Challenges of the procurement selection process
Optimal project outcomes are more likely to be achieved where an objective assessment of the most suitable procurement option is made based on the characteristics of the project. Key challenges include:
• poor planning and risk assessment. In some instances, poor project planning and/or risk assessment has resulted in inadequate consideration of key points required to ensure optimal project outcomes;
• timeframe pressures emerging for projects. Sometimes time pressures lead governments to make premature procurement decisions. Even where adequate consideration is given to procurement analysis, sometimes delivery timeframes can unduly influence procurement decisions;
• market sentiment. At various times, a certain method may be preferred either in the public sector or private sector. Procurement methodology should be selected based on the necessary upfront analysis and planning to ensure that the project is successful; and
• focus not on value for money drivers. Projects should be objectively assessed against all the feasible procurement options, and a decision should be based on the option that is likely to deliver the best overall project outcomes, rather than one which contractors prefer, or the department or agency can proceed with simply or quickly.
Table 3 below sets out some of the key factors to consider in the various models.
Table 3: Suitability criteria and drivers of value
When to use (e.g. suitability criteria) | Value for money drivers | |
• Complex and long-term infrastructure projects • Outputs can be clearly defined and measured • Scope for innovation • Whole-of-life asset management is achievable and cost-effective • Strong market interest • Opportunities for appropriate risk transfer • Opportunity for bundling contracts • Significant service component • Complementary commercial development | • Sufficient scale and long-term nature • Complex risk profile and opportunity for risk transfer • Whole-of-life approach from integration of design, construction, operation and maintenance over the life of an asset, in a single project package • Innovation • Appropriate third-party use of facilities, reducing net cost to government • Efficiency of contract management | |
Alliance | • Complex and high-risk infrastructure projects • The solution is unclear or there is a significant likelihood of scope changes • A high level of innovation is required • Risks are unpredictable and best managed collectively, with costs of transferring risk prohibitive • The owner can be closely involved and add value | • Cost of adversarial conduct, claims and disputes is eliminated (e.g. the "no blame" culture) • Culture promotes innovation • Integrated planning, design and construction process with early contractor and consultant involvement |
Construct Only | • The scope is defined and there is little likelihood of scope creep or wholesale changes to requirements • Little incentive or need for innovation from the contractor • It is desirable and there is sufficient time to complete design documentation before tendering • Limited opportunity for bundling services/maintenance and creating whole-of-life efficiencies | • Larger pool of potential tenderers which leads to increased competition • Greater scope for competitive prices because of design certainty • Contract value is set before construction starts |
Design & Construct | • The government's requirements are tightly specified before tender or do not change • Government is best-placed to manage most project risks • Limited opportunity for bundling services/maintenance and creating whole-of-life efficiencies | • Single point of accountability for design and construction • Fixed price contract • Potentially, reduced overall project cost because the Contractor has the opportunity to contribute construction experience into the design, resulting in innovation and efficiencies |
Managing Contractor | • Complex or high-risk projects with uncertain scope, risks or technology • A degree of expert government input is available • Early contractor involvement is beneficial | • Flexibility in delivery to manage uncertain risks • Maximising government input to manage risks where appropriate • Managing contractor is incentivised to achieve cost and schedule targets |