Critical Analysis of the Local Government Victoria - Case Study Example

PROJECT TENDERING AND CONTRACTING By Student’s name Course code and name Professor’s name University name City, State Date of submission Abstract This assignment aims at carrying out a critical analysis of the Local Government Victoria (LGV) against the Maddocks (2012) quotes which are mainly concerned with project procurement and tendering. The specifics considered in way of this analysis cover a road resealing project that was collaboratively tendered for during the financial year 2011/ 2012. As this was a collaboratively undertaken project, the councils covered included Ararat Rural City, Ballarat City, Golden Plains, Hepburn Shire and Pyrenees. The expenditure of this project was considerably reduced through the collective purchasing power that was put forth by the project tendering team engaged. The process was however slow in the other side in comparison to the projects that had been carried out before. Although the fundamentals of the project deliverables were achieved, the context of analysis applied within this study indicated that more efforts should be put in the future for increased efficiency. Owing to the delivery of the first phase of the project without hitches, two of the councils engaged in this project adopted the collective procurement and tendering strategy. It is important to learn that some of the projects carried out in areas around the world have emulated the collaborative tendering model due to its huge success in LGV. The best practices for procurement and tendering were also observed based on the documentation available contributing to the issuance of award of excellence to the procurement team for the innovativeness displayed during the execution of this pilot project which met most the deliverables. Table of Contents Abstract 2 Table of Contents 3 1.Introduction 4 2.Background and Environment of Project 5 3.Deliverables and Outcomes 7 4.Procurement Strategy 10 5.The Bidding Process 12 6.Contractual Relationships 16 7.Dispute Resolution 17 8.Outcomes 18 9.Conclusions 19 10. Recommendations 20 List of References 21 1. Introduction The pilot project carried out by the Local Government Victoria (LGV) was meant to observe the best practice for tendering and procurement. Strategic development for governmental processes needs a keen approach in order to ensure proper spending of public money. Therefore the procedures that were undertaken for this project ensured that all the standard requirements quoted by Maddocks (2012) were met not only for path finding but also to provide reference for future projects. As such, this article is aimed at establishing whether this procurement methodology achieved as per the promises that the procurement team laid at the early stages of tendering and procurement. As may later discovered, the risk management aspect of this project is met through concerted efforts to eliminate them. The fact that experience is shared among the project tendering and procurement team and the executive revive the ability to deliver a project that meets the financial value as stipulated within the requirements of LGV. Further on, this strategy is adopted by various councils that aim at reaping the benefits of collaborative tendering and procurement. The conflict resolution approach is also highlighted within this document together with the resolution arrived at by the project tendering team. Some of the recommendations that are arrived at include the need to reduce project tendering time through concerted efforts to allow for collaborative bidding too. Other than this, it is required that the procurement and tendering team be more keen in the future through continuous communications and commitment. 2. Background and Environment of Project In order to improve the state of procurements that are carried out within the Local Government Victoria (LGV) a pilot project was carried out by staging a bituminous road resealing project. This project was forecast to coast a minimum of $22.5 million hence each council that uses the roads in question was to be engaged in a joint tendering process. The major identifiable advantage is that the competition in terms of supply was stiff since there was more than one supplier offering resealing services within the Victorian region. By combining the market expenditure of all the five adjoining councils, the project’s management would easily manoeuvre the logistics and plant resources in order to meet the deliverables within the shortest time possible. The contract for resealing these roads was allocated a three year mandatory security with two years being provided as an optional period (Herford, 2008). The resources provided by LGV for purposes of preparing the procurement plan were numerous with the inclusion of guidance, assistance and expertise of all the councils. The strategic procurement plan was specific that all documents originating from the procurement teams were to be signed by the chief executive officers (CEOs) of all the participating councils i.e. Ararat, Ballarat, Golden Plains, Hepburn and Pyrenees. Other documentation to be prepared for the sake of fulfilling the project tender as per the quotes documented by Maddocks (2012) included; project procurement plan, probity plan, evaluation report, procurement conduct plan, specification, conflict of interest declaration and deeds of confidentiality (Herford, 2008). Figure 1: LGV bituminous roads resealing project. Apart from the documentation process, it was passed that a committee of two representatives from each of the participating councils and three officers from the LGV be formed to oversee the whole procedure of tendering and procurement. The team was also given a bonus slot for an engineer of equal knowledge and commitment to the entire project. During the inception of this board, it was also agree that all the councils be committed as well as the staff engaged in order to deliver this project and as a sign of the same, it was suggested that the team meet twice per month (Herford, 2008). 