Comparative procurement methodology analysis in Australia: A new approach
Date of this Version
A comparative review of procurement methods was undertaken for the purpose of objectively determining the relative strengths and weaknesses of the principal methods for the state procurement of economic and social infrastructures. The study concerned procurement alternatives commonly used
with large or complex projects and available to government, including:
o In-house provision using a state agency or works department
o Traditional procurement
o Build own operate and related forms of asset procurement
o Alliance contracting
o Public private partnerships.
Around 90% of state procurement in the late 1980s was traditional which employs a comprehensive input specification, a lowest price tender selection process, separation of the design and construction components of the project and an adversarial approach to contractual relationships. The main
measurement methods were delivery on time and within budget.
As traditional procurement is mainly concerned only with the delivery of assets, most performance measures concern the timeliness and cost of delivery and these are mainly applied at commissioning. Tender evaluation criteria may take into account the qualitative aspects of bids such as the bidder's credit strength, expertise and track record. However, these values are generally subordinated to price and few traditionally procured projects are evaluated again during their service life.
The development of a comparative procurement methodology involved a comparison of quantitative and qualitative outcomes. The evidence was sourced from the procurement outcomes of 124 economic and social infrastructure projects commissioned by governments or state agencies in
Australia, Canada, New Zealand and the United Kingdom.
The findings of this work show that PPP and outsourcing models are clearly the most effective methods of large or complex project procurement although it needs to be remembered that this method of procurement has limited in application and not appropriate for the majority of projects. PPPs are a better procurement option when the state is delivering services that can benefit from risk transfer, the certainty of lifestyle costing, and the integration of design and construct services, an output specification (innovation, new technology) and efficient management. The comparison also highlights the benefits of the shift from traditional adversarial contracting principles to a more collaborative approach that aligns agency and contractor incentives, an important driver of value for money procurement outcomes.
This document has been peer reviewed.