Construction procurement is a hot topic

View from the Board | Keith Sashaw
Source

There has been a lot of discussion in the industry about the different procurement practices that are being used, especially by public sector owners.

In the past it was typical for public owners to use only the traditional Stipulated Sum Tendering or Design-Bid-Build, whereby the owner engages the design community, a full set of plans and specification is prepared and the project is put out to tender, where usually the lowest bid contractor receives the project.

Now, we are seeing different forms of procurement being used by the public sector to build projects.

Generally speaking, there are five delivery method templates:

• Design-Bid-Build (stipulated price contract)
• Construction Management
• Design-Build
• Public/Private Partnerships (P3s) or Design-Build- Finance-Operate
• hybrids of the previous four methods.

There are a number of typical factors that affect delivery method selection.

These factors include project schedule and the possible need to fast track construction, the familiarity of the owner, consultants, and builders with the procurement method; the needs of the owner and lenders for cost certainty and completion date; whether there are unique quality standards, especially where the requirements of codes and other regulations don’t fully meet the owner’s needs; and the need to manage risks appropriately.

The adoption of procurement methods other than Design-Bid-Build has concerned some in the industry.

For Design Build and P3s, the pursuit costs for contractors can be extraordinarily high, as investments have to be made upfront and substantial costs are incurred if the contractor is not part of the winning bid.

Consequently, many contractors are unwillingly to pursue these opportunities.

While there are a different set of risks associated with alternate procurement methods, there are also opportunities.

The prudent contractor will learn more about these procurement strategies, if only for the reason that they are here to stay.

As governments struggle with the challenge of how to do more with less money, they will need to look at alternate methods and examine each as to how they can provide benefits. <0x000A>The Vancouver Regional Construction Association (VRCA) recognizes that each procurement method has pros and cons, and it is critical that the most appropriate method be selected, based on the unique circumstances of each individual project.

We do not support the mandating of procurement methods based on a “flavor of the month” basis.

In order to help contractors, the VRCA and Partnerships BC have teamed up to provide an interactive morning session on different procurement methods.

It will be a chance to learn how to participate in large partnership projects, such as Design-Build and Design-Build-Finance-Maintain.

A wide range of speakers will discuss the issues and debunk some partnership myths on April 4.

>For more information, visit www.vrca.bc.ca and follow the links for the events calendar.

Keith Sashaw is the president of the Vancouver Regional Construction Association and is also a member of the Journal of Commerce Editorial Advisory Board. Send comments or questions to editor@journalofcommerce.com.