Tender Processes for PSC Teams
Tender Processes for Professional Service Contractor Teams
Introduction
This guide note sets out the principles and policies of the Department of Planning, Transport and Infrastructure (DPTI) Building Management division’s professional service contractor (PSC) tender selection and appraisal processes.
There are a number of tender selection methods available. The choice of method depends on the complexity and specific requirements of the lead agency and its project.
There are also a number of models for assembling the design team for a building project. The range of models in use in DPTI Building Management includes:
· lead PSC selection
· lead PSC with alternative subcontractors selection
· subcontractor selection
· individual PSC selection.
Background
DPTI through its Building Management division is a major player in the building industry and has adopted tender processes that focus on the services required and a fair price for those services. In the long term it is in the Government's interest to ensure that value and service are emphasised and that excellent and financially viable private sector practices are operating.
Building Management engages private sector providers of architectural, engineering, quantity surveying and other associated building industry services on behalf of Government agencies undertaking major building construction projects.
Its policy is to expect a full and complete service from the PSCs for the offered price and it has developed an objective, equitable and efficient selection methodology which aims to provide:
· lead agencies with best value services
· PSCs with a clear understanding of selection criteria and the decision making process.
The selection methodology is underpinned by a principle of achieving the best outcomes for Government in the purchase of consultant services. Best outcomes include:
· value for money
· quality of service
· quality of product
· management of risk
· reduction of whole of life costs
· intelligent and innovative design.
To ensure appropriate governance over the procurement of professional services for construction projects managed by Building Management, project specific procurement plans are developed and submitted for assessment and approval by the division’s Procurement Review Panel. The Panel consists of senior Building Management project and procurement staff and is chaired by the Director Project Services. The key elements of procurement plans are risk assessment and management strategy, assessment of and recommended for the tender and contract methodology to be implemented and assessment and identification of proposed tender fields.
Selection of Tender Fields
Building Management practice is that consultant tender fields should be select fields, limited to 3-5 tenderers dependent on the value of the contract. This private tender call approach underpins the principle that value selection, where non-price criteria related to the quality of services are critical, is the best strategy for project success.
The primary consideration in determining the select tender field is to assess the prequalification status of registered PSCs, their previous performance on similar projects, their strategic fit to the project and lead agency objectives, and their general capacity to undertake the services effectively.
Another consideration is an assessment of the opportunities that each prequalified PSC has had to tender for contracts. It is DPTI’s objective to ensure that all prequalified consultants have equitable opportunity to tender for contracts over an annual cycle, noting that opportunities relate to the number of approved projects in the Government’s program and in some years not all organisations will be invited to tender.
In some instances, DPTI determines that a single select tender field is appropriate to the project requirements.
Annual statistics relating to tendering and contracting activity are published on the Building Management website.
Tender Selection Process
There are three industry generally recognised selection processes being:
· Low bid selection
· Value selection
· Qualification based selection.
Low Bid Selection
DPTI does not implement low bid selection on PSC tender calls where price is the only selection criteria.
Research has shown that generally, where selection is based on price only, it equates with lower standards of service or more limited scope of contract deliverables. This can lead to increased project cost and project delivery problems and ultimately to increased life cycle costs.
Where it is perceived by PSCs that selection will be dependent on price, there is inevitable pressure to limit the scope of work offered even though it is recognised that it would be in the client’s best long-term interests to extend the scope.
Price tendering places the cost of service before the service itself. It suggests that the client will accept whatever service can be offered for the money and that quality and value are lesser considerations.
Value Selection
The value selection process seeks to achieve best value for Government in the purchase of consultant services. The system allows both non-price and price criteria to be taken into account.
The implementation of the DPTI Building and Construction Project Prequalification System (Prequalification System) for PSCs does not alter the principles of value based selection but manages that all PSCs in a field have met basic benchmarks of performance.
Value selection is in accordance with Treasurer’s Instructions, which require that PSCs compete on price consistent with public accountability.
Qualification Based Selection
The principle behind qualification based selection (QBS) is that the client can, by spending an appropriate amount on obtaining design advice, obtain better overall value for the money measured by the total project or whole of life cost for the project.
Under QBS, the field of PSCs is assessed on non-price criteria only and then a price negotiated with the preferred PSC. Under this method, the price is not taken into consideration during selection and the achievement of price value relies on the successful negotiation of an appropriate price. The approach requires investment in the skills required to appropriately negotiate a price, and without the benefit of benchmark bands or tender market information, time and cost penalties can occur. Many Building Management projects are routine and do not derive a benefit from this very sophisticated selection process.
Qualification based selection does not meet the requirements of Treasurer’s Instructions for price competition, however it is occasionally used in conjunction with a single offer where program constraints or expertise required, result in the selection of a single PSC based on merit and subsequent negotiation of the price.
Tendering Process – Value Selection
DPTI has adopted value selection as the standard form of consultant tender selection and has liaised with the design sector of the building industry to consolidate consistent and fair selection processes which feature:
· standard conditions of tender
· statements on the selection criteria as part of the tender documents
· nomination of the selection panel prior to tender
· establishment of a lead agency/DPTI selection panel in all projects
· standardised ranking matrices for assessment of PSCs.
The DPTI Project Risk Manager will establish and chair the Tender Evaluation Panel generally consisting of at least three in total from the following list.
· DPTI Project Risk Manager
· Lead Agency Representative
· End User Representative
· DPTI Design + Heritage Management Representative
· DPTI Budget Risk Advice Representative
and/or if applicable to the tendering process:
· Lead PSC
· Project Manager
· Cost Manager.
