5. PROCUREMENT

THE CHALLENGE

The scale of infrastructure works that will be required to deliver NPR, along with constrained timescales and finances, will create huge challenges in the north. There will be growing pressure on the operating railway to do more with less, while improving reliability and ensuring high safety standards are upheld. New ideas and ways of working will be needed to achieve these contrasting objectives. Developing and implementing the right procurement strategy is key to enabling and stimulating innovative progress.

Procurement that enables innovation will help the rail industry to achieve sustainable growth, create jobs, and adopt new technologies and ways of working. Procuring for innovation will also help SMEs and new market entrants to be more competitive in engaging with major projects and to form thriving partnerships, which will ultimately be helping to reduce costs. In recognition that procurement is a key enabler of innovation, there have been increased efforts in recent years towards outcomebased procurement within rail. However, overall, the industry still tends towards traditional procurement approaches that are designed around detailed technical specifications. Over-specifying the solution in this way is likely to result in a small pool of pre-defined solutions, a limited number of suppliers capable of delivery, and minimal pricing competition as a result.

Many infrastructure projects have still not embedded innovation into their governance processes, particularly during option selection stages. Procurement by nature is risk averse, and as a result, innovative solutions considered to be higher risk are less likely to be adopted, in some cases shifting the risk of failure back onto the supplier. Processes such as engineering assurance, product acceptance, and design assurance favour preconceived technical solutions and can stifle innovation before it has a chance to flourish.

RECOMMENDATIONS

Alternative approaches to conventional procurement are available and should be considered as part of TfN’s procurement strategy. Learning from other large infrastructure projects can help to determine which approach will deliver the right outcomes for TfN. Collaborative arrangements, such as project alliancing and early contractor involvement can greatly increase the opportunity for innovation. Dedicated processes, such as the Innovation Partnership Procedure4, enable the early selection of suitable partners with which to develop and innovate and by allowing purchase of the resulting product improves on the otherwise successful Small Business Research Initiative (SBRI) used in Innovate UK competitions connect public sector bodies with innovative solutions, accelerating development, and supporting projects through feasibility and prototyping. Design contests and challenge statements are also excellent ways to stimulate innovation, provided there is a clear scope and outcomefocussed requirements.

Procurement mechanisms need to address the riskreward imbalance associated with undertaking innovation in the rail sector, to enable investment in innovation activities through its lifecycle and incentivise the scale up of successful innovations. The taking and sharing of risks should be accepted as an integral part of a future innovation procurement strategy with an increased tolerance for failure.

When procurement is focussed on innovation, more opportunities are generated for SMEs, companies and partnerships that are agile, creative and responsive in meeting specific needs. Tier 1 organisations should take a leading role in collaborating with SMEs, and clients should mandate this engagement as part of the procurement process, with measurable targets for the value delivered by SMEs. Consideration should be given towards adopting Project 13 principles5, to ensure procurement activities lead to sustainable innovation.

An innovation strategy should be established to define the expected outcomes of the proposed innovations and a means of evaluating the benefits delivered. The progress of innovations should be regularly reviewed to establish if they are achieving their intended outcomes. Brave decisions will need to be taken to either abandon or continue to support the innovation – commonly known as ‘fail fast, fail happy’. With the right monitoring and evaluation process in place, this should not present any undue risk or challenge to the organisation.

Recommendation: Embed procurement and contracting approaches in TfN that support and drive innovation, its exploitation and commercialisation.

4 https://www.legislation.gov.uk/uksi/2015/102/regulation/31/made 5 http://www.p13.org.uk/