July 5, 2021
The complex and uncertain nature of large railway construction projects requires an effective stakeholder management approach and a strong stakeholder engagement to accommodate conflicting stakeholder interests, reduce risk and deliver excellent project outcomes.
Stakeholders usually have their own interest in the project which can potentially cause different priorities, conflicts and dramatically increase the complexity of the project.
Stakeholder engagement requires fully understanding the current and future needs of all stakeholder groups, regulators, subcontractors, consultants and anyone whose interests may be affected by the project and converting these into goals for the organisation. These stakeholders must interact and relate to execute the project with the aim of achieving the set standards and thus have a common interest of project success.
Key Performance Indicators (‘KPI’s)
In large railway projects, stakeholder engagement can be driven through the use of performance KPI’s. KPI’s enable better measurement of the stakeholder performance thereby providing the Principal with greater security that the stakeholders are performing well throughout the duration of the project, and providing stakeholders with opportunities to prove they have met or exceeded expectations and be rewarded for such performance. Providing adequate and continuous incentives for all stakeholders can in turn improve performance, both in terms of punctuality and reliability, and achieve project excellence.
The KPI’s used in each project will differ but must reflect a true indication of performance against the key deliverables and outcomes of the project. The KPI’s can be used to measure:
- workforce capability;
- health and safety performance;
- mobilisation;
- plant & equipment management; and
- implementation of project core values (i.e. diversity, indigenous hires, local content etc.).
The stakeholders must keep sufficient records in respect to its performance to allow the Principal to evaluate the performance against the KPI’s during the relevant KPI evaluation report period. At the end of evaluation report period the Principal will notify the stakeholder if a bonus or abatement, if any, has been incurred as a result of the stakeholder’s performance against the KPI’s. If the project bonus is applicable, the Principal will pay the amount as agreed in the contract particulars, and a failure to comply with the KPI’s may incur an abatement and instead will be indebted to the Principal.
Assessing the performance indicators in this fashion reinforces a positive approach to achieving the indicators, does not effect the gain share/pain share mechanism within the contract and reduces the risks in the stakeholders not reporting safety events.
This driver of stakeholder engagement can be an effective method in large railway projects and arguably the most important item in terms of analysing delivery of expectations and ensuring project success.
Our Team at Lamont Project & Construction Lawyers have the knowledge and experience to assist both Principals and Contractors with any large project related issues. If you would like to discuss any matters raised in the above article as it relates to your specific circumstances, please do not hesitate to contact Peter Lamont ([email protected]) or myself ([email protected]).