4.1 The Choice

The choice of delivery model is a critical step in the project and in the development of the procurement strategy.

The delivery model decision requires:

• sound understanding of project or program strategic outcomes and their relationships to the various aspects of different delivery models;

• sound understanding of the project risks and characteristics (identified through the risk assessment and the data-gathering step);

• detailed analysis to identify which option best optimises project or program strategic outcomes/objectives, which includes achieving value for money;

• detailed analysis facilitating the alignment of key project risks with relevant characteristics of suitable delivery models to optimise risk management opportunities; and

• risk assessment of the selected delivery model within the project context.

In determining the appropriate model, departments need to consider which model will:

• facilitate achievement or optimisation of project objectives and outcomes;

• achieve the most suitable balance between the level of control the department requires and the degree of risk that is optimal to bear;

• optimise the schedule, cost and quality outcomes for the project;

• best suit the characteristics of the project;

• provide best value for money;

• achieve the risk management objectives for the organisation and the project; and

• provide the most appropriate risk allocation between parties.

Factors that may influence the choice of delivery model include -

Design	• complexity of the design solution • need for and ability to achieve complete design prior to tendering or construction commencing • desire for design flexibility during construction • obsolescence of the design and the ability to upgrade • scope for innovation and benefits of having competing design solutions
Capacity and capability	• availability of suitable contractors • the in-house resources and skills of the principal
Whole of life2	• merits of bundling capital and ongoing maintenance responsibilities • how whole-of-life costs will be assessed under each model • maintenance and disposal responsibilities
Political	• Government policy and other political considerations
Scale	• likely cost of the project • thresholds e.g. for consideration of PPP policy or project alliancing
Cost	• the need for strict cost control and/or certainty
Certainty	• what degree of certainty is there about design and achievement of KPIs? • what is the need for cost certainty?
Project characteristics	• risk factors particular to a project • unique or unusual circumstances or factors
Timing constraints	• what model is likely to best accommodate time constraints? • are there critical deadlines?

When making the delivery model decision, the department should keep an open mind and, at least initially, consider a range of potentially suitable models.

It is important not to presume that a particular model would be the most appropriate or to bias analysis of the available options.

The chosen delivery model may be a hybrid of several models to optimise project or program outcomes while concurrently managing risks that arise from the project or procurement activities.

__________________________________________________________________________________________________
2 Although PPPs and some other models explicitly take account of various whole-of-life costs, it is prudent to consider whole-of-life cost implications of all procurement decisions irrespective of the delivery model. Relevant whole-of-life costs may include the operations, maintenance, upgrades, energy and environmental costs.