Critical Analysis of Strategic Construction Procurement Plan – A Case Study of the New Schools Project by NSW Government
The construction procurement plan is required to complete huge and complex construction works of the different entities and these entities may an organization of the government or it may be a particular private organization. So it is clear than the planned strategy is followed by both the government and the public organization for the full implementation and utilization of time and resources in the forthcoming financial year. According to Done (2010) the main objective of this plan procedure is to avoid the haphazard procurement policy and to produce a more attractive marketplace for the government and the private organizations who are implementing this strategy. Under this procurement policy the relationship between the service providers and the group who are enjoying the service becomes very much transparent.
Large complex construction projects face different manageability problems in a regular basis. For these problems to the outsiders the project works delay frequently and the cost of the project estimated also overruns the recent events of large and complex projects that cover extensive media coverage in Australia or more precisely in NSW is the New Schools Projects (Wang et al, 2010). It is the first social infrastructure construction project of the government of NSW under the Public Private Partnership (PPP) contract to build eight new Primary Schools and a new Special Needs School. We are going to carry forward our analysis on the basis of this New Schools Construction Project of the NSW Government (Deasy et al, 2014).
The Government of NSW (New South Wales) was formed in 1856. NSW was a state of Commonwealth of Australia and so it is regulated under the Australian Constitution. Besides the project of New Schools this government has organized several government infrastructure as well as other projects. There are several major very successful projects was embarked since March 2011 for the development of the transport system of NSW Government, hospital and medical service by the government etc. creating almost 110000 new jobs and the investment of $60 billion was done for the improvement of the front line services and the infrastructure of the country. Now we are going to focus on the New Schools project of the government particularly to critically analyze the Strategic Construction Procurement Plan (DVLA, 2009).
The construction of new schools is the provision of the educational services to the public. The government of NSW has its own department to provide the educational services to the public in compulsory basis. It is the NSW Department of Education and Training (DET) and it is the largest educational service provider in Australia. According to Zhang (2012) DET has the asset of the base value of exceeding $15 billion and it has the capability to enroll at about 1.2 million students with the power of operating more than 2400 educational sites and the other related sites. The government of NSW has to provide schools in new urban release areas. Two major public private sector partnership type contracts have been provided by the DET of NSW for this purpose in the recent years. This new project has its own new name and the new name is New Schools Privately Financed Projects. The Axiom Education Private Limited is going to carry forward this new task of school project taking the support of St Hillers and Spotless, ABN AMRO Bank and Hansen Yuncken (Shen and Dou, 2013). There are some particular specifications of the new school projects that should be maintained by the new style contractors of the new contract. These are –
· The new construction should follow a new construction design which is specified by the commission affiliating the own cost by specified dates. The specifications which facilities in the schools are the equipments, fittings, buildings, electrical goods, playgrounds, paths and gardens, grounds, furniture, fixtures and buildings (Alvarez and Rubio, 2015).
· The school facilities should be handed over to the state. The State can nominate a new contractor on whose hand the school facilities can also be handed over when the contract will be terminated.
· The new schools privately financed project can also provide the safety, utility, operational, security, cleaning, maintenance and repair services for each of the facility.
Various procurement methods may be used for the procurement of the projects in strategic construction. These are BOT, Unit Price, Alliancing or Partnering, Fixed Price Contracting and Public Private Partnership Method.
BOT (Build Operator Transfer) is a method of financing the construction project. In this method there is a facility of concession to the private entity from the private or public sector. This concession is given to operate, finance, construct and design a facility. In the words of (ACAR and DURUCASU, 2014) the project proponent is enabled to recover its investment, maintenance and operating expenses under this method in the project.
Unit Price is calculated by dividing the total sales revenue by total units sold. The challenge faced by the manager using the unit price method is the determinants to compare units. Different unit selling prices are given weight by the percentage of unit sale to calculate the unit price. The measurement will be the price per statistical unit if a given standard is considered as a measuring unit (Price, 2012).
Partnering or Alliancing is a traditional approach of procurement of construction plan according to (LahdenperÃ¤, 2012). He developed a report ‘Constructing the Team’ criticizing the adversarial approach which is inherent in traditional construction contracts in 1994. Collaborative management approach is described under Partnering encouraging the trust and the openness in between the parties involved in the contract. A change in culture, procedure and attitude throughout the supply chain is required on the basis of the dependence of the parties on one another. The high risk, long term and large contracts use this most commonly.
The amount of time spent and the amount of resources never determines the amount of payment under the Fixed Price Contract. The cost and some amount of profit are not covered under the Fixed Price Contract like the Unit Price. To control the costs and to put the risk on the side of the vendors this program is often used by the government or by the military. This procurement policy often fails in use in new projects with underdeveloped technologies or untested materials when the costs of the procurement plans exceed to absorb unforeseen cost overruns of the contractor (Tepper, 2014).
