JNT Excel Consulting, which made a submission to the inquiry into Procurement Practices for Government, is suggesting a major shake-up infrastructure procurement.
In this second article on “Why procurement’s current model “is broken” and what’s the fix?” John Matta, Director and Founder – JNT Consulting, explains how the best-value approach to competing and awarding contracts through Expertise-Based Project Delivery (XPD) can turn an “outdated” RFP process on it’s head. Read part one.
While it’s clear to many working in the infrastructure and procurement arena in Australia that the current model is broken, what’s the fix and how do we get there?
Many procurement professionals are aware of the many challenges the industry faces, but there is also a lot of confusion around how to repair a broken system and also around what the RFP tendering process actually is. Request for Proposals have been used for many decades and are nothing to be baffled by.
They provide a great alternative to the “low-bid” award procurement approach, yet as with anything, there are risks. The RFP tendering process means that an owner can consider factors other than low-price on its own and this is achieved with contractors submitting written proposals. These proposals outline their technical capabilities and qualifications, and these proposals are then assigned to a group of evaluators who will review and score each for the owner.
This process can result in evaluator bias or favouritism, which may lead to probity risks, and this system needs its own checks and balances to be successful and unbiased. So, if we know that the RFP tendering process has high-probability risks, what can we do to solve these?
The challenges that Australian infrastructure projects face are already well documented, and it’s clear that a better job must be done with procurement practice and in delivering construction and infrastructure services. This can also include the RFP process.
There is one solution that stands out, having been utilised globally over the last 20 years in more than 3,000 large projects across industries. Expertise-Based Project Delivery (XPD) is an alternative procurement and delivery model that can be used on more complex projects and services to improve the overall outcome of projects. XPD was developed by engineering researchers from Arizona State University (ASU).
The process has resulted in:
- 20–30% reduction in cost change orders
- 20–50% increase in contractor responses
- 50% increase in diversity and small/local business awards
- 30–60% reduction in client efforts required to manage the work (owner can get more work done with same internal resources).
XPD has been recently used on a project with the City of Los Angeles to design and construct groundwater treatment facilities to restore the quality of groundwater in the San Fernando Basin – one of the largest contaminated groundwater areas in the United States.This basin is one of the largest contaminated groundwater areas in the United States. This project was valued at over $450 Million, and is the largest Progressive Design–Build (PDB) project performed on utilities in North America.
For this project, the RFP evaluation criteria included:
- Project approach worth 20%
- Risk assessment worth 20%
- Value and Innovation Plan worth 10%
- Past Performance and Experience worth 5%
- Interviews of key personnel worth 25%
- Cost/fee worth 20%.
Taking bias out of evaluations
organisations. This includes major asset management contract and large scale waste clean–up
This created an unbiased way of evaluating potential contractors. The XPD process has never been legally protested or challenged due to the rigorous internal balances and checks.
Although alternative Project Delivery Methods (APDM’s) have been in existence for more than 40 years, many of these models encounter the same issues with the traditional contracting method. These challenges may be around lack of accountability, low performance, blaming others and the like. However, XPD has so many unbiased checkpoints and criteria that these same issues just don’t exist.
People determine success
To maximise opportunity for success in the RFP tendering process, it’s paramount to have the best approach possible. XPD aims to attract the best contractors, the best subcontractors and the best internal staff for each individual project. Although many other APDM’s are shown to have success, XPD focuses on the people who are working on the project. Many alternative methods will focus on the delivery approach, but it’s the people who ultimately determine success.