3. Deliverables and Outcomes Ballarat council was appointed as the lead council that was supposed to define the deliverables and project specifications. Other mandates that were to be delivered by the lead council included the management and control of the advertisement exercise, receipt and circulation of submissions for further analytics and handling of any other documentation such as the addenda. The procurement deliverables were passed and as such project success was set on simple parameters such as described by Maddocks (2012). According to Maddocks, project tendering is aimed at offering proper guidance to the companies that are submitting to provide the services or deliver the goods. These specifications take various forms in terms of brand names, requirements and other critical considerations that affect the choices that the lead council would assume (Farmer, et al., 2008). Apart from project specifications, other important project deliverables identified by Maddocks include value for money considerations were pointed by this project as an important factor. The tender timeline shown in figure 2 below exhibits the lead council took its time in carrying out a research on how this vital job was to be carried out in way of scope development. This would ensure that the project was delivered as per the needs of the people residing within LGV. The lead team also consisted of an engineer who was meant to identify probable risks that come with this project based the pilot trial for collaborative tendering. Figure 2: Tender timeline (Herford, 2008). The specifications that were set as the main deliverables were to involve road resealing based on the standard sections of the road. This would ensure that the specifications met the needs that were identified by the technical committees. The common goals were therefore established in the earliest opportunity available within the provided timeline. These specifications would then be tested by third parties to establish whether the repairs would last the residents as per the indicated life of five years. The schedule rates would then be provided by the contractors with a possibility for change during the contract. This posed as a loophole for corruption and therefore one of the difficulties that faced this project. The price schedules were to be split between urban and rural areas in order to provide for a range of reseal areas although these were not quantified in studies prior to the tendering exercise. This would however be checked by the technical team together with the winning bidder (Herford, 2008). The documentation that was derived for price deliverables is shown in figure 3 below. Table 1: Pricing and tariff document to be submitted together with the tender (Herford, 2008). The project deliverables were also defined competitively to offer the bidding companies with an equal play ground to rid the project of inherent barriers. In order to mitigate the risks that would eventually be faced by this project, the guidance materials were developed accordingly to reflect the allowable levels of financial deviations within the document shown in figure 3. For example, it is stated that the prices for remote areas would definitely differ from those of the modern areas and so forth. This would also promote the efficiency, economical and ethical utilisation of resources as described within the commonwealth guidelines quoted by Maddocks. Based on careful planning on the deliverables, the project was aimed at achieving the accountability and transparency, commensurate with the scale of the procurement carried out. Based on the painstaking nature in which this procedure was carried out, the tender was able to save $630,000 a year with an investment of $4.5 million per annum per council. The adjoining of five councils also served as the best interest to the winning contractor when it came to management of resources and logistics in order to deliver within the allocated timelines and cost efficiency. On engaging the probity auditors, transparency was achieved in this procurement process prompting two of the participating councils to duplicate the collaborative procurement strategy. The pricing advantage that accompanied collective undertaking of this project opened door for opportunities across LGV councils. A feasibility study was funded as a recommendation from this project council to convert heavy fleet vehicles to biodiesel as an extension of the resealing exercise. An award was eventually bestowed in the project team for the excellent achievement and fulfilment of the Maddocks quotes. 4. Procurement Strategy The procurement strategy applied by the LGV councils was collaborative tendering. Collaboration has recently gained acceptance and was being test run by these councils as an approach to adopt then for future purposes (Clerwood Legal Services, 2014). This strategy involves a situation whereby two or more parties that have a common goal amalgamate their resources to deliver on a given tender. This may be the corporate requiring the services or even the companies that are involved in bidding (The Housing Action Charity, 2014). According to the housing action charity the pilot projects carried out using collaborative tendering in the UK have been successful and their adoption in LVG serve as an advantage due to the innovativeness it poses on solving the perennial tendering problems that the councils face. The intended outcomes for this project