Critical Review Of Tendering And Procurement Strategies: A Case Study Of The Federation Square Project Essay.

Project Scenario

It is indisputably factual that success of any construction project partly depends on the quality and timely tendering and procurement of construction materials. Any delay, of any form, can lead to devastating effects on the overall project quality. Many Project managers would therefore not hesitate to adopt the winning strategies for tendering and material procurement. However, in the case of Federation Square project, some aspects were never considered during project tendering, procurement and delivery of construction materials. Besides, seemingly, there were many indications that the project design team did not give the tendering and construction material procurement the attention it deserved hence leading to the massive failure that was witnessed. This report, therefore, provides a critical review on the happenings that led to the registered project failures. However, it is imperative to firstly introduce the project scenario. As mentioned earlier, the Federation square project, was implemented in the north of the princess bridge which is bordered by Flinders street and Yarra river. Mainly it was designed and implemented to serve the people of Melbourne in the arena of cultural and civil celebration. The major sponsor for this project was the State Government of Australia in conjunction with the City council of Melbourne. Besides, due to factors which shall be mentioned in the next section, there was an additional funding pumped into the project from the federal fund kitty. Most importantly, therefore, this report hereinafter will give an account of the actual said project scenario by elucidating various loopholes that led to the registered failures. Thereafter, a concise and systematic tendering methodology, that would have guaranteed overall success of the project, will be given. Therefore, certainly, the report may be adopted by the concerned authorities in the sector to leverage on the best practices during tendering and procurement of such mega projects.

The said mega project proved costly to both the client and financiers. As pointed out earlier, there were serious cases of project hijacking by the client right at the onset to the period the project was set into motion. Summarily, these strategies greatly contributed to unnecessary increase in the project cost and delivery delays. Initially, the project cost was estimated at $128 million but was later revised to $345million after some revisions were done to the project. Besides, the decision to revise the project led to delays by 26 months.

Admittedly, these shortcomings were due to administrative and construction chaos. The tendering committee was unable to develop an adequate brief at the outset. This, ultimately, led to fast tracking of the project in order to beat the deadline hence in the process incurring extra cost and time delay. Besides, due to the client’s drive to have the project delivered on time (not forgetting the weak foundation that was built at the planning stage), the tendering process was rushed through, with little consideration of the project complexities.  In fact, it was being led by the desire to produce more documentation rather than take the project scope into consideration at the earliest opportune time. Consequently, most fixing of the problems was done as the project rolled leading to more than doubling of the project cost. The inherent complexity of the project was never considered at the onset. It should be noted that such a mega project required proper preconstruction best practices to minimize on the costs. Notably, there was no competitive tendering process, perhaps, it led to mediocre company being granted the project tender.

Happenings that led to the Registered Project Failures

Furthermore, revisions were being done while project was rolling out. This complicated the situation as it was apparent that goal posts would have to be shifted from time to time; leading not only to unrealistic deviation from the initial plans but also chaos were a norm as it rolled out. In fact, Multiplex construction, a company that ‘won’ the tender took advantage of the legal lacuna in tendering to put forth an unrealistic claim for delays and damages caused by the absence of formal contractual agreement. Consequently, the project was further inflated by $ 19.1 million.

Lastly, due to several project revisions, defining the project scope was a nightmare. This was coupled with several reasons such as: the ever-changing and incomplete design and subsequent documentation; reluctance by the office of major projects to compromise the architecture and risk allocation for design to Multiplex. Besides, expectedly, there were disputes over fee arrangements due to contractor’s claim for delays and damages; this led to additional costs being incurred. In fact, the development of the design went through up to the tender period causing difficulties to tenderers to define succinctly the project scope, risk and time required for constructability issues. 

Having pinpointed the flaws in the tendering and procurement process for the said project, this section will provide a concise and systematic proposal on the best practices that can be implemented for such mega projects with great success. Therefore, in a nutshell, the methodology to be adopted will be an integrated strategic tendering and procurement strategy. This integrated approach is composed of the following elements:

