project failure, just failure of governance”. More about the outcome of this event in our summer newsletter.

We look forward to much more in 2014 including:

• our much heralded update to one of our core publications, Co-Directing Change

• a joint event with the APM North West Brach on 10 April

• a key conference on governance success in the summer to be held at the SAID Business School and featuring Tim Banfield from the Major Projects Authority, Cabinet Office.

We have also been active with important influencing bodies. Meeting with the NAO, they stated that the Directing Change Guide was the “most comprehensive guide on governance available”. We are also in discussions with the Financial Reporting Council and are being asked to input to their governance guidance – more about this later in the newsletter.

I hope that you have a productive and rewarding Spring.

Martin Samphire, Chairman


Update on CDC refresh

Hartley

We continue to make progress on our update of Co-Directing Change, but delays are occurring because of the work commitments of some team members. A draft of the revised principles is now available and the urgent work is to cross reference this to other sources of guidance - both the UK and US formal Corporate Guidance standards and those from other sources such as BSI. Additional volunteers would be very much appreciated.

The March meeting of the SIG will be devoted to structuring the key questions to match up with the new principles and to considering how field guidance should be developed and presented. We are particular interested in any specific and concrete examples of where proper governance would have helped avoid problems arising from multi-ownership of the projects.

Any contributions, large or small, are welcome. To volunteer or suggest examples please contact Hartley Millar. I will be delighted to hear from you.

Hartley Millar


Universal Credit (January meeting review)

contributed by Amerjit Walia


Universal Credit is an ambitious and complex societal transformation programme (not IT project) being led by the Department for Work & Pensions. This massive central Government programme has spent over £475m to date, but has only enrolled 2,500 claimants (against the total 17m people to be covered by the scheme by a deadline of 2017).

The APM Governance SIG held a workshop on 8 January which used the established APM Governance SIG ‘Directing Change Guide’ as a baseline to assess the performance of the governance and leadership of the Universal Credit programme to date.

image

The main findings were that the objectives were ambitious in the extreme, and that governance, leadership capability and behaviours have been unacceptably poor. Good governance is not only about authority, process and structure – it is essentially about behaviour of people.

The business case has not been underpinned by a clear vision, end state and intermediate state blueprints, or an implementation strategy that was based upon realism. Therefore a poor baseline existed against which to track performance.

The leadership role for the programme has been unclear: sitting uncomfortably between the Minister (held politically accountable), the Permanent Secretary (held accountable for Value for Money) and the ‘Senior Responsible Owner’ (SRO) – the key (sponsor) role held accountable for a successful outcome and benefits delivery. Due to a mix of circumstances and poor performance, this SRO role has been held by no fewer than six people in the last 12 months. Continuity of the SRO (sponsor) role is one key success factor for good governance.

The culture did not support open and transparent communication leading the MPA to describe it as a “fortress mentality”. The findings from Assurance reviews were not implemented in a robust manner.

Consensus was reached from the workshop that monitoring and control needed to be improved with a framework for people management and programme / project approach that is based on capability and capacity. It was initially claimed that an Agile approach was being used for delivery, but little experience or capability existed to either deliver or govern. The actuality has been an attempt at a ‘big bang’ transformation that has failed to embed rather than an incremental build.

The overall conclusion and recommendation was that following the APM Governance SIG Directing Change Guide would have avoided many of the issues – and still might going forward if adopted.

The Sept 2013 Executive Summary NAO Report can be viewed here

Directing Change can be viewed here.

Read the full workshop review here.


PF2

PeterDeary


Contributed by Peter Deary

Introduction

The Private Finance Initiative (PFI) was introduced in 1992 as a means of financing public sector projects using private sector money and expertise. Since 2011 PF2 has replaced PFI.

What were the strengths of PFI?

PFI allowed the public sector access to private sector capital investment funding, which at the time did not show on the national balance sheet. It also gave access to private sector skills, discipline and expertise. Delivery of PFI schemes has generally been to time and budget. Why change PFI?
PFI had been criticised for its inflexibility, cost (questions have been raised as to the financing costs when government can generally borrow cheaper than the private sector), unsuitable risk transfer, length of procurement, and lack of transparency. These criticisms had been recorded by the National Audit Office. PF2 is intended to address these concerns.

