Measuring 'soft' issues

Transco is strengthening its status at the 'thinking end' of contractual relationships as a result of its adoption of a soft issues protocol. It already knows which contractors are the best to get on with while projects are being built - and soon it will be able to spell out the reasons why.

Roy Staughton is the man who is pulling the process together for Transco. An independent expert on business-to-business relationships, he knows how to quantify and put substance into 'good feelings'.

Staughton is a specialist in operations management. He developed his pioneering thoughts on how to measure soft issues while a professor at various universities. Then, six years ago, he bit the bullet and stepped out into the commercial world to see if his ideas would fly.

Staughton now heads up his own Hereford-based business called Shape International. Its role is to enable two parties to share perceptions and the company's name is a pun on that very core task. Staughton has a lengthy client list, evidence that his ideas do indeed work.

Three years ago, Peter Roberts was busily reshaping Transco's relationships with its major contractors. As head of investment for the gas transportation group's high pressure national transmission system (NTS), he cut the number of names on the AVL (Approved Vendors List) down from the mid-teens to just seven, and switched to a contract form that gets them on board much earlier.

NTS spends £200m to £300m a year on large capital projects. Roberts invites all seven of its approved contractors to bid for new work. Offers are sifted and graded according to a 'shed load' of hard measures such as health and safety, environmental and metres of pipe to be laid per working shift.

When the bids come in, it could be that contractor A's figure is lower than the rest. Transco then undertakes its evaluation, including risk analysis, and by the end of this process, if contractor A's bid was found to be carrying a higher risk, the award might well go to contractor B instead.

But the selection process doesn't allow for behaviour and attitude. There is no allowance for issues such as: "What's it like working with these people?"

Staughton recalls: "Roberts aspired to measure what it's like working with its contractors and to capture such information. We knew it was possible as we'd already done similar work with others."

But Transco was prepared to play a part in the evolution of soft metrics. No-one had previously gone out into the field with them, but Transco was prepared to take them to its AVL contractors.

"We had a proven process," says Staughton, "so we talked to Peter about what Transco wanted and set up a pilot with one of its contractors, which developed five soft metrics that are generic to the gas pipeline business."

McAlpine/PPS volunteered to take the pilot scheme on.

"It is a good supplier to Transco," says Staughton, "and it was happy to join the process."

The metrics were jointly developed and written in language that both sides could relate to.

The trial went well, so well in fact that Transco decided to tell all the contractors on its AVL (see box below left) that it proposed to introduce five soft measures at the start of every piece of new work in the future.

The proposal was on the agenda at Transco's Tier 1 contractors' conference in Nottingham last November, with time allocated for McAlpin/PPS to report on the background to the pilot scheme. After hearing Transco's proposal in full, everyone agreed to adopt it.

So provided the merger between Transco and the National Grid doesn't delay things, the protocol is to roll out right away.

Soon after the winner of any future contract is announced, the five metrics will be introduced, spelling out the performance levels required.



Staughton, or one of his team, will step into the frame at this point, meeting up with the project team on site and spending time establishing how the two sides will work together.

To establish the extremes, the five soft issues will each be described in two senses (see charts opposite):

l What things would be like if they couldn't get any better - this indicates a score of 10.

l What things would be like if they couldn't get any worse - the scenario of a score of 0.

Phrases, taken from the two parties, will be used to anchor various positions on the scale.

Staughton says: "You could typically have joint agreement that one of the metrics, say attitude, was running at a score of four. We'd then establish what score both parties would like to move on to by the end of the project, perhaps six or seven, and we'd draw out forms of words for describing that improved scenario.

"The next phase of Shape's input would establish changes necessary to get that score lifted from four to seven. It could be that one side or the other - or both - have to change to achieve this goal.

"You'll notice that we work to reality - that the improved scores will still be short of a perfect 10. Rather, the intention is to lift contractors to a higher, agreed level.

"Transco has got these AVL guys pared down to a small group and it knows they are all technically up to scratch. But like all major clients, Transco knows quite well that working with each of them isn't the same, that things go sweeter with some and that issues are resolved more harmoniously."

Transco's hope is that with practice, all seven of its approved contractors will rise to similar levels on their soft issue scorings and, conversely, its performance as a client will also improve.