1. Incorporation of the tendering and procurement requirements in the project design

An effective construction manager would often begin with the end in mind then she/he will attempt to apply reverse thinking to arrive at the requirements and scope of the project. Notably, as advised by DHPW (2008), a construction project requires that the scope, risks and constraints be properly defined at the onset. Constraints are those factors that limit or restrict the project in some manner so that project objectives may seem to be unattainable (DHPW, 2008). Top on the list, is the issue of funds. It should be noted that project delivery will only be possible if sufficient funds are secured early when the project scope is being defined. In fact, the scope of the project squarely depends on the amount that is available. For the case of Federation square project, money had been set aside for procurement and construction but due to late revisions in the project scope, there was need to look for more funds. Not only did this create chaos in project roll out but also led to more costs being incurred. To escape such a scenario, VCCI (2008) recommends that there should be early contractor involvement. This normally starts at the pre-tendering stage where client must properly package her/his requirements for the project. In fact, in defining the project requirements, the client needs to engage the experienced experts such that the resulting project requirements could be packaged in a manner that helps the tenderers to comprehend the scope of the project before the tendering process can begin. All these can be done at the project initiation stage (VCCI, 2008). More often, the client may technically be represented by a Superintendent who handles all the technical matters of the project on behalf of the client and engages with the contractors at the professional level. This is done so that the ignorance of the client may not be taken advantage of by some unscrupulous contractors.

Proposed Best Practices for Tendering and Procurement Strategies for Mega Projects

2. Background check on the potential contracting companies participating in the tendering process

It is imperative to confirm the contractor’s ability and capacity to handle the project at hand by considering checking on her background work (Dwarika & Tiwari, 2014). For example, what kind of projects has the contractor delivered in the past? What was the extent of these projects; were they small, medium or mega? What is her financial position currently? What kind of values do the contractor hold? Are they in harmony with the client’s values or there is a clash? What about the human resource, does the contractor have a mix of skills that are in tandem with the project requirements or will she subcontract to fill up the skill gap? For example, one company could be experienced in construction engineering but since client wants a contractor who can handle all under one roof, that is, the company may be lacking the expertise in electrical installations hence may opt to outsource; bringing a third party on board. If the contractual agreement did not consider such a scenario, then matters would be complicated hence it is critical that client does the background checks beforehand.

3. Level of Project complexity

Tendering and procurement process becomes more complicated as the project becomes more complex. There are many constraints and even risk becomes more complicated. Design of the project must therefore greatly take into account the project complexity. Mega projects are usually complex in nature. It is recommended that more resources and time be expended at the initiation stage so that all issues worth considering can exhaustively be addressed. The mega projects can be broken down into elements where each can then be handled by a group within the project team network. This is normally done to simplify the complex project at hand.

4. Alliance

There is also need for a more collaborative approach as the project is too complex to be left to a single group. This strategy is a perfect choice for parties willing to cooperate by sharing the project risk and responsibility such that the success of the project relies on the successful corporation of all parties. Besides, all transactions and costs are shared equally. This has been seen as a potent method to eliminate disputes that normally arise due to claims for delay and damages. However, the written contract agreement must ensure that clearer and more specific clauses are included. 

5. Contract management

This involves proper adoption, implementation and review of the contractual agreement. The concerned parties must at all times seek to pursue professional engagement during design and development of the project by religiously abiding by the terms of agreement. On general terms, a properly crafted contractual agreement should incorporate quality management principles such that reworks and excessive audits are minimized, which are likely to hamper progress as claims for variation often come up. This normally happens when the quality standard is not properly defined. Secondly, a cooperative approach is highly recommended such that various issues that arise in the course of project roll out can proactively be dealt with in a transparent and harmonious fashion. Besides, a properly crafted contract, such that parties can show commitment to its operationalization hence cultivating an opportunity for timely delivery and in accordance with the expected quality standards (as stipulated on the document). In the case of the said project, there was no written contractual agreement; this admittedly, turned out to be a costly mistake on the side of the client, as contractor took advantage of the lacuna to file claims for delays and damages. But supposedly there was a written contractual agreement, it would have provided a potent reference material from which such disputes could amicably be solved so that no party loses. Besides, the document provides a clearly full and open detail of the project costing and any variations to the project can easily be accommodated (VCCI, 2008). Now, when it comes to adoption and administration of the contract, a third party may be assigned by the client to act on her behalf so that all technical provisions of the contract are midwifed by the third-party professional, mostly, a superintendent (who is skilled and experienced in managing construction projects). Notably, in administration of the contract, the superintendent must always ensure that communication systems between her office and that of the contractor remain a two-way and open (VCCI, 2008). For example, in decision making, a consultative approach is the best strategy to adopt to build consensus. In the case of the said project, the client would have recommended endless goal shifting at will, without consulting the contractor hence leading to disputes and conflicts between both parties. There should also be regular meetings between the superintendent and the contractor to discuss the progress of the project. Besides, this can offer an opportunity for the contractor to be open and transparent in sharing the actual performance of the project. For example, he/she could point out if more resources are needed by justifying the same to the superintendent. Typically, therefore, some of the documents that are likely to be submitted to the superintendent include: audit, progress, safety, claims and contract finalization report.

