Tied supply chains in construction projects: Lessons from London underground's public-private-partnership

This paper addresses the lessons learnt by London Underground (LU), the public sector contracting authority, when a tied supply chain arrangement, namely where shareholders are also commercial beneficiaries from sub-contracted delivery, was utilised by a consortium to upgrade its system under an innovative Public-Private-Partnership (PPP) model. Research on tied supply chains and their application in PPP agreements is significantly under reported. The paper sets out insights from industry using secondary sources, which include parliamentary reports and reviews. The paper postulates that different models of tied supply chains might exist, from those that rely on some form of equity structure to those that rely only on the collective reputation of the supply network. Five lessons learnt from the contracting authority’s perspective are highlighted on the use of tied supply chains in PPP contractual arrangements. Whilst tied supply chains can be effective, they are better utilised in PPP contractual arrangements where there is certainty with the scope of works and required resources. During the bid evaluation stage the contracting authority must evaluate whether prospective bidding consortiums have satisfactory governance arrangements at Board level and across its tied supply chain. Furthermore, the contracting authority must include governance safeguards within the contractual documents and strictly regulate the tied supply chain to prevent failure. This paper provides a new insight into tied supply chains and their governance with respect to Public-Private-Partnership models, and other forms of procurement.