The Public Private Partnership is actually a contract between the government and a private business venture. The substantial technical, financial or operational risk of the project is taken by the private business ventures to provide a public service or project under this plan. The public never bears the cost of provision of the public goods provided under this plan. The whole cost is borne by the private business tycoon here. But there are some other types of projects called Private Finance Initiative where the cost of provision of the good or service is partially borne by the government whereas the whole capital investment is done by the private company (Grimsey, 2010). The government can provide a onetime grant to the private company for the provision of public goods like in the infrastructure sector in the form of capital subsidy to make the public private partnership plan more attractive. Some types of revenue subsidies like the tax breaks, removal of guaranteed annual revenues etc. can be given by the government under this type of procurement plans.
In our analysis we are going to choose the Public Private Partnership Construction Procurement Plan for a successful completion of the New Schools Projects by the Government of NSW.
The Public Private Partnership Construction Procurement Plan is the best method under these circumstances because it is the best value procurement method. Battase and Shankar (2012) defines the best value procurement method as the procurement method where the key factors like price is considered for the evaluation of the project and under this procurement method to select the process of the plan procurement minimizes the particular impacts. This procurement plan enhances the value of the construction and also the performance in the long term basis. There are primarily four factors which can describe the best value procurement process. These are – Rating systems, Evaluation criteria, Award Algorithms and the Parameters. The best value parameters are mapped to complete the system of identification of the literature, case studies and the surveys (NASA, 2013). There is an association between the evaluation criteria and the rating systems. It is used for the satisfying, modified satisfying, direct scoring systems and also adjectival scoring systems. The technical criteria can be met through much more qualitative cost-technical tradeoff techniques and the award algorithm ranges this low bid.
Public Private Partnership in the project of construction has promises great measures in most of the countries around the world. It is a complementary and alternative method of procurement of plan of construction in Australia. To encourage the participation of reliably finance and also to encourage the private investment the PPP serves in Australia and NSW. The large complicated transit projects are managed by PPP very easily. The public private partnership procurement plan in construction can take the necessary and number of immediate steps from project planning to risk allocation including the scope to financial modeling to achieve the main objective of the plan (BMJ, 2009).
The public private partnership in NSW government for the procurement of the plan of construction has faced a number of challenges like, rail technology integration, ridership estimates and disruption to local business in NSW. Not only in Australia or NSW, but also if we consider the case of Canada Line Rail System Construction Project under the Public Private Partnership then we can discover a great success in the form of automated light rail system which is connecting different cities of Canada. So it is a very much justified decision to choose the Public Private Partnership for the procurement of the construction project of New Schools by the government of NSW (Schmidt and Dmytryk, 2014). Considering this procurement plan it is clear that there are some common factors which are allowing the Public Private Partnership successful. These are –
1. There is a strong political leadership and sponsorship for the derivation of the Public Private Partnership.
2. A dedicated public entity is responsible for the creation of the oversight of the project and an interface with the private sector is present in the private sector (Stabb and Popescu, 2012).
3. The procurement is crafted to seek enterprise in internal and external Public Private Partnership.
4. The key risks to the private sector are the transference.
5. A stable long term funding is secured by contracting the arrangement from the public sector.
6. There are open dialogues between the private and the public sector during the procurement.
The operation of the supply chain can be most effective and it is described in the words of the supply chain management experts. The most efficient supply chain has performed under this case of procurement method. The recommended procurement method Public Private Partnership can improve the supply chain performance in the following way –
1. Get Rid of Spread Sheets
In the words of Botta-Genoulaz (2010) it is explained that there are too many enterprises and organizations that are planning the whole purchases of the project according to the spread sheets which are slow and unreliable. The organizations should move up to the most accurate, up to date and affordable supply chain platform.
2. Identification of innovative patterns
It is determined by the supply chain managers that capabilities are possessed by the suppliers and they can produce innovations in products and services used in the projects or the go to market strategy (Cunha-Callado and Jack, 2015). The key role is played by the procurement organizations. The organizations always look for the opportunities for the improvement of the current process by the leverage method of the capabilities of the suppliers.
3. Selection of new supply chain software tailored for the industry
There are ample of supply chain software packages in the today’s market. Some good level of customization and integration is required for the implementation of the supply chain software packages. The homework should be done by the workers in the project and then the research should be implemented ;for the development of the supply chain software packages and this is similar to the key aspect of the project procurement plan (Liberatore and Miller, 2012).
4. Establishment of the Supply Chain Management
There are some decades are over but the supply chain metrics are not the under control of the different companies. They have to work on it more and more because for a better and the best productive situation. Cascading the supply chain metrics, Management of dashboards and Enterprise wise balanced score cards required under this case to provide the timely insights (Gopal and Thakkar, 2012). It helps the supply chain managers to react to the disruptions and the opportunities in the today’s markets which are very much volatile. Return on the working capital, Cash-to cash cycle time; eligibility indicators and the perfect order fulfillment are the internal and external benchmarks of a perfect supply chain management.
5. Involvement of the employees to integrate sales and operations
A single concuss driven plan is required for the integration of the sales plans and operation plans. This provides a optimum balance among the demand of the customers, capabilities to produce and corporate the financial performance (Kumar and Banerjee, 2012).
