Outcome Based Contracting at Sellafield

Part 1: Setting the Scene

Katherine Bew PCSGA fresh approach to project delivery at Sellafield is unlocking benefits at the UK’s largest and most complex nuclear site.

Katherine Bew, Managing Director of the international built-environment consultancy, PCSG, explains how.

Hello! Thank you for taking time to read this blog. Over the next five weeks, I’m looking forward to sharing some of the experience I’ve gained over the past 18 months working at Sellafield on an exciting and innovative pilot project. First things first, some context…

The clean-up currently underway of early operations facilities at Sellafield is part of a wider 120-year programme to decommission nuclear sites across England, Wales and Scotland.

The Cumbrian site, seven decades in the making, comprises a densely packed area of two square miles and with thousands of buildings, is home to some of the most hazardous nuclear facilities in Europe.

The challenge at this, the UK’s first plutonium plant, is vast and it was clear that new innovative approaches would be needed to accelerate remediation of the site and deliver these works at best value for the taxpayer.

A new approach

This new delivery mechanism, developed by Sellafield with help from the team I’m part of – the Project Facilitation Team, comprising PCSG, Nuclear Technologies and Enkom, is known as Outcome Based Contracting (OBC). It’s an approach based around four cornerstones (outlined below in Figure 1) and is already yielding significantly positive results.

Outcomes based contracting

Figure 1: The four cornerstones of Sellafield’s OBC approach

On OBC projects, the supply chain is empowered to lead project delivery, with contracts procured for a fixed price. Achieving a fundamental win-win scenario – transferring the risk for delivery of works, at best value, while also providing an acceptable commercial return for the supply chain, is the aim.

To make such a challenge work on any project, let alone remediation of land on a nuclear licenced site such as Sellafield, requires the whole approach to be intensely collaborative. Not surprisingly therefore, a central tenet of our new OBC approach is establishing the optimum culture and behaviours to enable Sellafield to collaborate effectively with its supply chain.

How do we achieve this?

Well, it has meant working hard to de-risk the project, to find ways to proactively manage the remaining risk, to participate in joint problem-solving activities and to make sure the integrated team has an engrained ethos of learning and improvement.

For example, payments to the supply chain are made on the achievement of outcomes defined in the works information, for the delivery of real business value rather than the completion of an amount of work.

In short, it’s about the whole project team embracing a new way of working to deliver the combination of a shared understanding, incentivisation and contracts needed to achieve a solution where everyone wins (Figure 2).

Sellafield approach to contracting

Figure 2: Sellafield’s OBC approach means new ways of working together

Sellafield is not alone in identifying a need for a new project delivery approach. The Institute of Civil Engineer’s (ICE) Project 13 initiative also seeks to address the infrastructure sector’s long-recognised problem of over-budget, over-time and under-par delivery. Those behind Project 13 have dubbed the traditional approach to infrastructure delivery as ‘broken’.

The OBC Pilot Project

Sellafield’s OBC model is already showing early signs of success and major steps forward have been taken to ensure its effective deployment and ability to unlock value out on-the-ground. Projects are delivered in three Phases.

During Phase 0 Sellafield takes the project through feasibility and the tender process, culminating in a contractor being selected to deliver the works. In Phase 1 the Sellafield team integrates with the contractor’s team to de-risk the project further and provide Sellafield with the assurance that the fixed price for Phase 2 (Delivery) represents best value.

At PCSG, we have been privileged to be part of the team which has helped to launch and embed the approach on the OBC pilot project – the £7 million remediation of the Pile 1 East Blower House.

Successful measures undertaken include the co-location of the integrated project team from Phase 1 onwards, and the swift management of risk through the effective use of NEC early warnings and risk reduction meetings. The first outcome was delivered on time at the end of Phase 1 enabling the project to move smoothly into Phase 2 – Delivery. The project is now over half way through Phase 2 and progressing well.

Critically, use of the NEC 3 Option A fixed price form of contract with Z clauses has enabled payments for delivery of outcomes that are of value to Sellafield (e.g. ‘Superstructures are de-planted and ready for demolition’).

We were delighted when the effort and innovative thinking invested in embedding the approach was rewarded with the Pile 1 East Blower House project being named the NEC contract innovation through additional clauses category 2018 winner. The award recognises excellence in project delivery and showcase examples of good practice through collaboration worldwide.

The success of this project, which got underway in 2017 looks set to accelerate delivery of the UK’s nuclear decommissioning programme over years to come. Sellafield is now planning the delivery of larger and higher-value remediation works at the site using the OBC approach.

The OBC Toolkit

The OBC approach has been carefully designed to deliver results that meet Sellafield’s business needs. These include the delivery of best value for the taxpayer and a resilient supply chain capable of delivering the remediation works.

To help stakeholders understand the OBC approach and realise the benefits of implementing it, we developed a detailed ‘Toolkit’ based on the learning and experience of implementing the approach on the pilot project and centred on the four cornerstones (shown in Figure 1).

Over the next few weeks we will look in more detail at each of these cornerstones, their contribution to the OBC approach, and the reality of making them work out in the field.

Read Katherine’s second blog in the series: Shared Purpose Drives Performance

Read Katherine’s third blog in the series: Aligned Outcomes

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PCSG-strapline-CMYKKatherine Bew is Managing Director of PCSG – a leading built-environment consultancy.

PCSG is focused on delivering sustainable outcomes through digitisation and effective use of resources. From its bases in the UK and Australia, PCSG is a trusted partner to some of the biggest names in industry. PCSG helps clients to deliver, operate and optimise their built assets – solving key business issues, unlocking value, building resilience and helping transform the way they do business.

Please feel free to share your thoughts and feedback by commenting on this blog, sharing on our social media feeds or by contacting Katherine directly at: katherine.bew@pcsg.co.uk.

www.pcsg.co.uk

 

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