6. Strategic sourcing and tendering process

It is always imperative to exhaustively pursue the process of tendering so that the best bidder can win the tender. The strategic sourcing for best contractor therefore begins at the procurement process; this is normally constituted of two major stages: the pre-qualification and tendering processes.

• The pre-qualification process

This involves establishing whether the potential bidders match the project delivery standards, so that unnecessary cost could be minimized in the preparation of expensive tenders. Therefore, the company will have to:

Prepare pre-qualification documents detailing the project requirements

Then advertise and issue the prequalification documents to interested parties so that they can demonstrate their abilities and capacities in financial, managerial, and technical skills that match with the expectation of the project.

Then an evaluation committee will have to evaluate the submitted documents by the potential bidders to further scrutinize them.

Then a short list will have to be proposed featuring those who have managed to book their slots for the tendering process. Notably, the criteria must be very robust to ensure only the best tenderers are picked.

• Tender process

This now will deliberately provide an opportunity for the shortlisted tenderers to develop their designs so that they can submit them to the tendering committee for selection and thereafter award of the tender. Hence the tender documents are first prepared by considering all project issues such as finance, technical, risk among others. The tenderers will then be briefed on the particulars of the project. Should they have any reservation, this will be a perfect opportunity to ask questions for clarification. They might also conduct site visit to get the complete picture of the design. Later, the tender documents are submitted to the committee after which the process of evaluation and selection begins. Notably, although cost is critical, it should not be the only determining factor for selection. One tenderer may appear cheap but could also be a mediocre in delivering quality projects in a timely fashion. The evaluation team may also decide to seek clarification from individual tenderers before selection can be done. Thereafter, the results of tendering must be forwarded to the individual tenderers before going public. The selection process must be fair and transparent so that the interested parties can be satisfied with the outcome (King, 2011). 

Conclusion

As mentioned in the introduction section, effective tendering and procurement strategies is one of the effective ways of ensuring that project implementation would pick up and roll out to its successful conclusive end. A discussion on the integrated procurement strategies have been provided. Notably, however, the successful implementation of these strategies would require a concerted effort from all stakeholders. One of the issues that normally arise in construction projects is funding. It is a critical success factor as the quality and time of delivery greatly depends on the amount available and the willingness by the sponsor to issue it out on a timely basis. Expectedly, it is common for the sponsors to feel as if the funds being supplied are not yielding any value for them. However, with a long-term view of the project, one could see that actually the project will tremendously yield great value. Therefore, it is recommended that a part from ensuring the procurement and tendering process is smoothly implemented also there is need to have a winning strategy to successfully negotiate for project funds from the financiers so that the project plan can be implemented with minimum delays due to funding challenges. Secondly, it is important that the project work in an organized way under the leadership of the project management. Besides, innovative ideas should be cultivated from the project team members, especially in the areas of austerity so that the project at hand can be cushioned from the external financial shock such as inflation. Shielding of the project against such factors would likely boost the performance of the project and even make it more resilient as various risks come to play. 

Reference

DHPW. (2008). Procurement Strategy and Contract Selection. Queensland Government. Available at: https://www.hpw.qld.gov.au/SiteCollectionDocuments/CWMFProcurementStrategy.pdf

Purchasing Centre. (no year). Strategies for World-Class Procurement. Available at: https://www.mypurchasingcenter.com/files/6413/5429/1398/Strategies_for_World_Class_Procurement.pdf

Wells, J. (no year). Getting better outcomes on construction projects: suggestions for modification of World Bank procurement procedures. Available at: https://www.engineersagainstpoverty.org/documentdownload.axd?documentresourceid=59

King, W. (2011). D&C Projects A Model Procurement Process. Available at: https://www.constructors.com.au/wp-content/uploads/2001/09/D-and-C-Projects-A-Model-Procurement-Process-20011.pdf

Anywhere Muriro, A & Wood, G. (2010). A comparative analysis of procurement methods used on competitively tendered office projects in the UK. Available at: https://usir.salford.ac.uk/23055/1/download_feed.pdf

1. (2008). Best Practice Guide for Tendering and Contract Management. Available at: file:///C:/Users/Otieno/Downloads/VCCI-Best-Practice-Guide-for-Tendering-and-Contract-Management.pdf

Puri, D & Tiwari, S. (2014). Evaluating The Criteria for Contractors’ Selection and Bid Evaluation. Available at: https://www.ijesi.org/papers/Vol(3)7/Version-2/I0372044048.pdf