manmanaging noaging nonn conconventventioionnal al … · 2016. 4. 16. · 1 alternaalternattive...

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Alternative Delivery Mechanisms & Alternative Delivery Mechanisms & Managing Non Managing Non Conventional Conventional

Contracts Contracts


Drivers for Change

1. Emerging contracting environment:

Environment of

Uncertainty

Changing Client Needs Diverse Stakeholder

Interests

Community Involvement in Decision Making

Shifting Political Imperatives Rapid Technological

Changes

People and Relationship Issues

Project Scope Changes

2. Traditional Risk transfer strategies inappropriate in uncertain circumstances

3. Human relationships KEY to dealing with uncertainty


Some Key Issues

Client § Non completion of annual works

program unacceptable § Difficult to find skilled resources § ‘Work in progress’ for some

Regulatory environments § Delayed start to the delivery

phase § Project budget overruns § Uncertainty about future funding

requirements § Product / facility quality issues § Demand exceeds supply in some

markets so fewer providers in the marketplace

§ See the ‘adversarial approach’ as wasting scarce resources

Contractor § Skilled labour & subcontractor

shortages § Intense competition for skilled

technical resources § After effects of past tight margins

low profitability § Cost of bidding must be contained

within budgets § Competing on a level playing field § Traditional low level of staff skills

development


Choosing a Choosing a Delivery Model Delivery Model


Factors that will effect the Delivery Strategy Choice

§ Scope of the project

§ Nature of the work

§ Corporate and project objectives

§ Level of project uncertainty

§ Role of the client

§ Client attitude to risk

§ Client attitude to innovation

§ Market conditions

§ (others)


Accepted ways of choosing a Delivery Strategy

§ Custom and practice (“… the way it is always done around here.”)

§ Tailored to match specific corporate and project objectives (usually assisted by a transaction manager

§ Client preference (or bias)

§ Analytical approach (use of tools)


3DM Decision Making Process

Project Scope

Market Conditions

§ Corporate Objectives

§ Project Specific Objectives

§ Procurement / Delivery Strategy

§ Procurement / Delivery Tactics


Scoping the Scoping the Project or Program Project or Program


Scoping the Project

§ Project Scope includes all the work required, and only the work required, to complete the project successfully. It is primarily concerned with defining and controlling what is or is not included in the project

§ Differentiate between § Project Scope & Product or Facility Scope


Inception

And

Feasibility

Project

Definition

Concept

Development

Design &

Document

Procure &

Construct

Commission

& Handover

Operate

§ The project package may comprise one or many of the elements

The Infrastructure Supply Chain:

Scoping The Project


3DM Decision Making Process

Project Scope

Market Conditions

§ Corporate Objectives / Project Goals





Project Goals The common link between the Agency and the project

Project Goals are the primary reasons for proceeding with a project, and should strongly correlate with the Agency’s Corporate Goals. Typical project goals may include:

§ “the provision of water purification (or reclamation) services of sufficient capacity to meet the needs of the community” or

§ “the cost effective provision of services in a manner consistent with ecologically sustainable development”, etc.


Project Objectives The specific outcomes required of the project

Project Objectives are the specific targets by which the Project Goals are identified as measurable target outcomes eg.;

§ to provide a water treatment facility to a nominated capacity and to nominated performance standards by a required inservice date.

They also typically include a range of corporate business objectives that are not specifically related to the project, eg.

§ to remain below an identified borrowings level, etc.


Project Strategies The methods by which project objectives will be achieved

Project Strategies encapsulate the specific methods by which it is planned to undertake the project, and include strategies on the project delivery model, contractual packaging, and the like.

§ These strategies are focussed on devising the means of delivery that will maximise the likelihood of project success and minimise the possibility of failure.

This is the area of emphasis for the 3DM decision making methodology, as it focuses on evaluating which delivery strategy is most likely to produce the outcomes (i.e. goals and objectives) desired by the agency.


