Long term planning of major projects

Tiffany Cloynes, Geldards

The successful management of major projects depends on using effective long-term planning from the outset, applying this planning, and then keeping it under review throughout the life of the project. The result of the referendum earlier this year about leaving the European Union has reminded us all how one event can have a huge impact on a range of issues. For local authorities involved in long-term contracts, the ability to respond to changes in circumstances and to secure the best position for the local authority and those it represents is crucial. When local authorities start long-term projects, they need to have a strategy which not only identifies how they will deal with a range of important issues but which also, as far as possible, builds in sufficient flexibility to accommodate change during the life of a project.

Change control

A long-term contract for the provision of services will include mechanisms for change control. These allow the parties to identify in advance how they will address the implications of changes of circumstance which will affect the contract.

In some cases, parties to a contract may be able to anticipate particular events which could affect a project. While the outcome of the referendum about the European Union was unexpected to many people, its occurrence was known in advance and could have been considered when parties were agreeing the terms of contracts which were entered into in the period leading up to the referendum. Before the start of the 21st century, there was concern about the potential impact that the millennium bug might have on computers, so many contracts for information technology services included provision which recognised the need to address problems caused by the millennium bug.

Contracts should also include more general provisions for change. Not every change in law which may affect a long-term contract can be anticipated, yet a change in the law could have a significant impact. For example, the Local Government Association recently announced that local authorities would need to make a considerable investment in IT systems and staff to implement the government’s pay-to-stay policy, being introduced through the Housing and Planning Act 2016. This could have significant implications for projects involving IT services or housing provision that were agreed before that legislation was passed. Local authorities should be considering the extent to which they can make use of the obligations of the contractor to meet those expectations, without facing unacceptable pressure on the payment required from the local authority under the contract.

Contracts need to include a process allowing the parties to address the implications of change. Having included such a process, local authorities need to ensure they are prompt and active in using it.

Exit routes

Although projects are embarked upon with the expectation that they will last for a long time and be effective, local authorities need to be able to exit the contract with as little cost, administration and long-term implications as possible should the need arise. A contract needs to contain robust provisions which allow for the flexibility to terminate the contract when necessary, without making termination so easy that this threatens the long term viability of the project. As with change control, local authorities need to be active in using exit routes when they need to and securing the most advantageous position for the local authority.

The time and resources that local authorities need to put into procuring their contracts, and the importance of good use of contracts to effective service delivery, mean that local authorities are likely to be keen to use contracts for as much of their term as possible particularly if they are working well for the local authority. However, if a contract is no longer proving effective for the local authority and it is not possible to use terms within the contract other than exit provisions to address this, a local authority will need to consider whether an exit from the arrangement will be the most appropriate action. This would be a severe step to take. As well as taking the necessary action to extricate itself from the contract, the relevant local authority would need to ensure that it has appropriate arrangements in place to ensure continuity of service delivery.

Pricing

Pricing terms should be agreed, including review arrangements for a contract, which allow the local authority to receive services from a contractor for the best value for money. Both the local authority and the contractor will need to consider their options if circumstances change to such an extent that the contract is no longer economically beneficial for the authority or profitable for the contractor. It will be important to consider whether the local authority could improve its position by varying the contract. If not, the local authority may need to consider whether termination could and should be achieved.

Government programmes

Some contracts involving local authorities are part of programmes supported by the government. They may attract government funding and may require the parties to use model contract terms and conditions published by the government. If a contract is affected by changes, the parties concerned will need to identify the implications for government funding and the terms and conditions expected by the government.

Compliance with contract terms

Local authorities need to ensure that they comply with the terms and conditions of contracts and other agreements, and that they are aware of the consequences of failing to do so. If they are in receipt of external funding, they need to be aware that non-compliance with the terms of an agreement with the funder may give rise to rights for the funder to terminate the agreement and clawback funding. The recipient of funding needs to monitor and manage this sufficiently so that it is ready for an auditor to assess its compliance at any stage.

Conclusion

If the issues discussed above have been addressed at the planning stage, then there should be sufficient flexibility within the contract to allow the local authority to respond to changes in circumstances. The importance of this to the ability of a local authority to manage its contracts effectively cannot be overestimated. It is also important that when those circumstances arise, the contract is reviewed as soon as possible to see what options are available and what action needs to be taken to make use of them.

With careful planning, a local authority can ensure that long-term contracts are effective and ready to withstand the effect of sudden and far reaching events.

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