Identifying and correcting project weakness

Context

Our client was a global power generation company running a 1200MW capacity CCGT facility. It had a £90million fixed priced long-term service agreement to maintain the unit over an eight-year term. The client was unsure whether its maintenance agreements were delivering value for money and wanted an independent view.

Comment

“We identified that the company was losing £12.5m, or 14% of the contract value, under the current commercial arrangements. Our review pinpointed weaknesses in the procurement approach, which resulted in value and performance issues occurring during the contract. The client’s lack of historical information compromised their ability to provide a robust challenge to the costs being proposed by the supplier and resulted in the resource element of the budget being over-estimated by 43%. Recommendations were made to enhance our client’s project governance in order to strengthen its commercial position in the event of a contract variation or extension of time claim” (PwC).