Project Tactics Specific devices to enhance the likelihood of project success

Project Tactics focus on fortifying the likelihood of project success by devising specific tactical measures that will strengthen the generic form of the selected delivery strategy.

Project tactics typically include devices such as purpose written “Special Conditions of Contract” and the like.

Choosing a Delivery Model – 3DM model

A contract for delivery of a service where the contractor owns the assets and operates them for an extended period.

Build Own Operate Transfer (BOO/BOOT)

This packaging focuses on lifecycle cost comparisons by adding an operational term to design & construction.

Design Build & Operate (DBO or BTO)

A single package where the contractor takes on the normal construction and preliminaries risk, and provides project management services and manages the design for a fixed fee. The contractor engages and pays any subcontractors. The designer may be initially engaged by the client or selected by the contractor from a prequalified panel.

Managing Contractor

A single point delivery method of, i.e. Contractor undertakes design, procurement and manages the construction and commissioning phases. Construction & equipment costs pass through to the client. Turnkey project outcomes

Engineering Procurement and Construction Management

(EPCM)

A contract for operations and maintenance of assets that have been built and are owned by the Client.

Service Contract

A single packaging of design and construction and commissioning risks to optimise asset costs.

Design and Construct (D&C)

Two packages, one for all design, construction & commissioning other than civil works; the other civil works

Process Systems

Where purchaser and provider work together using bestforproject drivers, and the contractor is paid open book cost and performance adjusted margin

Alliance Contract

The sequential method of delivery, i.e Client separately appoints consultants, builders, and equipment suppliers.

Construct to Design

GENERAL FORM PROCUREMENT / DELIVERY METHOD



§ Corporate & Community Scope Issues § Economic Development § Principal’s Risk § Corporate Treasury § Staffing § Community

§ Performance & Physical Scope Issues § Project Cost § Changes in Physical Scope § Site Risks § Design & Quality § Facility Process Performance § Interface Risk § Controlling time § Client/Owner management needs § Client/Owner staff involvement


Corporate & Community Scope Issues

CORPORATE TREASURY C8 Need to secure State/Federal subsidies C9 Contractor to finance construction works C10 Contractor to finance future augmentation works at the site C11 Agency wants project debt 'off balance sheet‘ C12 Agency wants project debt to be competitively bid

STAFFING C13 No loss of employment for existing staff C14 Need to maintain direct control of operations staff C15 Agency to retain O&M expertise as a stepin/ backup role C16 O&M services to be contracted C17 Retain ongoing flexibility in operator selection

COMMUNITY C18 Agency wants a direct relationship with the community C19 Agency needs to limit/control impact on rates C20 Agency's stakeholders do not favour private sector operation C21 Agency's stakeholders do not favour private sector ownership


Performance & Physical Scope Issues

FACILITY PROCESS PERFORMANCE P23 Optimisation of existing plant operations is a priority P24 ‘Commissioning Guarantee' required P25 Ongoing 'Process Guarantee' required

INTERFACE RISKS P26 Plant contractor to take or share catchment management risks P27 Plant contractor to take or share reticulation system risks P28 Have only a single contract interface for project delivery P29 Minimise the number of contract interfaces P30 Commissioning to be carried out by the process designer P31 Commissioning to be carried out by the head contractor P32 Contract operator to carry biosolids & screenings disposal risk P33 Agency to manage and carry the risks on biosolids & screenings disposal P34 Agency to retain overall management of effluent disposal/reuse

CONTROLLING TIME P35 Need to minimise the project delivery time P36 Maintain flexibility on time & cost rate of project delivery


Sample 3DM output

Summary

0

50

100

150

200

250

300

350

400

450

ConstructtoDesign Alliance Process Contract Design&Construct DBO BOOT EPCM Managing Contractor

Delivery Methods

Inhouse



§ Issues Preweighted for each Procurement / Delivery strategy § (client experience – validated with DPWC NSW 2000)

§ Scoring in teams e.g. § Owner perspective § Operator / Maintainer perspective § Project Manager / Delivery Manager perspective § Community / Stakeholder perspective

§ Taking the project stakeholders on the journey to choose a suitable Delivery Model


Decision Making Process

Project Scope

Market Conditions

§ Corporate Objectives / Project Goals





Market Conditions

§ Are there enough players in the market who can deliver the anticipated scope?