"I was pleasantly surprised to be invited into the construction sector," says Staughton. "Roberts is interested in sharp-end stuff and as a result Transco is leading the way. We've now worked out the methodology and we're ready to go. It's close on revolutionary.

"The benefits will drop through to improved profits and to a reduction in the cost of Transco's projects.

"The usual set of metrics is six to eight. If you go for a much higher figure, like 25, the question is how will you measure them all. Several clients have opted for eight or nine, with Transco settling on five.

"We're the only player offering this sort of service. Theoretically, Transco and one of its AVLs could tackle soft issues on their own, but in practice having us there as broker is a big help. We add an independent view.

"Over recent years, we've helped over a hundred companies introduce soft issue measurement. We start up with 10 to 12 new clients each year and a measure of our success is that we're regularly asked back when a former client is preparing to launch a follow-up project. Transco qualifies as a repeat client as we've already been asked back."

Shape's role is to help Transco and their contractors keep the score for each metric improving during the lifetime of the project. The fact that there is a gap between the start score and the targeted final score isn't a problem. In fact it is the norm.

"We routinely revisit the project and look to see that scores are moving," says Staughton.

So, getting down to the nitty gritty, how does Staughton operate? How does Shape help get the score for a particular metric five units higher by the end of a project?

It's about identifying the key people, sitting them all down together and then getting this cross-business team to talk openly and honestly.



Where the two sides have a different perception of how things stand, that calls for a questioning third party to tease out phrases and comments that give substance to the stance they are taking. All too often the phrase "I didn't know that was important to you" crops up and opens the door to more positive thinking.

The aim is for the sides to agree that things can be done differently so that at the next meeting, not only do they say: "We're moving things forward", but this can be backed up with solid evidence.

"We get joint teams to present," says Staughton, "and its evidence can either show that things are moving forward, or that they haven't moved at all, or perhaps they have gone backwards."

Using metrics to put substance into soft issues will give short-term benefits as each Transco project should run more smoothly from start to finish - and more profitably.

But what might happen when soft issues are taken to the next level?

Let's look ahead to the day when a client receives three bids - all priced at £90m, but the contractors' soft issue scores from the past stand at three, six and seven.

Mmm, that third guy with a score of seven looks good.

Moving on to the following project, let's say that the two last names on the client's shortlist are a contractor bidding at £85m and a soft issue ranking of nine, while his rival's strength is an £82m bid, but his weakness is a soft issue score of just three.

"That's the next level," says Staughton. "Future clients will be asking for not only a bid but also a Shape score, or some other evidence on soft issues. And where a client has an established shortlist of AVLs, should a new contractor make an approach, he will be told: 'give us evidence of your soft issues performance'.

"Forward-looking clients are looking to move to a position whereby the substance behind the metrics they use for soft issues is up to a level where it is firm enough to get past the legal department so that it can be integrated into the process of qualifying bids."

That seems a reasonable aspiration. After all, if two contractors bid at around the same price, any client would want to go with the one who is good to get on with, rather than the firm which is always a difficult handful.

All of which presents an interesting twist - one which is not happening in construction as yet, but which has arrived in other sectors. And that would be that a contractor backed by its experience as one of Transco's approved contractors and having made headway with the measurement of soft issues, would then take that evidence to other potential clients.

"The contractor, wishing to back up its status as a good supplier, would volunteer its differences," says Staughton, "and would say to that client 'we recognise that there are criteria other than hard issues and we reckon we should spend time with you to draw out the soft issues'.

"The contractor might make the offer to work with Shape. This is already happening. We've appeared alongside a contractor as part of its bid at the stage when the client was down to a shortlist of two.

"All in all, we've been involved in 10 bids at the final-two stage, where the contracts involved were worth between £10m and £100m, and we've won several of them. Our contribution has made the difference and I believe this is will be the sharp end of bidding in the future."

Clients will always face the dilemma of assessing what it's like working with a potential contractor. They know only too well that picking the right one will eliminate sleepless nights, irate staff, frustration and desires to indulge in bouts of neck wringing.

For them, metrics that measure soft issues could open up a glorious whole new world.