RISK 10: Risk management processes
Definition Failure to put in place robust systems to monitor and manage ongoing risks to the delivery of the service.
Reason for overall assessment of this risk category in the eight case study projects: Some risks to value for money Effective risk management is important in delivering value for money in private finance projects which are long term and often complex projects. We found some examples of good practice in adopting a risk-based approach to procurement in the case studies and our census identified that most of the Department's PFI projects also made some use of processes designed to help monitor and manage risks. There were, however, shortcomings on four case study projects. In our census some project managers did not know their risk management process, and processes in some instances were insufficient. NOTE 1 This project did not proceed to contract and is not part of the current Department portfolio. |
2.46 We found some examples of good practice in adopting a risk-based approach to potential threats to value for money during procurement.
■ On the Tidworth Water and Sewerage project the initial preferred bidder, Wessex Water, was replaced because risk allocation could not be agreed, particularly around the extent of contractor liabilities and potential payments to the contractor in the event of breach or termination. The Department's project team was unwilling to retreat from its intended risk position and approached the reserve bidder, Thames Water, to replace Wessex Water.
■ The Heavy Equipment Transporter project was a pathfinder for the use of Sponsored Reserves employed as drivers and mechanics. This practice was identified as an area of potential risk and three standard bid options were developed, with differing proportions of the service delivered by Army personnel and Sponsored Reserves. The bidders addressed all three options separately in their bids. By including different options, the project team could assess the impact of this risk on the eventual contract price. It decided that a workforce made up of one third Sponsored Reserves offered best value for money.