as indicated in the deliverables section were to ensure that the participating councils maximised the resources. Negotiating for contracts on a larger scale is certainly the best way to achieve the best bargains for LGV council as the results established. According to Smith (2003), the cost-benefit of partnership contracts is immense due to larger scope coverage and sharing of experience. Maddocks (2012) is very clear that whatever strategy is utilised for project procurement and tendering, efficiency and economic considerations must be put in place. The opportunity that the collective tendering opportunity provides to the council is both economical and efficient. The State of Queensland Government (2014), some of the advantages of collaborative tendering as observed in the past tenders include lesser or shared risks. Some of the outcomes documented from the collaborative tendering strategy include the fact that carrying out such tenders is resource intensive in terms of intellectualism and guidance needed to carry out such huge projects. A strong commitment is required to carry out collaborative tenders and projects as was observed from the five councils involved (Herford, 2008). According to Soreide (2006) huge projects should be guarded strongly to avoid misuse of public funds. In this case that is the only way to reduce public spending is by avoiding the burden of having to carry out this tender in every council that requires the resealing services within LGV through a concerted approach. 5. The Bidding Process The bidding process involved submittal of bid proposals through the electronic format in order to ensure that the confidentiality levels required for this pilot project were achieved. Bid proposals were announced together with the rightful specification on the State Government of Victoria’s contract portal. All other procedures such as issuance of instructions, bid submission, analysis and award had to be carried out physically by the project team. According to Kajewski, et al. (2001), this system of bidding process utilises the technology in order to curb such hurdles as corruption which may have arose. This further encourages competitive and non-discriminatory processes within the public procurement and tendering domain which is full of allegations of political arm-twisting (Hancher & Bierbaum, 1998). Figure 4: Project bidding process employed by LVG councils A total of three submissions were received from road constructions companies within the LGV region namely; Boral, Sprayline and Victorian Surfacing Alliance. These were way below the expected number of companies that were expected to bid for this tender. It was realized that the online publication had at that time not been known been publicised to other regions to allow for competition. It was however notable that regional bidding allows for portfolio expansion for companies within the region as a way of fostering regional growth (Herford, 2008). The project team could not however be faulted for not extending the bids as there was limited time allocated for the submission period. This is also based on the fact that the tender briefing exercise was ell attended and the questions raised during the tender tailored within the project tender documents in order to provide fair and competitive conditions. The tender evaluation exercise was based on the percentages criteria contained in table 1 shown below. Table 2: Criteria used for evaluating the LGV road resealing tender. The prices submitted by the bidders was compared exhaustively against the existing tariff costs utilised by participating councils during the financial years 2011/ 2012. This was to ensure accurate articulation of the project evaluation exercise for achievement of the most economic and realistic prices for best practices as described by Local Government Victoria (2013). For the best outcome in the evaluation process, it is suggested by Simister (2000) that there is need to articulate the volumes and any other standards accordingly for the best outcome to all parties involved may it be the bidders or the project management team. The use of standard procurement terms and parameters for this project ensured that the collaborating councils understood well the implications of any steps undertaken by the project team. According to Tonkin (2007) project procurement requires tenders prepared for the sake of national interest to have a common and understandable language that can be perceived by all those involved. Therefore, it was in good order for the tender documents to be prepared in the manner that they were presented in. The tender documents were well analysed within the given the timelines and the expertise required. Data was accordingly converted to comparable data sets that could be understood in terms of economic implications and the standards of work required to be carried out by the winning bidder. Victorian Surfacing Alliance was chosen as the winning bidder by the LGV council bringing with it a $630,000.00 collective savings per annum. Each of the councils involved adopted the resolutions of the procurement team without any confidentiality issues. A three year contract was awarded to Victorian Surfacing Alliance commencing 1st July 2012 with considerations for project continuation to Hepburn and Ballarat councils being allocated the 1st July 2013 commencement dates (Herford, 2008). This type of tendering exercise reduced the uncertainties that would be faced if each council would undertake the project separately. This also taps expenditure wastage by the councils and as such the savings that emanated from this project are as per Maddocks (2012) requirements with regard to economies of scale. 