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Critical Essay On Procurement Strategy

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Question:

Write a critical analysis of strategic procurement of infrastructure development project. 
 
 

Answer:

Introduction

Strategic construction procurement should be constructed upon the intention and the objective of procurement process (Young and Grant, 2015). This study would analyze the construction procurement process and its implementations on the new school projects generated by the DET under Australian government. In this essay the critical evaluation of the strategic construction procurement has been discussed in the light of the given case study. This scenario in accordance to the case study can be cited in this manner that the new school project conducted by the NSW department of education and training which is the largest provider of education services within Australian region. The public private partnership has been considered so lately as the effective tool in terms of exercising the multidimensional impacts on the construction procurement. It has been largely observed that the public sector project that remains under the strict observation of government is getting more dependent on the private sectors in recent years (Akintoye et al. 2003). Therefore, this study has also enhanced the importance and effectiveness of public private partnerships in the construction procurement. NSW department of education and training has provided a number of primary schools and special school to the society within the record time period. The primary education services are being provided by the DET in order to make the generation more successful and adaptable to new systems in the future. Hence, this study has also evaluated the procurement strategies along with the advantages and disadvantages of BOT and its achievements in this regard.

Effectiveness of Public and private partnership

The public private partnerships (P3) have been found to be growing as one of the most popular strategies in course of infrastructure development across the world (McQuaid and Scherrer, 2010). As far as the international infrastructure development is concerned, it can be mentioned that there are several types of public private partnerships that are put into practice in terms of achieving utmost significance in the concerned projects. Public Private Partnership can be regarded as some sort of a contractual agreement between the likes of a public agency and a specified private sector entity to serve the purpose concerning the delivery of public infrastructure services and others in lieu of long term relationship. Introduction of Public Private Partnership can well be considered as a more unique as well as innovative approach for the cause of improved effectiveness in association with increased value for money (Akintoye et al. 2003). Alongside this factor, the P3 is an approach of uniqueness for the purpose of improved service access, for the cause of timely delivery, for serving the purpose of reliability, transparency alongside appropriate accountability of public money.

The effectiveness of the P3 arrangement lies in its allowing in designing the actual optimum combinations regarding both the public and private financing. The projects involving the public private partnerships offer limited cost overruns and at the same time, help in lowering operational costs in comparison to the other contracts (Zhang, 2005). The identification of barriers to the respective infrastructure of Public Private Partnership i.e. social, political and social risks; inefficient procurement framework; unfavorable commercial and economic conditions etc has in turn aided in ensuring the effectiveness of the partnership in the given project. Creation of added value is the main reason along with gaining significant competitive advantage amongst the different spheres of the world why this P3 has become so popular in terms of working on the integration and cross-transferring of the respective public and private sector knowledge, skills and expertise (Abdel Aziz, 2007). Furthermore, the fact that public private partnerships are not standardized makes it far more approachable in terms of meeting the concerned governmental policy objectives in addition to the cause of complementing the other methods of public procurement and public service delivery in accordance with their availability of resources (Ke et al. 2009). 

 

Background information of the project

As per the given case study, it is being known that the NSW Department of Education and Training (DET) is considered as the largest possible provider as far as the educational services in Australia is concerned (Jefferies and McGeorge, 2009). DET is found to be operating in more than 2400 sites, in connection with enrolling approximate 1.2 million students and having an asset base valued in excess of $15 billion. DET has managed to get two key public private sector partnership contracts in terms of letting those in providing the NSW government run schools in the new found urban release areas. While the New Schools Project is being regarded as the first ever social infrastructure Public Private Partnership contract of the NSW Government, this particular approach is known as the New Schools Privately Financed Project.