§ Do enough of the players have access to skills to ensure competition?

§ Is our offer attractive to enough players to ensure competition?

§ What is the demand for delivery of the anticipated scope within our timings?

§ What are the broader market conditions for our potential suppliers?


Forecast Turnover Projects Client Value

$m M J S D M J S D M J S D M J S D M J S D M J S D M J S D M J S D M J Burdekin Pipeline Sunwater 200 $ 33.333 33.333 33.333 33.333 33.333 33.333

Boggo Road Busway QT 170 $ 18 18 18 18 18 18 18

Tugun Bypass MRD 540 $ 54 54 54 54 54 54 54 54 54 54

INB Stages 1 and 2 QT 280 $ 35 35 35 35 35 35 35 35

RG Tanna Wharf Berth 4 CQPA 150 $ 25 25 25 25 25 25

Southern Regional Pipeline SEQ Water 300 $ 30 30 30 30 30 30 30 30 30 30

SEQIPP Rail Program Alliance QR 800 $ 40 40 40 40 40 40 40 40 40 40 40 40 40 40 40 40 40 40 40 40

Ipswich Logan Road Interchange MRD 120 $ 20 20 20 20 20 20

Ripley Valley Projects x 3 MRD 180 $ 15 15 15 15 15 15 15 15 15 15 15 15

North South Bypass Tunnel BCC 1,200 $ 75 75 75 75 75 75 75 75 75 75 75 75 75 75 75 75

Western Corridor Recycled Water Scheme SEQ Water 300 $ 50 50 50 50 50 50

DBCT Wharf and Outloading Facilities Babcock & Brown 130 $ 16.25 16.25 16.25 16.25 16.25 16.25 16.25 16.25

Gold Coast Cruise Ship Terminal TBA 300 $ 25 25 25 25 25 25 25 25 25 25 25 25

Gas Fired Power Station Dalby Energex 300 $ 25 25 25 25 25 25 25 25 25 25 25 25

Gateway Bridge Duplication QML 1,600 $ 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100

Central QLD Rail Alliance Program QR 600 $ 37.5 37.5 37.5 37.5 37.5 37.5 37.5 37.5 37.5 37.5 37.5 37.5 37.5 37.5 37.5 37.5

Airport Northern Access Road BACL 120 $ 15 15 15 15 15 15 15 15

Sunshine Coast Motorway MRD 280 $ 28 28 28 28 28 28 28 28 28 28

Ipswich Road to Centenary Highway MRD 320 $ 32 32 32 32 32 32 32 32 32 32

PNG Gas Pipeline APC 2,000 $ 125 125 125 125 125 125 125 125 125 125 125 125 125 125 125 125

Tarong Energy Alliance Tarong Energy 400 $ 40 40 40 40 40 40 40 40 40 40

Gold Coast Desal Plant SEQ Water 400 $ 40 40 40 40 40 40 40 40 40 40

Mt Lindsay Upgrade MRD 150 $ 18.75 18.75 18.75 18.75 18.75 18.75 18.75 18.75

Townsville Cruise Ship Terminal Tab Corp 300 $ 37.5 37.5 37.5 37.5 37.5 37.5 37.5 37.5

Hale Street Bridge Link BCC 150 $ 18.75 18.75 18.75 18.75 18.75 18.75 18.75 18.75

Wiggins Island CQPA 400 $ 40 40 40 40 40 40 40 40 40 40

Northbank Qld Gov 300 $ 25 25 25 25 25 25 25 25 25 25 25 25

Springfield/Darra Road/Rail Corridor QR 800 $ 66.667 66.667 66.667 66.667 66.667 66.667 66.667 66.667 66.667 66.667 66.667 66.667