For each project, the key selection criteria are determined by the Procurement Review Panel before preparing the consultant tender. The selection criteria generally include as a standard:
· past performance and recent experience general and relevant to the project
· key team members and percentage of time involvement
· project methodology
· professional and technical capability
· subcontractors
· price
and may in addition include:
· program management capabilities and current workload
· budget management capabilities
· creative and innovative ability
· procurement method experience
· other project specific criteria.
The selection process is commenced by inviting a number of PSCs (commonly 3-5) to submit tenders to DPTI under competitive circumstances.
After tenders are received, the tender evaluation panel will conduct an evaluation of tenders received.
The tender evaluation panel will determine the weighting to be applied to each of the non-price selection criteria and to the Prequalification System performance score.
First the panel will score the non-price criteria and apply the Prequalification System performance score for each tenderer, apply the agreed weightings and determine the total score for each tenderer. The tenderer with the highest points score is the initially preferred tenderer.
Second, the panel will compare the price offered by the initially preferred tenderer with DPTI benchmarks derived from market data and with the price and hours offered by lower ranked tenderers to assess whether the price represents value. (For example, if the services are judged to be the best and the price is lowest, within acceptable benchmarks, then this would be judged as excellent value. If the services are judged as best however the price is say the highest, a judgement would be made as to whether it still represented best value or whether the second ranked PSC with a lower price is preferred.)
If the panel determines that the price represents value, the tender is the preferred tender and is recommended to the delegate (Cabinet or Minister for Transport and Infrastructure, depending on contract value) for acceptance.
Models for Assembling the PSC Team
Lead PSC
The preferred tendering process is for DPTI to invite tenders for the role of Lead PSC. Each tenderer (architect or engineer, depending on the project) is advised of the range of subcontractors required to provide services. In response, the tenderer selects and assembles a team of PSCs to provide design services to the project. The appointed Lead PSC holds the subcontractor contracts.
The advantages are:
· the tendering process is relatively short and DPTI holds a single contract
· there is a single point of accountability for the design team and its performance
· the Lead PSC has the right to select a team which is aligned with its design philosophy, company culture and customer service objectives
· the Lead PSC manages co-ordination of the design team services and deliverables
· communication channels between client and PSC are straightforward
· payments are streamlined.
Disadvantages are:
· the client has reduced choice in regard to subcontractors, although there can be designation of subcontractors
· the Lead PSC tenderer may include the lowest bid subcontractor rather than the best qualified. In regard to this issue the tenderer is required to provide detailed information on subcontractor prices so that it is immediately apparent to the panel if one subcontractor is very low when compared with the rest of the tender field
· the Lead PSC may elect to reduce the scope of subcontractor services and provides these services itself with less expertise applied.
Lead PSC with Alternative Subcontractors Selection
This tendering process is utilised where DPTI wants the benefit of the Lead PSC process but increased choice in regard to key subcontractors. The tenderer is advised of the range of subcontractors required and is requested to select a preferred subcontractor and alternative subcontractor in key disciplines. The tenderer advises in the tender on the factors that have resulted in the subcontractor being preferred.
Added advantages over the Lead PSC selection method above are:
· greater subcontractor choice for the tender evaluation panel.
Added disadvantages are:
· tender evaluation process can be marginally longer and is more complex
· additional work for the tenderers in preparing the tenders.
Subcontractor Selection
Another tender process which can be implemented is the direct tendering and selection of each PSC and subcontractor required in the design team. Generally there is a ‘cascade’ approach to selection where the Lead PSC (or project manager if applicable) is selected first. The lead assists with the selection of the engineering and other subcontractor disciplines which will join the design team.
At the end of the selection process, the Lead PSC is required to enter into contracts with the selected PSCs and form a Lead PSC team.
Advantages of this method are:
· the tender evaluation panel is able to select the most suitable subcontractor in each discipline
· subcontractors can tender in the same way as prospective Lead PSCs and are able to offer information directly to the client and tender evaluation panel
· there is more access to tendering opportunities for subcontractors
· second bidding of subcontractors by Lead PSCs is eliminated
· the whole tendering period is available to subcontractors rather than a reduced period after review by the Lead PSC.
Disadvantages are:
· there is a significantly increased tender period and increased tendering cost
· selection panels have lower levels of experience in judging subcontractor services
· the Lead PSC loses the sole power to select a team which is aligned with its design philosophy and company culture
· subcontractors selected by the panel may not work well with the Lead PSC. In really serious cases the Lead PSC may even claim against the client as the ‘nominated’ PSC is not performing and is incurring cost for the Lead PSC.
Individual PSC Selection
The final tender process which can be implemented is the direct tendering, selection and contracting of each PSC required in the design team. Generally again there is a ‘cascade’ approach to selection.
At the end of the selection process the client is required to enter into contracts with each selected PSC. Each PSC has a contracted obligation to work with other PSCs selected for the team and generally the Lead PSC has a contracted obligation to co-ordinate and manage others in the team.
Added advantages of this method over the Subcontractor Selection method above are:
· the direct accountability and autonomy resulting from this approach can be an advantage in relationship or alliance settings where all project team members are expected, as equals, to agree on and deliver the project objectives
· there is security of payment for all PSCs due to direct payment.
Added disadvantages are:
· the client holds many contracts
· there are multiple points of accountability in the design team
· coordination and management can be fragmented and the subject of dispute