It can be mentioned further, that these stipulated tasks were to be conducted by the likes of Axiom Education Pty Limited, in support of ABN AMRO Bank, Hansen Yuncken, St Hilliers and Spotless. The new type of procurement approach has actually come up as an appropriate replacement of the conventional method that takes into account individual school construction contracts coupled with several short term services and supply contracts. It can be mentioned in this regard that, under this new procurement style, the person in charge of construction must engage in designing, constructing as well as commissioning specific school facilities i.e. buildings of school, school playgrounds, furniture, fixtures, fittings, equipments, necessary electrical goods etc at its own respective cost by preset dates. It is the duty and responsibility of the contractor to provide operational, maintenance, security, safety, utility, cleaning and last but not the least repair services for each and every aspect of the school facility. Furthermore, after the contract is over, the contractor should hand over the respective school facilities to the State or to a newly nominated contractor, whichever is applicable and necessary.

Procurement strategies

Procurement strategies can be described in terms of preventing the different level of risks in this context. Strategies of procurement has been engaged from decades as the services related to the building process that has been adapted in order to deliver better services to satisfy the public needs. When a new project regarding the school building has been selected for renovation it includes different types of procurement strategies encompassing the solution along with the aims and objectives of effective solutions instead of engaging the real estate aspects like renting, leashing or purchasing the preset object in this regard (Chen, 2012). At the time of adapting any new project regarding the renovation of building the client should be made aware of the fact that along with the adoption of procurement strategy there comes some of the complex array that may generate constraints in the process of implementing procurement strategies as these complexities may be handled in the course of the entire procurement process. In this regard it has been detected that there are some important aspects that needs a sheer attention that is procurement process must involve few essential elements like;

  • There should be an appropriate arrangement for the entire procurement process in order to implement such strategy effectively.
  • It should be clearly stated in the contract format of the procurement package that what systems and methods will be taken into account for the procurement process.
  • It should also be mentioned that how the procurement agency will manage the entire process that will suit the delivery system along with other services.

There are many factors that are influencing the procurement strategies in recent times and which have remained under the cover of a veil for a long time. The agencies that are going to undertake a series of projects in the near future will opt for the option of partnership irrespective of the procurement rules that does not follow the line. The working activities of both the contractor and they consultant can be detected through the pre determined indicator in the procurement process and also helps in comparing the action outcomes of the both parties. In this regard the external factors like economic, political, social, environmental factors also influences the client and their business activities involved in the procurement process (Ekung et al. 2013).

In order to define the procurement system it can be said that it is an organizational system that allows individuals to access the responsibilities and authorities in the organization along with this provides a explanation of the various aspects affecting the building projects in this regard. In the traditional procurement system the activity of the entire procurement system has been conducted in such a way in which the employer considers the fact the design will automatically adapt its assigned work, the contractor will be responsible to carry out the entire process and the consultant has been appointed for design and cost control of the entire project. Hence the procurement process can be considered as the series of risk and the prevention methods that are being adopted by the organizations would form in the strategies in the concerned field (Improving Construction Procurement Systems using Organizational Strategies, 2014) 

 

Procurement strategies at international level

Procurement strategies have been adopted by many countries in order to avoid the unsatisfactory faces of the clients and also to avoid the embracing situation regarding the failure to attend the public needs. The new schools projects has introduces a new level of procurement strategies in the course of their action as it has made profit more than $ 15 billion and also provided services in the education sector within a record breaking time frame. Many types of procurement strategies have been developed so far in order to develop the international infrastructure system. The NSW department of education and training has introduces a new system of procurement strategies that can be assessed in terms of risk management in the course of building projects. The new school project has strictly depicted that the accountable organizations would be able to adapt effective procurement policies and also would be able to attain the public investment needs. It has been observed in the recent times that procurement is an internationally recognised profession in the building project sectors (Ishii et al. 2014). It is also evident that procurement strategies on an international level have the ability to influence the overall performance outcome of and organization. Therefore, in this regard it can be suggested that the government of the mentioned country or the other countries should be aware of the different crucial aspects related to procurement system as this can take the critical shape for both the private and the public sectors.teh procurement system can also be handled with the effective public and private sector partnership strategies (Liu and Wilkinson, 2016).