Pacific Motorway Upgrade MRD 400 $ 50 50 50 50 50 50 50 50

CAR Stage 2 Comalco 1,000 $ 83.333 83.333 83.333 83.333 83.333 83.333 83.333 83.333 83.333 83.333 83.333 83.333

Eastern Busway QT 530 $ 53 53 53 53 53 53 53 53 53 53

Balance of Central Qld Rail Program QR 2,000 $ 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100

QR Northern Missing Link (NewlandsGoonyella) QR 700 $ 58.333 58.333 58.333 58.333 58.333 58.333 58.333 58.333 58.333 58.333 58.333 58.333

Misc Coal Mine Rail Spurs Misc 300 $ 37.5 37.5 37.5 37.5 37.5 37.5 37.5 37.5

QR Southern Missing Link (SuratGladstone) QR 1,200 $ 60 60 60 60 60 60 60 60 60 60 60 60 60 60 60 60 60 60 60 60

Second Parallel Runway BACL 1,000 $ 62.5 62.5 62.5 62.5 62.5 62.5 62.5 62.5 62.5 62.5 62.5 62.5 62.5 62.5 62.5 62.5

Airport Link MRD 1,500 $ 93.75 93.75 93.75 93.75 93.75 93.75 93.75 93.75 93.75 93.75 93.75 93.75 93.75 93.75 93.75 93.75

Abbot Point Stage 3 Ports Corp 400 $ 50 50 50 50 50 50 50 50

Balance of SE QLD Rail QR 2,000 $ 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100

Northern Busway BCC/QT 500 $ 41.667 41.667 41.667 41.667 41.667 41.667 41.667 41.667 41.667 41.667 41.667 41.667

Wyaralong Dam Sunwater 200 $ 25 25 25 25 25 25 25 25

Toowoomba Range Bypass MRD 700 $ 50 50 50 50 50 50 50 50 50 50 50 50 50 50

Ipswich Motorway Upgrade balanceMRD MRD 2,000 $ 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100

27,220 $ $ 87

$ 235

$ 412

$ 879

$ 898

$ 1,272

$ 1,239

$ 1,214

$ 1,322

$ 1,347

$ 1,583

$ 1,538

$ 1,586

$ 1,339

$ 1,474

$ 1,331

$ 1,294

$ 1,119

$ 994

$ 731

$ 648

$ 608

$ 608

$ 608

$ 566

$ 566

$ 410

$ 410

$ 260

$ 200

$ 100

$ 100

$ 100

$ 100

Monthly Turnover

$ 29

$ 78

$ 137

$ 293

$ 299

$ 424

$ 413

$ 405

$ 441

$ 449

$ 528

$ 513

$ 529

$ 446

$ 491

$ 444

$ 431

$ 373

$ 331

$ 244

$ 216

$ 203

$ 203

$ 203

$ 189

$ 189

$ 137

$ 137

$ 87

$ 67

$ 33

$ 33

$ 33

$ 33

2006 2007 2008 2009 2010 2011 2012 2013


Assumptions – Capacity

§ Generally CCF companies are at their capacity and will only get busier as QMCA members move up to larger projects

§ QMCA companies are approaching their capacity.

§ Assume that 15 QMCA companies are currently turning over $150M in the work represented in this report – combined turnover $2.25B per year = $188M per month.

§ Say current residual capacity $150M per month.


Turnover

Forecast Turnover Major Projects >$100M

$

$100

$200

$300

$400

$500

$600

Mar06

Jun06

Sep06

Dec06

Mar07

Jun07

Sep07

Dec07

Mar08

Jun08

Sep08

Dec08

Mar09

Jun09

Sep09

Dec09

Mar10

Jun10

Sep10

Dec10

Mar11

Jun11

Sep11

Dec11

Turnov

er ($M's) p

er Mon

th

Turnover Current Capacity


So what are some solutions?

§ Interstate Contractors § Yes, this is happening but they are also very busy.