6. Contractual Relationships The relationship between the LGV councils and the Victorian Surfacing Alliance was guided by Best Practice Procurement Guidelines 2013 document published to guide the project team for success of this pilot project. The council offered flexible and constructive management environment for this company to deliver upon allocation of the project. It was observed that in order to nurture a good relationship between the council and the contractor there was need to establish an understanding between the two parties (Herford, 2008). Spang and Riemann (2011) in their research established that giving the contractors the space to execute their mandate develops a cordial working relationship for the purpose of future business. Fostering good relationships between the contractor and the council contributed heavily towards the success of the first phase of the project by delivering ahead of the set timelines. Other than this open communication practiced by the project team further proved as a risk reduction factor due to scope verification and problem solution without further litigations. Project optimisation was also achieved through the good relationship that was observed during the execution phase (Chan et al., 2007). An understanding based on the mutual goal was established between the council and the contractor. This was also followed up by constant monitoring and reporting using established communication protocols and proper record keeping systems. The stakeholders were updated from time to time regarding the rules and guidelines governing the road resealing project to avoid prejudice of either party. It was also ensured that contractual meetings were carried out every fortnight to review the critical deliverables such as finance and scope coverage without forgetting the timelines. As reflected in Walker, et al., (2000) relationship based procurement strategies work best in finance intensive projects requiring to be carried out in long periods of time. In this case it was particularly correct for the project team to engage closely with the contractor closely as a means of nurturing this project till delivery of the entire scope. 7. Dispute Resolution Most of the disagreements that emanated within the project cycle were mainly to do with the environment and space occupancy within the neighbourhoods at which the resealing project was being undertaken. The financial implications of such disputes was well documented within the contract thus the need for negotiation in extreme cases so as to resolve further plunders that may have arose was paramount. Conflict resolution through negotiation is a method that is championed for by (Hughes, et al., 2006); (Arrowsmith, et al., 2000) as most disagreements at a tender stage can find a mutually acceptable solution. In case of negotiation the council and Victorian Surfacing Alliance would collectively meet the costs that would be incurred as seating allowances for the project team. Regarding project progress and cost coverage, the disputes arising were suggested to be forwarded to a higher level of the project directorate team for litigation purposes. All the disagreements that would come out of the negotiated agreements would be considered as disputes worth resolution through higher modes of conflict management (Local Government Victoria, 2013). The dispute resolution team would comprise of the executive management of both parties as advice or assistance and ramifications of a higher scale were being sought. All councils would be engaged in providing the required way forward to the project team to allow for easy of project execution. Litigation would however be avoided by all means as it would stunt the project undertaking rate since its time consuming and expensive (Harris, 1994) comparing to the other two methods of resolution that were mentioned in the tender documents. 8. Outcomes This tender’s first phase carried out on Golden Plains Shire, Ararat Rural City and Pyrenees Shire councils was observed to be successful and without any major eventualities as the framework was correctly laid down. Collaborative regional procurement model was found to work to the delight of two councils which readily embraced this procurement and tendering strategy. The pricing was also discovered to be more competitive and well bargained for the sake based on the deliverables and the finances that were saved by the participating councils. The saved amount of money was precisely $630,000 per year which amounted to $3.2 million for a five year roads maintenance plan. These outcomes further triggered upcoming collaborated tenders such as the one involving heavy vehicles conversion for biodiesel consumption (Herford, 2008). Due to the success of this tendering and procurement process, this process has been further replicated in the “Model of Collaborative Solar Purchasing: The Alameda County Renewable Energy Procurement Project” as indicated by Donalds (2014). This reflects that the advent of this strategy is going to be handy within Australia and states that may want to execute collective projects. 