There are various cultural differences in the building project sector that are able to influence the development procedure though building partnerships. The reforms that have been adopted in the sectors of procurement have exercised a large impact on the legal framework along with the institutional aspects of a country. The procurement strategies has shown its charisma in relation to international business as it has been adapted by the organization internationally when the organizations fails to coordinate and collaborate between the public and the private sector partnership. The international procurement strategies have delivers an ample amount of advantages along with disadvantages, like

Contractors are getting the opportunity to collaborate and coordinate with one particular and single company which decreases the scope of increases procurement.

The contractors are able to assume the risk and possibilities regarding the building projects and procurement of the continuing project.

And finally the roles, responsibilities and the charges are clear to the all parties’ and the risk of procurement would also be detected in the due course (Plantinga and Dorée, 2016).

Adaptation of appropriate procurement strategy for the NSW project

The BOT strategies can be described as the binary options trading strategy that has been considered as the most effective and useful tool in the public and private partnership. The BOT strategies are a set of ideas that would be leading the organizations in the right path of deliberation (binary options trading strategies, 2010). . The rules regarding the binary option trading should be based on the market values.  The best way to develop a right model of BOT strategy is to gather as much as possible comprehension about the current situation of the market. BOT strategy is very much influential and effective in deriving the right outcomes for the project. The project can be shapes with sheer effectiveness if the BOT strategy can be implemented in the right directions and right tools in this regard. The Binary option trading also provides the scope of financial security as the users can predict the financial situation of the market. In other words it helps in constructing the financial structure of the intended project. The new school project has taken into account the binary option trading as an integral part of the procurement system in relation to the building project and the effective implementation of the public private partnership aided by the BOT strategies (Zhang, 2005).  

 

Advantages and disadvantages of BOT

It can be put forth that the BOT procurement method is a particular type of private public partnership mode, in accordance with which, the financing of work is being carried out (Zhang and Kumaraswamy, 2001). There are certain advantages and disadvantages of this specified procurement strategy that must be taken into account in terms of exploring the strategic approach.

Advantages:

  • BOT helps in saving time on grounds of the service provider’s respective expertise in course of assembling the concerned infrastructure and the obtainment of local regulatory consents and in saving efforts for the service provider is capable of performing at considerably lower price.
  • Transfer of technology along with the respective training of the local personnel and the national capital market development can be counted as one of the key factors of this mechanism.
  • BOT is efficient in saving money alongside market share for the new infrastructural benefits are enjoyed sooner and with accelerated effectiveness (Kumaraswamy and Zhang, 2001).
  • BOT formula which is a complex mechanism can be applied to any sector of economy with special preference for transportation, power plant sector and telecommunications. 

Disadvantages:

  • Transactional costs are usually high for they take up around 5-10% of the total project cost. It is found that there are additional costs which are incurred for paying a certain amount of profit to the service provider in consequence of the value of its know-how and stipulated time in organizing the infrastructure of service delivery.
  • It is rare that BOT is applicable to early stage startups in lieu of short term urgency.
  • Not suitable for small scale projects
  • BOT projects are successful depending on the factor of financial support and projects can only gain success when substantial revenues are found to be generated during the operational activity phase.

Achievement of BOT (Build Operate Transfer) strategy in the NSW project

BOT (Build-Operate-Transfer) is regarded as one of the most successful as well as helpful strategies for the public private partnership of the infrastructure project which can be mentioned as an essential form of leading where the project sponsor i.e. the government allows for designing, financing and building an infrastructure facility by the project promoter i.e. private entrepreneur (Shrestha, 2011). It can invariably be put forth that BOT is inherently an output oriented procurement strategy that plays a pivotal role in designing appropriate structure of the concerned partnership project. Governments tend to adopt BOT project procurement strategy because the active involvement of both the private sector and the commercially experienced lenders helps in ensuring a detailed and in-depth evaluation as an added sign of the concerned project feasibility. Public sector is entrusted with the responsibility of bearing the project risk generally, but use of BOT strategy which is a specified service model makes it an integral aspect of private sector instead. The effectiveness of P3 with regard to the specified characteristics of building and management of schools in close association with the BOT strategy in achieving the requisite goal of the New Schools Privately Financed Project can also be counted in this respect (Liu and Wilkinson, 2014). It can be summed up in this regard that BOT strategy is the effective most procurement mechanism that comes as a great deal of help in the infrastructure development project of construction, as in the case of the New Schools Privately Financed Project. 