§ Overseas Contractors § Yes, and this is starting to happen at the top end – eg. Hochtief, Bouygues, B+B,

Saipem, Spie.

§ Overseas Staff § A number of QMCA organisations are recruiting overseas. Is the Dept

Immigration aware of the extend of the need.



§ Offshore fabrication § Number of member companies now looking overseas for not only fabricated

steel but precast concrete.

§ Overseas labour § Is this an option ?

§ Increase labour pool from § School leavers into trades – BCITF are working on this thru their Qld Skills

Plan. Needs to be rolled out.

§ Rural workers to the industry – Needs a coordinated training strategy



§ Prioritise the infrastructure work § Focus on critical projects

§ Procurement § Remove the burden on tendering resources. A bid field of two rather than

open market will reduce wasted effort and resources. It will also allow greater focus and better bids.

§ Alliance and ECI models

§ Preselected contractors. Award on basis of available capacity and performance – similar to the way consultants are engaged.



§ Greater involvement between QMCA and Government Departments

§ Early and regular updates into upcoming projects

§ Closer working relationship key to successfully managing this workload


Delivery Model/Strategies

§ Situations require a wide range of delivery methods § Best answer is a matching of project circumstances with

methods § A spectrum of possibilities

Risk Transfer Risk Embrace

Traditional Lum

p

Sum or S

.O.R.

Document and

Constru

ct

Design and

Constru

ct

Project

Managem

ent

Constru

ction

Managem

ent

Managing

Contractor

Cost Reimbursable

Perfo

rmance Incentive

Alliancing


Relationship Relationship Contracting Contracting


Modern Project Delivery Options Traditional

Partnering

Cost R

eimbursable

Performance

Incentive

Incentives with

Joint M

anagem

ent

Alliance

Legal Frame

Traditional Adversarial “BlackLetter” Law

Relational Frame

Collaboration Partnerships

§ Modern complex projects with uncertainties are being delivered using Relational options.

§ Success depends on relationships.


Water Industry Applications of the ‘Pure or Traditional Alliance’ Model

§ Awoonga Dam for GAWB [D&C] $100M

§ Treatment Plant Upgrades for Brisbane Water [D&C] $150M

§ Gippsland Water Factory [D&C] $70M

§ Southern Regional Water Pipeline [Approvals, D&C] $250M


Water industry applications of the ‘Project Alliance’ Model

§ Maroochydore STP upgrade [D&C] $3M

§ Gold Coast Coombabah Water Futures Alliance [EPCM] $77M

§ Coffs Harbour Deep Sea Release [D&C] $19M

§ Coffs Harbour Woolgoolga STP upgrade [EPCP] $17M

§ Citiwater Townsville Wastewater Infrastructure Upgrade Program [3 Treatment Plants DBP, other projects D&C] $55M

§ PimpamaCoomera Waterfuture Program Management Services [PM 36 years] $510M

§ Gold Coast Desalination Project [DBO] $150M

§ Southern Regional Water Pipeline [O&M Services] – 10 years

§ Coffs Harbour Infrastructure Program [WRP & WTP DBP & Bridge & Community Centre D&C] $80M


Water Industry Applications of the ‘Competitive TOC Alliance’ Model

§ Bega Valley Sewerage Project $80M

§ Merrimac Wastewater Treatment Plant Upgrade Project, for Gold Coast Water [DBP] $48M

§ BeenleighMerrimacPimpama Wastewater Network Augmentation Program Alliance for Gold Coast Water $130M

§ Beenleigh Network [D&C] – Competitive TOC Alliances

§ Merrimac East & Merrimac West [D&C] – Project Alliances

§ Maroochydore Sewage Treatment Plant, for Maroochy Shire Council [DBP] $31M

§ Wetalla Wastewater Treatment Plant Upgrading, for Toowoomba City Council [DBP] $30M

§ PimpamaCoomera Waterfuture Infrastructure Package A [DBP] for Gold Coast Water $100M


