Gold Star Cost Control for Super Sewer
The Thames Tideway Tunnel, also known as the ‘Super Sewer’, is a major £3.8 billion project to construct a 25km tunnel under London’s River Thames to prevent tens of millions of tonnes of pollution entering the river each year.
The BAM Nuttall, Morgan Sindall, Balfour Beatty joint venture is delivering the £416 million west section running from Fulham in South West London to Acton in West London.
The joint venture is being delivered in partnership by three major infrastructure companies, all of whom operate different processes, so adopting a central technology-based approach for controlling project costs was essential. A methodology was required which could be used across the entire project from procurement, project finance and commercial activities to the operational teams.
A selection of process controls, the ‘Process Control Management System’ (PCMS) has been developed to define all cost control processes. This replaces paper-based processes with digital solutions and uses COINS as the underlying central platform. This approach has resulted in transparent, cost-effective and accurate cost control processing from start to finish.
From the outset the key priority of the finance team was to move the process from ‘the stone age to the digital age’. With three project partners involved in delivering the project a common approach was required, one which used a common language, common processes, with common controls on a single system.
Solving the problem.
The team aimed to develop a 21st century solution from the very start of the project, one which was slick, quick, automated and obstacle free. One which was simple and easy to use and would have a massive impact on how the joint venture team operated and managed their contracts at the sharp end.
A lack of common solution and reliance on paper-based processes not only results in a huge administration burden but also leads to errors, such as inaccurate data inputting, delayed or incorrect allocation of costs, all leading to lack of clarity on financial performance.
The Thames Tideway Tunnel Approach
Imposing cost controls and increasing transparency is essential for the construction business to work profitably. To start the team focussed on the vulnerable front end of project costs - purchasing, the area of most financial risk.
E-requisition documents were implemented, tailored for specific budget locations and self-populated with Work Breakdown Structure (WBS) codes they also include spending limits relating to the user’s role. With anyone being able to raise a requisition, delays in the purchase process are avoided.
The next stage was the development of project process controls, the PCMS Tree for which COINS is the underlying central platform.
By having a system that prompts, guides and questions the user at the front end of the process we have greatly reduced escalating issues at the back end.
Finance Manager for the Joint Venture
Working with COINS and their Supply Chain, automated transaction systems have been developed which as well as enhancing audit traceability also save wasted time and reduce the administration burden which comes with manual paper processing.
The joint venture operates a automated 3-way match process, whereby orders are called off using PCMS tree procedures, and suppliers are requested to submit electronic Goods Received Notes (GRN) and invoices using COINS.
The management and controlling of plant and material deliveries is never easy on a large infrastructure project. Add in seven sites scattered across west London with restricted areas of entry and it becomes even more challenging.
Where a standard 3-way match formula is not applicable or practical a new approach has been developed ‘Supplier Engagement for Bespoke Solutions (SEBS)’ to handle supplier purchase orders, front end delivery and costs which relies on collaboration with both the suppliers and the operational teams.
The current development is for electronic call-off forms submitted from PCMS to be confirmed by the supplier and returned directly into COINS. This supplier order confirmation will create the line item and auto-generate the Goods Received Note (GRN) creating an automated 2-way match. This process will ensure that costs have been captured accurately as well as reducing the need to manually input the GRN delivery ticket
As well as saving time on trying to find the delivery ticket this increases the volume of invoices being cleared without going into query.
Engaging with the materials team and site engineers has been another option. Working from concrete pour forecasts against supplier live batching reports has saved time and effort and has produced more accurate accruals at cost period end, as well as reducing invoice queries and aged creditors. However, there is still much more to do in this area.
Towards a common solution…
A key project challenge has been to get both suppliers and site-based construction teams on board.
It’s not just process, it’s about people and keeping everyone in the loop. Helping to remove obstacles with everyone having an understanding of the wider picture.
Suppliers have been keen to collaborate with the promise of speeded up payments.
Regular site based finance meetings. Mid-month site meetings with section managers and their core teams both increase engagement and are an opportunity to review reports such as ‘outstanding orders’ produced by COINS in advance of the formal month end reports.
Simple to view, simple to use budget dashboards are designed to show commercial performance at a glance. These allow for data to be selected in various formats to measure commercial standing by identifying variations, risks and trends. The COINS DSL (Detailed Source Listing) report is built into the background of the dashboard making it easy to drill down into the detail.
Before the system went live with the PCMS tree projects of this scale, with a similar scope of works, could average around £950,000 to £1,200,000 of aged debt and 45% of this was due to invoices on hold because of missing paper delivery tickets.
Since its introduction this is now averaging at 15%.
Supply chain disputes such as incorrect rates and quantities on invoices have reduced from 30% to 10%
The introduction of PCMS processes with COINS has greatly reduced human error – for example incorrectly coded requisitions and call off forms with the wrong cost codes have reduced on average from 17% of the project monthly cost turnover to around 0.5%.
PCMS and COINS solutions enable real-time expenditure reports to be visible throughout the project, providing complete transparency from start to finish.
Paper is still an issue but one which has been dramatically reduced.
The PCMS Tree has changed the way that the joint venture project team operate, with benefits ranging from cost savings to collaborative working. Using COINS as the central platform this approach has helped to standardise processes across this complex project.
COINS sister company Fulcro have also been working with the Thames Tideway project, where the groundbreaking FULmax technology is being utilised to create a virtual digital twin environment read more