What is PF2?

PF2 is a new contract standardisation process which replaces the original PFI process for certain public sector capital and infrastructure projects, having evolved from previous PFI agreements. PF2 financing is now shown on the national balance sheet.

Will PF2 introduce major changes?

PF2 promotes change in five major areas:

  • financing, by giving access to wider sources of equity and debt finance, thus improving value for money and enabling participation by the public sector;
  • transparency, by increasing participation in equity returns for the public sector;
  • procurement, by speeding up the process;
  • flexibility, in improving the provision of services, particularly by removing soft FM from PF2 projects;
  • risk, by making more appropriate arrangements for holding / management of that risk.

Where will PF2 be used?

HM Treasury’s tracker records the progress of development, procurement and delivery of PF2 projects, at present in the health, education and transport infrastructure sectors. Use of PF2 in defence schemes is also being assessed.

How will governance of projects be affected?

Business cases will continue to be approved at departmental and HM Treasury level. A public sector director will be appointed by HM Treasury to the PF2 project company board to improve transparency. However, this represents a conflict of interest for the public sector appointee both in relations with private sector investors, and with other parts of the public sector. The contracting authority will also be given observer status at board meetings, but could be excluded from some parts of the agenda. Throughout, the contracting authority will be required to act as an “intelligent client” making informed decisions.

Who procures PF2 schemes?

Procurement of PF2 schemes will be carried out at departmental level, overseen by a central unit located within HM Treasury. There is to be a maximum 18-month period of procurement, so proposed schemes must be market ready before this process begins with publication of an OJEU notice.

Conclusion

PF2 is an evolution of PFI, addressing some of the contentious issues which had been identified. However, the level of public sector representation has caused unease, and it remains to be seen if there will be sufficient flow of projects to attract interest and investment from the private sector.


Around the world of governance

a) Book Review
Contributed by Peter Deary

Review of ‘The Blunders of our Governments’. Authors: Anthony King and Sir Ivor Crewe: Oneworld Publications, 2013

Blunder: a stupid or careless mistake. This book, written by the distinguished political observers Anthony King and Ivor Crewe, catalogues some of the blunders our governments have made over the past three decades, many of which have related to projects; the common factor is that problems have occurred where project governance is most vulnerable, at the interface between political policy and project management. They identify the failings of the systems of government which have allowed such blunders to run unchecked. The authors are not politically biased – for every Metronet fiasco under the last Labour government, they record a Poll Tax under the previous Conservative administration; and they make the point that governments of both parties appear to blunder in much the same way. Blunders are not confined to the public sector – just think of Lehman Brothers, G4S in 2012, or the break-up of GEC, caused by the successors to Arnold Weinstock from the 1980’s onwards.

As causes of blunders, the authors have identified cultural and operational disconnects, group think, and prejudices and pragmatism in the category of ‘Human errors’. In the category of ‘System failures’ they point to a lack of accountability, the wonderfully-named ‘asymmetries of expertise’, and deficits of deliberation. In particular, they point out that

‘to put it politely, the performance of successive British governments in negotiating contracts and managing projects has not been entirely satisfactory’.

Tellingly, they note that many projects appear not to have been thought of in those terms; and that even where they were, they were not professionally managed as such. Hanging over these are the influence of the feared HM Treasury, and politicians either giving insufficient support and direction, or micro-managing schemes.

The Major Projects Authority has been established, and it is to be seen whether they are better able to protect governments against the consequences of their own activities.

There have been successes: HS1, DVLA automation, London 2012 and Crossrail (so far) come to mind, noting that politicians had (in effect) been excluded from being involved in the management of these schemes.