The Public Private Partnership Method is used for the procurement of the project plan. The particular private sector and the government both were obtained from the Procurement Management Unit and the Department of Education and Training, the largest educational service provider of Australia (Munier, 2013). The different procurement of methods is analyzed initially and ultimately the PPP method is chosen as it is the best procurement method. The procurement management unit is affected by this procurement method to prepare the annual procurement planning. The procurement plan cannot be prepared properly if the schedule of requirements from the user departments is not submitted as per the requirement. Often the respondents from the operation plan agrees that the procurement process takes more than the required time due to the absence of a well prepared procurement plan and the management also complains regarding this matter (Kelly et al, 2009). The reason behind this is the wrong source of the plan which comes from a unplanned procurement plan. Another reason may be the unavailability of the required items for the plan in the local markets and for this reason the management has to bring the items from the abroad which creates a much cost of production and also takes a lot of time (Deasy et al, 2014). Another factor under these circumstances that affects the project plan is the submission of incomplete requirements from the user departments.
In this contract $137 million is involved to build 9 schools. These schools are – Ironbark Ridge Primary School, Kellyville Ridge Primary School, Dapto Primary School, Sherwood Ridge Primary School, John Edmunson High School, Glenwood High School, Woongraph Primary School, Shell Cove Primary School and Tallowood School for Special Purpose (Simister, 2012).
There is a lack of cooperation between the Procurement Management Units and the department of user. So the most effected policy is the procurement planning and its implementation in the projects of NSW Government (Piotrowski, 2014). The procurement management unit orders to prepare a comprehensive procurement plan and it depends more on the schedule submission according to the requirement. There is a lack of understanding of the Public Procurement Act because there is no support from the user departments.
The Public Private Partnership plan is the most important tool to the government of NSW and this because this procurement procedure has the assistance power to conduct the activities of this whole plan most effectively and efficiently. This procedure is the only one which can meet the intended objectives in all dimensions. The success of the procurement plan illustrates its own success (Morledge, R. and Smith, 2013)
The partnership structure of this particular PPP project is quite different than the other PPP structures which we have already know as a successful structure of PPP. The concession agreements of this project are embedded in the risk transfer related to the partnership in details. The existing PPP contracting framework is considered as the best practice in the countries Australia and NSW to identify the transferring of risks and it also includes the best concession agreement. The size and the scope of the project are very much different from other PPP projects. So the financing profiles for the PPP project are also very much different. A huge amount of financing is required to complete the project successfully (Talabi and Fischbeck, 2013). That’s why the government takes the help of the private organization in case of financing the project. The procurement plan also should look after the proper financial planning for the full utilization of the available resources to finance. The government of NSW compares its existing funding models with the ones which are already used by the government and also by the government of Australia.
The developed countries like Australia have their effective procurement planning system. It is always like a challenge to the public organizations of the country. The required environments for the functioning of the procurement planning are the complex political, ethical, technological religious and cultural environment (Kelly et al, 2009). The stake holders of the public organizations are from different and divergent economic expectations, religious differences and political ideologies of procurement functions. There is a direct impact on the procurement planning to be very much successful. The procurement planning should be in the core of every construction projects of the NSW government, the whole public sector of the particular government and the policies which are increasing day by day by the government of NSW. According to Simister (2012) this priority section should be supported but the ministry of finance and economic affairs of the government. The training and technical guidance should be provided for the implementation of the plan procurement. This particular training and technical guidance should be provided by the government maintaining the rules under the Public Procurement Plan. Conceptually, critical components of procurement of planning has revealed in this study. The critical components are – the process of planning, use of the expected practices, involvement of the responsible staffs and measurement of all sets of rules. Both the Procurement Management Unit of the Project and the DET should act prominently in the process of the preparation of the management plan and the implementation of the annual procurement planning. This process provides great implications to the [policy makers and the management of the procurement plan. The whole use of the public resources should be accounted by the stake holders in whatever decisions they make in the regard of the concern of the use of the public resources (Iromuanya et al, 2013). In the procurement area all the stake holders should be very much attentive and must be very much careful because of the hug budget involved in it and it is managed in a very accountable manner. Now the service delivery should be improved in a higher margin so that the tax payers or the public becomes so much attracted to the project work and they should be encouraged too.
The annual procurement planning should be known to the procurement practitioners and the other professionals. This is because the annual procurement plans acts as the road map of the future planning of procurement not only in the construction area but also in the other areas of project that will be going to be completed under the Public Private Partnership Procurement plan (Talabi and Fischbeck, 2013). The success of this PPP plan procurement should be taken into the notification of all the private organizations who are to come in the partnership programs of the government so that they will be encouraged for the investments in the future projects. In this way the targeted goal of the procurement plans can be achieved and the planners and the organizers can be motivated so much in investing the everything they can in this type of projects which are planned, developed and executed only for the development purpose of any country (Morledge and Smith, 2013).
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