On customer-supplier relationships and the T5 Agreement

30 January 2007, updated 11 January 2008

[A revised and extended version of this article was published in the January 2008 edition of ITNOW]

Most major software- and systems-engineering projects involve a customer working closely with a number of suppliers. Sometimes this relationship works well; often it breaks down into mutual acrimony at best - legal action at worst. In the future, I think that the software industry may turn to a ground-breaking civil engineering project for customer-supplier relationship best practice.

BAA is the largest global airport operator; it owns and runs seven UK airports, including Heathrow. Recently, work started there on building a new terminal, Terminal 5 (T5). It is Europe’s largest engineering project, with costs projected at £4.2bn (approximately $8bn/€6bn).

From the start, BAA realised that following conventional programme management techniques, T5 would be statistically likely to be two years’ late and £1bn over budget. Conventionally, the customer (BAA) would seek to offset risk contractually to its suppliers. BAA realised that it was not possible to do this, as, in any case, failure in the form of delay or over-run would ultimately be associated with themselves.

Therefore, BAA, as the customer, decided to bear all of the risk itself and enshrined this contractually with all its suppliers in a document known as the “T5 Agreement”. This bold move was made to ensure that all the suppliers’ efforts were focused on the programme, rather, as happens so often in conventional arrangements, in trying to avoid the risks that are contracted upon them.

In addition, this T5 Agreement (the exact text of which has not been made public):

  • has an emphasis on teamwork and joint problem solving;

  • has a joint risk management, problem solving and planning infrastructure;

  • states that the suppliers’ profits are ring-fenced on top of openly-audited costs, eliminating claims for extra payments;

  • is deliberately written in a non-adversarial style.

Interestingly, despite its size, T5 has links with Agile development!

The use of prototyping activities.  The roof of the T5 building, with a span of 150 metres, will be one of  largest in Europe. BAA decided to trial the erection off-site, documenting the lessons learnt, leading to a three-month schedule saving when the roof was erected in situ. This use of prototyping is one of the core techniques in DSDM.

The use of Lean principles. Work on the site has been arranged according to “demand-led” or “pull” system, where materials are delivered on a just-in-time basis. This is one of the central tenets of “Lean” thinking.

The use of iterative techniques. By using an expert joint review team, BAA is able to give approval for construction of a feature to start before the design of it is complete. This is similar to agile software-development techniques such as XP, where development starts before all the requirements are known.

The results to date? At the time of writing, T5 is 55% complete, ahead of schedule and below budget. A lesson for all large-scale programmes - software included.

Further reading: UK National Audit Office Case Study.

Success Stories

"Agilier's experience in managing business processes made them an ideal candidate to manage functional integration thereby reducing a significant risk to the business. This involved them working with the workstream leads and developing a high-level integrated businesses process against which we planned our programme."

Chris Davies
Programme Manager, EADS Defence and Communications Systems


"I was extremely happy with the professional and complete way that Agilier performed their work and would not hesitate to use their services again."

Mike Haynes
Senior Project Manager, Cogent Defence and Security Networks


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