The best place to read this book is from behind the sofa, with your hands over your eyes. Stephen King should have been invited to contribute, as the authors acknowledge by calling one of the section headings ‘Horror stories’.

b) The APM ‘Vision debate’
Contributed by Martin Samphire


Many of you will have read with interest the debate that had taken place regarding the APM Vision statement – “a world in which all projects succeed” – reported in November’s issue of Project. The gathering was high powered and ideal to debate the subtleties and strategic issues behind the APM vision. I recognise that a number of debates have been had over the meaning of the vision. This particular debate seems to have gotten close to the core of the issue, but stopped short of a clarification statement, in my view. I think that good governance requires better clarity.

A key issue around the vision is the ‘success’ word. A project may be started for good business reasons but subsequently proactively stopped (for good business reason) and the investment saved is reinvested in an even better project. Although the project manager and sponsor may feel aggrieved (and feel it is a failure), the decision is actually a success for the business at the portfolio level – it has stopped business value being further eroded. This is consistent with what I understand by Eddie Obeng’s concept of “smart failure”.

For all the reasons that the panel stated, unless we change the definition of success and failure from the project to the portfolio level, we cannot have a world in which every single project succeeds – that is nonsense in a world of change. However searching for ‘all projects succeeding’ is missing the key measure of success – that of ‘business success’ or value from the portfolio.

The GovSIG has adopted the view / interpretation that the APM vision statement means to them that “organisations maximise the outcomes from their overall portfolio of projects” – the business measure of all projects succeeding. Maybe we need to build in “smart failure” to our definition but I feel the portfolio view is at the core of what we are striving for.

I have requested that the APM refine and adopt this as the intent of the vision statement and so help APM members to consistently articulate the meaning to colleagues, suppliers and clients alike? Please do contribute your views to the debate via the APM website.


Upcoming events

a) Preview: Major Project and Change Governance Conference, 10th April 2014

The financial crisis in 2008 brought into sharp focus the importance of Corporate Governance and devastating impact failures of it can have on society. The governance of major projects and change is one important element of Corporate Governance having the potential to damage both an organisation's reputation and financial performance. Examples include the fire at BP’s Macondo well in the Gulf of Mexico and in the public sector, the West Coast Main Line retendering project, and, more recently, the Public Accounts Committee reporting governance failures in the early stages of the programme to introduce Universal Credit.

With the aid of the APM Governance Specific Interest Group the North West Branch of the APM will be holding a full day conference at AstraZeneca's Alderley Park site in Cheshire on the topic of Project and Change Governance. The intention is to revisit and review the key leadership roles, culture, behaviours and processes that will assist in moving towards the declared objective of the APM 2020 Strategy ... a world in which all projects succeed. To underline the importance of the subject, Governance is the first topic set out in detail in the 6th edition of the APM Body of Knowledge issued in 2012.

The conference will aim to address the 4 key themes of Governance i.e. Portfolio Governance, Project Governance, Sponsorship and Reporting. Speakers will include Martin Samphire [Chair of the Governance SIG ], Peter Taylor and the APM Chief Executive Andrew Bragg. Delegates will also learn the some of the principal aspects of Governance through several interactive sessions.

The conference will be of interest to organisational executives, leaders with organisational accountabilities for major projects and change as well as project and change practitioners.

b) PROMS-G Spring School "Making Governance Work"

PROMS-G, the BCS Special Interest Group on project management is running their spring school this year under the title of "Making Governance Work". It will run on each of the first four Mondays in March. Subtitled 'Could your project fail because of poor project governance?', the first week, featuring Martin Samphire is headed 'Good PM Governance a Dream or Reality?', with the second week on 'Combining PRINCE2 with Good Governance' led by Andy Murray and Keith Richards on 'Combining Agile with Good Governance' in the third week. The fourth week will be a panel debate with a period for networking.


Dates for the diary

2014    
PROMS-G Governance School Mondays in March (3rd, 10th, 17th, 24th) London
Major projects and change governance conference Thursday April 10th, led by the North West branch Cheshire
Co-Directing Change refresh Wednesday March 12th London

Comments and feedback

The Governance SIG would appreciate any comments or feedback you have on our newsletter – let us know whether it was useful, and what you’d like to see in future editions. Email the newsletter editor.

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