Case Study

Gold Coast City Council Gold Coast City Council


Forecast Capital Expenditure Program – Gold Coast Water

0

50,000,000

100,000,000

150,000,000

200,000,000

250,000,000

2001/02 2002/03 2003/04 2004/05 2005/06 2006/07 2007/08 2008/09

Year


Current Major Programs

§ Coombabah Waterfuture $77M § Project Alliance EPCM scope

§ Merrimac WWTP Upgrade $48M § Competitive TOC Alliance

§ Beenleigh Merrimac and Pimpama Wastewater Network Augmentations Alliance § Beenleigh Subprogram – Competitive TOC Alliance $32M § Merrimac Subprograms – Project Alliance – D&C scope $100M § Pimpama Subprogram – [under Pimpama Coomera Alliance]

§ Water Pumps and Pipes Program $72M § Managing Contractor

§ Pimpama Coomera Waterfuture Master Plan Implementation § Program Management Services – Project Alliance $10M § Treatment Plant Infrastructure – Competitive TOC Alliance $65M § Network Infrastructure – Competitive TOC Alliance $35M


Future Major Programs

§ Desalination Project Alliance $150M § Project Alliance DBO scope

§ Southern Regional Water Pipeline $90M § Project Alliance – D&C scope

§ Regional Biosolids Management $35M § WWTP Odour Control $66M § Project Alliance – D&C scope

§ Total $780M


Why Alliances/Alternative Delivery Methods?

§ Nature and scope of works program § Internal resource limitations § Maximising GCW operational staff input/involvement

§ Status of planning § Tight delivery schedules § Integrated focussed project team with flexible access to necessary skill sets and procurement opportunities

§ Incentives to ensure access to the “A” Team


Why Alliances/Alternative Delivery Methods?

§ Reasonable cost outcomes without compromising quality

§ Flexibility to match changing project requirements § Environment for innovation, continuous improvement and knowledge transfer

§ Optimal engagement of stakeholders § Optimise internal communications


Some Lessons Learnt

§ Coombabah Waterfuture Alliance (Traditional with EPCM Scope) § Spend time to scope at commencement

§ Progressively build team § Don’t misuse unit rates and rating curves § Preferable to have constructor on team

§ Need “real hands on” construction experience input to design § Sub alliances for major packages

§ Single Project Office where practical § Communication/commitment /culture issues with multiple offices

§ Market risk difficult to predict in TOC § Early involvement of regulators and key stakeholders essential


Some Lessons Learnt

§ Competitive Alliances § Focuses proponents on Value for Money especially risk and opportunity allocations

§ Very intense but does reduce timeframes § Significant demands on organisational resources § Engenders a D&C culture § Innovation –v Descoping

§ Shortcomings in “endorsement” process § Difficult to introduce initiatives Probity issues § Outcome Endorse acceptable solutions only


Some Lessons Learnt

§ Competitive Alliances § TOC1 to TOC2 § Allow time and cost in TOC1 § Management of TOC2 process difficult § Manage personalities as well as time and cost § Another opportunity to include other improvements

§ Clearly defined objectives and assessment criteria essential and upfront

§ Speed of delivery places severe stress on normal approval processes eg. DA’s and subsidy


Future Directions

§ Pimpama Coomera Waterfuture Implementation § Combination of approaches § Progressive appointment of skill sets § Traditional for Services Program Management § Competitive Sub Alliances for contestable infrastructure provision

§ Extensive organisational change management § Integrate with parallel project to ensure consistency of approach with other projects


The Result GCW CAPITAL EXPENDITURE

0

20

40

60

80

100

120

140

160

2000/01 2001/02 2002/03 2003/04 2004/05

Y EAR


Key Points

§ Successful Project Procurement strategy; § Must support the Corporate Strategies & Project Goals § Agreed early & before the Feasibility is concluded § Be creatively and collaboratively developed § Reflect the specific features and context of the project § Reflect the current market conditions

manmanaging noaging nonn conconventventioionnal al … · 2016. 4. 16. · 1 alternaalternattive...

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