Putting Contractors Through Their Paces
Shortly after London's 2001 New Year celebrations had ended, Transport for London began inviting tenders for the five packages. The £71.5 million in IT-related contracts made the project large enough to require listing in the European Union's public-sector register, and tenders were open to companies throughout Europe. Again, the consultant-designed procurement strategy came into play: The camera and communications packages could be bid for separately, while the remaining three could receive bids on a combined basis, or individually. "Ideally, we wanted a single provider, but were retaining the ability to mix and match," says Murray-Clark.
While selecting the camera and communications packages was straightforward, the remaining three packages - the bulk of the IT work - proved more problematic. A long-listing process, managed by Deloitte & Touche, brought the original 40 or so bids down to four. "We went through a couple of months talking to all four, and then reduced the bidders to two," says Murray-Clark. At this point, the procurement strategy dictated another move that in retrospect seems astute.
"We told the two bidders that before we could make a decision, we wanted them to undertake a technical design study," he says. Taking three months, this step would firm up the technical issues underpinning the contracts - issues such as data throughput, how the retail channels would work, how to achieve the best number recognition performance, and what payments might be expected through each payment channel. From the perspective of the procurement strategy, explains Murray-Clark, the clever thing about the technical design stage was that it added a lot of value without actually holding anything up. "We were moving ahead but still using the competitive element of the bidding process to get the best solution," he says. The move wasn't without cost - the two bidders were each paid for the work - but the theory was that the cost of paying the losing bidder for doing the work would be more than outweighed by the benefits of using its work to improve the overall quality of the project.
It was this phase of the project that highlighted the fact that from the technical point of view, the greatest challenge was going to be the creation and management of the image store. It had to process a million records each day (picture those 250,000 vehicles moving about the city centre all day) - as well as store them for evidentiary purposes for the subsequent prosecution of nonpayers. Meeting the challenge meant carefully evaluating design considerations (such as using the most reliable technology available) and writing software code that would automatically detect which image of a passing vehicle would yield the most accurate number recognition.
From the perspective of The Capita Group, the winning bidder that emerged in December 2001, the process was a confidence booster. "The experience of the technical design study was actually quite a useful one because it created confidence in both us and Transport for London about how the scheme would work, and how long it would take," says Simon Pilling, executive director at Capita, who was in charge of the project. "The deadlines were very tight and were politically driven, and it highlighted where the risks were."
Some of those risks were outside Capita's control, of course. (London officials were anticipating some kind of legal challenge to the scheme, and the city beat back a challenge from the Westminster district arguing that it would unfairly impact them.) But for the rest of it, the company was on the firing line. The contract included a very robust set of liquidated damages against the contractor for failure to deliver against the time-scale," says Murray-Clark. "We set out the [market] stall, they agreed that that was what they would produce, we agreed to the milestones for getting there, and we agreed on the consequences of not getting there."
There was one additional ingredient: third-party oversight for the main contractor. Despite assigning people who as Pilling puts it "had spent a large part of their working lives on large government projects", Transport for London required that Capita agreed on project management methodologies with the consultants from Deloitte & Touche before work could commence. "They were the advising consultant, and their job was to report on how it was being performed," Pilling says.
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