Legal Insights

Fast tracking procurement

By Alicia Sheridan

• 17 June 2020 • 4 min read

Both the Federal and State Governments are focusing on infrastructure projects – and fast tracking projects where possible - as part of the economic recovery from the COVID-19 restrictions.

In particular, the Victorian Government has fast tracked more than $1.2 billion worth of building and development projects in order to kickstart Victoria’s economy and create jobs.

So, if your procurement team – whether in State or Local Government – will benefit from the ‘kickstart’, you may be asked; ‘Can you get this project to market quickly?

In answering that question, you should consider what is in your procurement toolkit to move any construction job (or service contract) forward to being ‘shovel ready’ as soon as possible.

Your ‘fast track’ procurement toolkit includes:

ECI contracting and D&C contract models – instead of using a ‘traditional’ construction contract where the contractor builds the works from 100% complete design, consider using a contract model that allows work to ‘start’ before the design is completely finished such as:

  • ‘Early Contractor Involvement’ (ECI) contracts - these involve the contractor working with the consultant team and Government/Council to work up the design and provide buildability advice for a fixed fee or monthly service payment. You can also ask the contractor to do early works in this phase. Later, the contractor can be engaged under construct only or, more typically, a design and construct contract.
  • Design and construct (D&C) contracts - these involve the contractor taking on responsibility for completing design which has been partially completed by consultants, in addition to doing the construction work for a lump sum price. The model typically involves novation to the contractor of the consultant team who have started the design.
NB – the Victorian Public Construction Contracts approved for all State Government agencies include D&C contract forms (AS4300 and the Minor Works) but don’t include an ECI form.
Dividing the project into smaller packages or staging – consider whether your project can be divided into smaller packages of works or carried out in stages. Staging or dividing works into smaller packages may:
  • increase the ability for smaller contractors to participate in the project;
  • ease the procurement process given the lower spend of each package; and
  • increase the risk of claims if contractors will concurrently be on site together and a high level of interface is required between them or their works.
Alternative pricing models – if there is insufficient time to fully bed down the scope of works or design (to allow a lump sum price to be tendered) consider an alternative pricing model for your contract such as:
  • ‘Cost plus’ - which involves payment of actual costs incurred by the contractor with a fixed allowance for profit and overhead; or
  • ‘Cost plus’ with guaranteed maximum price (GMP) – which is based on the above model but has an overall cap on the costs payable, which cap is only increased in certain limited cases.

These pricing models can be used with most types of contract models but are often used in a ‘managing contractor’ contracts or ‘construction management’ contracts where the main contractor is engaged to manage subcontractors performing packages of discrete works. As these models involve less price risk for the main contractor, they can often involve a shorter procurement process.

NB – These models move price risk to Government/Council. So also consider if, even if you start with an alternative pricing model, you can convert to a lump sum at a later time.
Panels – A panel arrangement is where Government/Council engages a number of contractors/suppliers under an overarching agreement to perform a scope of work ‘as and when’ directed. Work orders are then issued during the term for each package when and if works/services are required. Consider if:
  • using providers from any existing panel of approved contractors or service providers would be suitable for new activities or works. A properly established panel will mean that terms and conditions are already agreed and you save time on getting individual works/services packages started; or
  • it is worth establishing a new panel if you have a number of tasks or activities to work through. There is sometimes a higher up-front investment of time and money to establish a panel but a reduced cost and time saving down the track through ease of procuring individual packages of works/services.

The above are some of the contracting models and approaches you can employ if you have projects you need to get to market and started quickly.

While it is critical to follow all internal procurement guidelines when contemplating how to approach a new project, the current environment also provides a good opportunity to consider contracting models and pricing structures you may not have used before.

Need more information or advice on how to fast track your procurement?

By Alicia Sheridan

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