Best Value Procurement a change of paradigm

Transcription

1 Best Value Procurement a change of paradigm Carlita Vis Procurement manager Ministry of Transport and the Environment

2 Agenda 1. 2.Priority Road Investment Programme leads to Best Value Procurement (BVP) 3.Innovative procurement model BVP and special framework contract Early contractor involvement 4.Discussion need for paradigm change 2

3 Agency of Ministry of Infrastructure and the Environment Founded in 1798 Around 9,000 employees 240 locations throughout the entire country 10 regional departments and 5 specialised departments, 35 districts, 1 project department Annual budget: 4 to 5 billion euros 3

4 s area of management manages three National Infrastructure Networks 4

5 Procurement Strategy... is a leading client in the Netherlands is focusing its attention on the network users focusing more on core tasks is handing over more work to the market in integrated contracts to capture value from the market 5

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7 Priority Road Investment Programme Ambition from Minister of Infrastructure and the Environment: 30 starts of work of road widenings and rush hour lanes and 10 openings for road users before june 2011 Start september 2008 May 2011: 30 shovel hits the ground 10 cutting the tape 7

8 Innovative market approach Award contract (MEAT) with Best Value Procurement Quick tender phase, but risks for the client (Quality, Time, Cost) need to be mitigated: Target price A bonus of 2.5% of the target price if the building costs do not exceed the target price 25% of remaining risk-reserve paid after completion Bonus/penalty scheme to ensure early opening Personal commitment of key players Uniform contract 8

9 Traditional Innovative approach Sequencing Parallellization or Entwinement Phases Initiative Exploration Plan elaboration Realization Concept Decision Initial Decision Preference Decision Spatial Decision Delivery Decision Decision Points Procurement Contract preparation Contract Tender preparation Tender Contract Implementation Design Construct Design & Construct 9

10 Supply Chain: We work in Silos Planning / Programming Designer Contracting Contractors Suppliers Clients 30K Foot Level Technical Details 10

11 Paradigm Shift: contractors should have minimal technical risk and should minimize risk that they do not control Me vs. Them Us Risks Risks Non-technical Risk Nontechnical Risk Technical Risk Technical Risk 11

12 Minimizing risks from the beginning! Use of information and logic Project Risk Time Risk Risk Manage and minimize from the beginning, by monitoring risks 12

13 Selection Phase Filters and Clarification Phase High Quality of Vendors Low Filter 1 Past Performance Information Filter 2 Project Capability Criteria -Project Capability (PC) -Risk Assessment (RA) -Value Added (VA) -Cost -Schedule Filter 3 Interview Filter 4 Prioritize (Identify Best Value) Criteria -Cost -Interview -PC -RA -VA -PPI Filter 5 Dominance Check Dominance Check Minimized decision making in selection -Best Value is within cost range -BV dominant information is valid Clarification Phase -Vendor clarifies proposal -Client concerns addressed -Detailed Schedule -Risk activities -RMP -Performance metrics -WRR Award Time 13

14 PIPS process 14 14

15 Evaluation of market approach Acceleration achieved! 6 contracts awarded, each in 5 months Tender phase reduced by 50% Costs 60% lower Vendors: 50% to 75% lower costs : estimated reduction by half, development costs for the contract excluded May 2011: On average 1 year earlier completion date per project 15

16 Lessons Learned ECI transforms procurement strategy: think supply chain BVP ensures tenderers keep interest of the client in mind Paradigm change is needed, this takes time to implement: core team 16

17 Performance Performance Problem with Priced Based Systems High Owners The lowest possible quality that I want Contractors The highest possible value that you will get High Maximum Minimum Low Low 17

18 Industry Structure High Performance III. Negotiated-Bid Owner selects vendor Negotiates with vendor Vendor performs IV. Unstable Market II. Value Based Best Value (Performance and price measurements) Quality control Contractor minimizes risk I. Price Based Specifications, standards and qualification based Management & Inspection Client minimizes risk Low Perceived Competition High 18

19 Discussion statement Best Value Procurement adds value in any delivery model but needs a directed paradigm change. 19