Optimising commercial strategies for integration

We’re often asked by projects to support them towards the back end of programmes (the latter half of construction, moving into test and commissioning) to ensure they are on track to deliver safe, operable infrastructure that will support the required performance and service outcomes. One common challenge we face is the misalignment of commercial and procurement strategies with the efficient delivery of these outcomes.

Considering integration when designing the commercial strategy for a project prioritises this alignment from the outset, significantly reducing the risk of missed outcomes, project delays and budget overruns.

Three key aspects of integration

Integration is the activity of breaking down the project’s overall scope into constituent parts and progressively combining these parts to deliver the outcomes for the project. These parts are likely to be delivered by multiple organisations under separate contractual arrangements. This packaging and apportioning of scope creates interdependencies between contracted work scopes. While the subject of integration is a topic in its own right, there are some key aspects to highlight which are often misconceived:

Integration occurs at multiple levels

Successful integration happens across multiple levels. From the top level operational, service or enterprise level integration required to achieve the outcomes, down to system and subsystem integration.

Integration is a full lifecycle activity

Integration, though often seen as a final, back-end stage due to its focus on bringing project components together, is truly a full lifecycle activity. By considering it only a back-end activity, organisations risk underestimating the importance of front-end tasks that lay the groundwork for successful integration because the visible effects of integration are observed towards the end of projects.

Integration applies across the full scope of change

Project teams are often primarily concerned with the technical interfaces between physical assets and systems. This is of course important but can mean there is insufficient focus on the people, process and information aspects of the change.

Commercial causes of integration risk

In this context, the commercial strategy defines the contracting model and how the work is packaged between organisations to deliver the required outcomes for a programme or project. Commercial strategies need to take account of multiple factors including organisational capability and capacity, risk tolerance/risk sharing, competition, funding, and the political environment, however integration should also be a key consideration to reduce risk.

Our experience reveals several primary causes that can lead to integration problems stemming from the commercial strategy:

Accountability for integration at each level is not clearly defined and reflected in contracts.

Unclear contractual definitions of integration accountability can mean different organisations have different assumptions as to whose responsibility integration is. This can lead to one party believing integration risk has been transferred when significant risk is still held. This lack of clarity often causes problems later in the project, requiring additional scope, time and cost to attempt to close these integration gaps.

Overly constraining contracts limit the ability to meet integration obligations.

Where accountability for integration is defined, the contract overly constrains the accountable organisation (through over prescription for example), effectively meaning integration risk remains with the contracting authority. This can be seen in large technical specifications containing both integration level requirements and detailed specifications of the parts.

The accountable organisation lacks the authority to achieve their integration obligations.

For an organisation to be accountable for integration and hold the integration risk, they also need to have the corresponding commercial authority, or at least the ability to influence it. Where an integrator does not have that commercial authority, for example where contracts have been let directly by the client, they cannot be held fully accountable and effectively become an “integration co-ordinator”.

Organisations lack the capability to deliver integration obligations.

Organisations which have either explicit or implicit accountability for integration do not have the required capability to deliver their obligations. While this can be due to resource availability, it is more often a symptom of integration risk not being allocated to the organisation best placed to mitigate that risk.

An over reliance on specifying standards to achieve successful integration.

Standards related to integration are designed to apply to a broad range of applications and cannot on their own define the approach for a specific project. Specifying standards as the primary means of defining integration obligations within contracts leads to those obligations not being fully achieved. Each organisation applies the standard to their specific scope, often with differing interpretations and approaches, leading to a failure to fully achieve successful integration.

Commercial considerations to support integration

It is important to recognise that in reality there are few projects that have full, top-down control and influence over all aspects of the change being delivered. Existing contracts might have been let previously or let by other parties for example. There is no single ideal approach but there are considerations that can be applied to reduce integration risk:

Fully considering integration when designing the commercial strategy is critical to reducing risk and ensuring major programmes and projects are set up for success.