Evaluation, statistics and OR

Forecasting and Planning for Extreme Events

Pity the planners and forecasters - their names are mud across Northern Europe as snow brings transport, delivery services and health services to their knees.  Why?  Because most of the time, their forecasts and plans save the public purse and private corporations huge sums of money, by not having stocks of materials, staff and plant on hand but not doing anything.  However extreme events show where the gaps are to cover the worst eventualities, and that is what we are facing at the moment.

When I did temperature demand forecasting for British Gas a long time ago, we planned for peak days - a 1 in 20 cold winter had to be accounted for with ease and on long term planning we looked at a 1 in 50 cold winter to ensure capacity, and a 1 in 50 cold day within the year for short term storage capacity (gas holders they used to be called).  We used weather data (daily maximum and minimum temperatures and daily wind speeds) going back to the mid-1920s to model the climate of northern England, and our reference really bad winters were 1928/29, 1946/47, 1962/63 and 1981/82, with 1946 and 1962 the worst we had to play with.  Some weather monitors are calling 2010/11 a 1 in 100 cold winter already, and we aren't half way through yet, so planning is difficult as it would appear to be more extreme than existing records.

Then think about the resources - in order to cope with a 1in 20 event, on a normal day you will have resources sitting in stock (in the case of things) or that can be diverted to other uses (people, but only if that is in their contract and competence), or just sitting around depreciating (plant that can be used for one thing only - snow plough attachments spring to mind for some reason).  Those who watch the money don't like that, and will look at ways to avoid having stocks of stuff that might not be needed (excess salt), people (one of the biggest costs to an organisation) and plant (surely we can borrow someone's snow plough?) sitting idle.

When that 1 in 50 event happens, there is no-one to take your call however urgent, the salt runs out after two weeks and no-one will lend you a snow plough as they are using them themselves or can't get it to you in time.  The result is a knock on to services to the public in general or to customers in particular.  When I worked at British Gas, we were not long out of being a public monopoly and still ran the business from well head to burner, so it was our pride and our obligation (on pain of dismissal) to ensure that there was enough gas in the system to meet all domestic and non-interruptible needs.  As the monopoly went (and after my time I hasten to add), domestic customers did get cut off and in events that were not as extreme as a 1 in 20 winter.  It was no longer an integrated system and cost savings had to be made.

Then add in the human effect - despite warnings to not travel unless absolutely essential, Parisiens decided that Christmas Shopping, visits to beauticians and hairdressers were essential and got stuck in their cars and had to be rescued.  You can warn, but people won't listen because it won't affect them.  Similarly, the most extreme weather event I dealt with at British Gas was in 1991 when we had a foot of snow, but it wasn't that cold.  Gas usage rocketed because of the psychological effect of snow.  If we could have found the records for lying snow in the weather archives going back to the mid-1920s, I am sure a 0/1 variable for snow would have improved our peak day forecasts. 

Nature is chaotic, and we can't plan for every eventuality (Haiti and the Boxing Day Tsunami are good examples), and if we plan for the very worst, there will be resources that are rarely if ever used.  The irony is that this cold snap has come at the start of a major UK austerity drive in public spending - to save money public sector staff will go, but who will drive the gritters and ploughs in future and who will pay for the salt/grit mix?  I'm not sure tax and council tax payers will want to find the extra cash somehow.

 

Welcome to my world, Mr Cameron!

"We was robbed" seemed to be the general opinion on the lack of success of the bid to host the World Cup 2018.  There were also comments about the unfairness of producing the bid with the best marks but not getting the job, and how the voting process should be changed, and the relative waste of spending money on producing materials as requested, when Britain was out of the process after the first bidding round.  It was all wrong and frightfully unfair!

You would think a politician would understand the vagaries of a voting system, but I doubt our Prime Minister, Prince William or David Beckham have had much experience in the last three years of public tendering processes.  This is why I say "welcome to my world!"

There are very few projects nowadays that are offered to external organisations (builders, consultants, advertising agencies to name a few) without some sort of tendering process, and while not of the scale of a World Cup bid, actually for a micro-enterprise like Plantagenet Consulting, the tendering process is a major expense.  First there is finding out about the tendering opportunity - BIS kindly provides the Supply 2 Gov website, but at about £250 per year subscription for anything other than the most basic view, this is not cheap (other portals are available I hasten to add). 

Relevant opportunities are either one off contracts or framework agreements.  For a business the size of Plantagenet Consulting, you can forget framework agreements - you can never get beyond the tickbox element for the various policies you have to have, as the fact that you have fewer than 5 employees, so you don't need them, is not a valid excuse in general.

So you are looking at an invitation to tender for a single contract.  If you are lucky, the potential client does not have a tendering portal such as Bravosolutions (again other portals are available) to battle against, and does not want a tender in hard copy (don't get me started on the challenges of the Mail system and courriers), but will accept an e-mail document. 

In order to produce a good tender, that meets the requirements of the potential client and represents you well, I estimate the minimum time required is 2 days, and the maximum viable time is two weeks, depending on the potential value of the project.  For a micro business that is between 2 and 10 days, and for an individual consultant, allowing for admin and such things we reckon there are 15 billable days in a month, but for a bigger project, you can see that every extra day is an opportunity cost of whatever your day rate happens to be.

If you are incredibly lucky, you get the project and away you go.  If you are "lucky" you are shortlisted, and get to go to all the additional expense of attending a beauty parade with a presentation of how you and yours would best meet the customer's needs.  You are never recompensed for attending these parades, even if it becomes clear that you are only making up numbers.  Sometimes your pitch wins, sometimes it doesn't.  And in at least 50% of cases, your excellent tender will be rejected (and realistically it will often be a higher per cent of cases), and sometimes you will get useful feedback and sometimes you won't.  If you do, it must be valued and pondered over.

Such is the world of the consultant, occasional highs leading to valuable work and rewarding new relationships, but so often counting the not inconsiderable cost of being one of those who didn't win.  Often as well, you feel that actually you did a good job, and deserved a better hearing, but as with the World Cup bid, it just didn't happen.

Mr Cameron, if you have read this, consider the amount of wasted effort and money in ALL unsuccessful bids around the country in a single year.  Your bid's failure was a bit more public than most, but you expect public suppliers to go through that self same process and beauty pagent, and invest proportionate costs.  In your failure, you found a peer group to relate to!