9. Conclusions Tendering for large projects requires a painstaking approach in order to ensure that the deliverables are met without necessarily plunging the project team into chaos. The LGV road resealing project was collaboratively carried out as a pilot project aimed at establishing whether the outcomes of such strategies are worth replicating for economic and delivery purposes. Apart from developing an advanced portfolio for the contractors within the LGV region, the project also emerged as a financial saviour that was replicated and quoted as a reference in other projects having saved close to $3.2 million dollars collectively for the participating councils. This strategy is therefore worth utilisation in every major upcoming project that would require concerted efforts among the councils for purposes of reaping the benefits listed herein. These include: i. Efficiency of project undertaking and through a well guided strategy/ tendering and procurement framework. ii. Reduction in risks due to sharing of regional experience among team members involved in the procurement and tendering and also in the project administration. iii. Competitive and non-discriminatory procedure based on well-defined criteria and early briefings to those contractors intending to bid for the project. iv. Considering the fact that this is a five year plan; this could take one year for each council. Thus the time consumed in carrying out collaborative projects or tenders altogether is longer than necessary. 10. Recommendations i. Based on the above deductions it is strongly recommended that the projects teams that may want to engage in collaborative procurement and tendering be strongly committed towards reducing the time required in carrying out the scopes defined for their respective exercises. ii. More focus should be put in achieving the best specification description at the early stages of tender prequalification so as to avoid the probability of conflicts and further time wastage through processes such as litigation. iii. The outcomes need to be better documented through an established timeline in as much as the project is not allocated a definite end date. According to Maddocks (2012), the periodic review as was carried out by the procurement team is very necessary to achieve a continuous project analysis for present money value. List of References Arrowsmith, S., Linarelli, J. & Wallace, D., 2000. Regulating Public Procurement: National and International Perspectives. Massachusetts: Kluwer Law International. Baily, P., Farmer, D., Jessop, D. & Jones, D., 2008. Procurement principles and management. 10th Edn ed. Harlow, UK: Financial Times Prentice Hall. Chan, A. P.-C. et al., 2007. Comparing Partnering Practices and Performance Between Australia and Hong Kong – A Case Study Approach. Hawthorn, Australia, Australasian Universities Building Education Association Conference. Clerwood Legal Services, 2014. Collaborative Tendering: Part 1. [Online] Available at: http://www.clerwoodlegal.com/collaborative-tendering-part-1.html [Accessed 21 June 2014]. Construction Industry Institute (CII), 1991. In search of partnering excellence, Texas, USA: Report of CII, Austin. Department of Transport, Planning and Local Infrastructure, 2014. Procurement. [Online] Available at: http://www.dpcd.vic.gov.au/localgovernment/publications-and-research/procurement [Accessed 22 June 2014]. Donalds, S., 2014. http://www.cesa.org/resource-library/resource/a-model-of-collaborative-solar-purchasing-the-alameda-county-renewable-energy-procurement-project. [Online] Available at: http://www.cesa.org/resource-library/resource/a-model-of-collaborative-solar-purchasing-the-alameda-county-renewable-energy-procurement-project [Accessed 24 June 2014]. Farmer, D., Crocker, B., Jessop, D. & Jones, D., 2008. Procurement, Principles and Management. Harlow: Financial Times Prentice Hall. Hancher, D. E. & Bierbaum, R. E., 1998. Submittal of Bid Proposals in Electronic Format. Brisbane: Transportation Research Board. Harris, V., 1994. Litigation Support Management: The Winning Edge. Leichhardt, NSW: The Federation Press. Herford, K., 2008. Collaborative Road Resealing Project: Central Highlands Regional Procurement Excellence Network (Vic). Bannockburn: Golden Plains Shire. Hughes, W., Hillebrandt, P. M., Greenwood, D. & Kwawu, W., 2006. Procurement in the Construction Industry: The Impact and Cost of Alternative Market and supply processes. Oxon: Routledge. Kajewski, S. et al., 2001. Electronic tendering: An industry perspective, Queensland: Cooperative Research Center. Local Government Victoria, 2013. Best Practice Procurement Guidelines 2013, Melbourne: Victorian Local Government . Maddocks, 2012. Commonwealth Procurement Rules - Effective 1 July 2012. [Online] Available at: http://www.maddocks.com.au/uploads/articles/commonwealth-procurement-rules-effective-1-july-2012.pdf [Accessed 20 June 2014]. Robinson, A. A., 2004. Risk mitigation. [Online] Available at: http://www.allens.com.au/pubs/pdf/const/pap26nov04.pdf [Accessed 25 June 2014]. Simister, S., 2000. Bidding. In: J. R. Turner, ed. Gower handbook of project management. Aldershot, UK: Gower Publishing, pp. 663-670. Smith, N., 2003. Roles and responsibilities in project contract management. Gower, Aldershot, UK: JR Turner. Soreide, T., International public procurement conference proceedings. Tender manipulation: Large firms and infrastructure contracts. Michelsen, Norway, Chr. Michelsen Institute (CMI). Spang, K. & Riemann, S., 2011. A guideline for partnership between client and contractor in infrastructure plrojects in Germany. Management and Innovation for a Sustainable Built Environment, pp. 1-12. The Housing Action Charity, 2014. Sustaining diversity through collaborative tendering is the evaluation report of the Collaborate 1 project.. Indeas and innovation in housing, 21 June, pp. 1-101. The State of Queensland Government , 2014. Pros and cons of collaborative bidding. [Online] Available at: http://www.business.qld.gov.au/business/running/winning-new-business/developing-competitive-bid/collaborative-bidding/pros-cons-collaboration [Accessed 22 June 2014]. Tonkin, C., 2007. E-procurement: a cross-jurisdictional comparison. In: L. Knight, et al. eds. Public Procurement: International Cases and Commentary. Oxon: Routledge, pp. 216-246. Walker, D., Hampson, K. & Peters, R., 2000. Relationship-based procurement strategies for the 21st Century, Melbourne, Australia: RMIT University. Read More