 

Conclusion

In the final segment, it can be concluded that this particular essay has critically analyzed the various dimensions of the procurement strategy with special reference to the BOT strategy. The given case study of New Schools Privately Financed Project has been discussed in light of the specified procurement strategy in close association with the public private partnership. The P3 is the basis of the new version of infrastructure project and that has been effectively co-ordinated with BOT strategy in order to achieve success in the concerned genre of construction. How far the procurement strategy in concern has managed to pave the way for the public private partnership in the field of infrastructure development has also been explored in the essay in this connection of given case study. The nooks and corners of the BOT procurement mechanism have been delved deep upon in this context from highly analytical perspective, which has actually led to the establishment of the fact that procurement strategy is essential in the genre of infrastructure development with necessary advancements in the contemporary situation. 

 

References

Abdel Aziz, A. (2007). Successful Delivery of Public-Private Partnerships for Infrastructure Development. Journal of Construction Engineering and Management, 133(12), pp.918-931.

Akintoye, A., Hardcastle, C., Beck, M., Chinyio, E. and Asenova, D. (2003). Achieving best value in private finance initiative project procurement. Construction Management and Economics, 21(5), pp.461-470.

Binary Options Trading Strategies. (2010). Joining traders from New York • Tokyo • Singapore • Toronto • Paris • London.

Chen, K. (2012). Procurement strategies and coordination mechanism of the supply chain with one manufacturer and multiple suppliers. International Journal of Production Economics, 138(1), pp.125-135.

Ekung, S., Siriwardena, M. and Adeniran, L. (2013). Optimised Selection and use of Project Procurement Strategy in Nigeria: A Case from Practise. Ethiop. J. Env Stud & Manag, 6(6).

Improving Construction Procurement Systems using Organizational Strategies. (2014). Acta Polytechnica Hungarica, 11(01).

Ishii, N., Takano, Y. and Muraki, M. (2014). An order acceptance strategy under limited engineering man-hours for cost estimation in Engineering–Procurement–Construction projects. International Journal of Project Management, 32(3), pp.519-528.

Jefferies, M. and McGeorge, W. (2009). Using public‐private partnerships (PPPs) to procure social infrastructure in Australia. Engineering, Construction and Architectural Management, 16(5), pp.415-437.

Ke, Y., Wang, S., Chan, A. and Cheung, E. (2009). Research Trend of Public-Private Partnership in Construction Journals. Journal of Construction Engineering and Management, 135(10), pp.1076-1086.

Kumaraswamy, M. and Zhang, X. (2001). Governmental role in BOT-led infrastructure development. International Journal of Project Management, 19(4), pp.195-205.

Liu, T. and Wilkinson, S. (2014). Using public-private partnerships for the building and management of school assets and services. Engineering, Construction and Architectural Management, 21(2), pp.206-223.

Liu, T. and Wilkinson, S. (2016). Using public-private partnerships for the building and management of school assets and services.

McQuaid, R. and Scherrer, W. (2010). Changing reasons for public–private partnerships (PPPs). Public Money & Management, 30(1), pp.27-34.

Plantinga, H. and Dorée, A. (2016). Procurement strategy formation: (re-)designing rail infrastructure project alliances. Int J Managing Projects in Bus, 9(1), pp.53-73.

Shrestha, S. (2011). Prospects of BOT (Build-Operate-Transfer) Projects for Infrastructure Development in Nepal. Journal of the Institute of Engineering, 8(1-2).

Young, R. and Grant, J. (2015). Is strategy implemented by projects? Disturbing evidence in the State of NSW. International Journal of Project Management, 33(1), pp.15-28.

Zhang, X. (2005). Paving the Way for Public–Private Partnerships in Infrastructure Development. Journal of Construction Engineering and Management, 131(1), pp.71-80.

Zhang, X. and Kumaraswamy, M. (2001). BOT-Based Approaches to Infrastructure Development in China. J. Infrastruct. Syst., 7(1), pp.18-25.

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