INFRASTRUCTURE BC: AN INNOVATIVE PROCUREMENT SOLUTIONS LEADER

Written By: Infrastructure BC

The following article is submitted by Infrastructure BC in support of CLR’s efforts to keep members informed on the latest news and updates regarding complex infrastructure projects and innovative procurement models.

An established centre of expertise, Infrastructure BC advises public sector clients on planning, procuring, and implementing complex infrastructure projects using various procurement models. These models engage the private sector and seek to harness their innovation to deliver the infrastructure citizens need and efficiently allocate risk to provide value and positive outcomes for Infrastructure BC’s clients’ projects.

Since its inception in 2002, Infrastructure BC has provided procurement services to 78 public sector capital projects with a cumulative capital investment of approximately $28 billion. Wholly owned by the Province of B.C. and reporting to its shareholder, the Minister of Finance, Infrastructure BC works with all levels of government and is connected with similar organizations worldwide to exchange successful strategies for our common challenges. The flow of projects remains strong in B.C. and across the continent. In recent years, the larger complex public sector infrastructure projects are attracting relatively few bidders. There are two reasons for this:

1. There are a limited number of contractors with the experience and bonding capacity to undertake projects over $1 billion, and
2. There are more projects than capacity in the construction market; as a result, contractors can decide which projects to pursue. They inevitably select projects which expose them to the least amount of risk.

Infrastructure BC continues to examine and implement collaborative procurement models new to B.C., such as Progressive Design-Build and Alliance, to attract more market participants.

Infrastructure BC has supported clients in completing three Progressive Design-Build procurements in the health sector. Another project, the Fraser River Tunnel, is currently being procured.

Progressive Design-Build is a procurement model that improves market interest in projects as the procurement process to get to a preferred proponent (i.e., winning bidder) is shorter, thereby reducing participants’ pursuit, time commitment, and opportunity costs. It can also allow for the de-risking of a project by allowing the owner, designer, and contractor to collaborate better and potentially conclude on a price later in design development than in a traditional Design-Build procurement.

Infrastructure BC’s Progressive Design-Build model is a three-stage selection process.

• Stage One – Request for Qualifications (RFQ) – identical to Infrastructure BC’s standard Design-Build RFQ. Up to three teams are shortlisted to be invited to participate in Stage Two based on their relevant historical experience and proposed key individuals.
• Stage Two – Design Early Works Agreement (DEWA) RFP – a preferred proponent is selected to proceed to Stage Three. The competition is focused on the design fee, the contractor’s overhead and margins, and the proposed key individuals’ experience and approach. Notably, no design work is undertaken at this stage, minimizing bidder’s effort and expense. As a result, the RFP phase is shorter than a traditional Design-Build RFP.
• Stage Three – Design-Build Agreement (DBA) RFP – design development proceeds collaboratively between the owner, designer, and contractor under the DEWA with the preferred proponent. The owner pays for design development monthly. One or more design and price proposals will be submitted under the terms of the DBA RFP to the owner during this stage with the goal of the owner receiving an acceptable proposal (technical and financial) from the preferred proponent and entering into a DBA, with a clear allocation of roles, risks, and responsibilities for the parties. Pricing can either be firm and fixed or subject to a sharing regime between the public and private sector participants based on how actual costs compare to the proposed costs included in the accepted proposal.

Alliance procurement is another collaborative procurement model that Infrastructure BC has introduced to the B.C. market, which also addresses market capacity and interest. The absence of bonding for some parties and a risk-sharing approach are among benefits.

The Alliance (Project Alliance Agreement or PAA) is a collaborative, multi-party contract with certain key characteristics, including:

• Joint Management Structure (for project solution and delivery) composed of the owner and private sector participants.
• Best person for the role (no predefined roles for any participant).
• Collective use of experience.
• Joint decision-making.
• Equitable approach.
• Good faith and integrity.
• Transparency (fully open book).
• No fault, no blame (claims are generally not permitted).
• Pain-Share/Gain-Share.
• Risks and responsibilities are shared equitably and managed collectively rather than allocated to individual participants.
• Financial upside and downside are shared equitably among the participants.

The Alliance model requires significant owner resources and is typically used on complex infrastructure projects where the project scope is difficult to define, there is a lack of market interest, risks cannot be adequately defined or measured, and/or the cost of transferring risk to the contractor is likely to be too high. Additionally, this model may be appropriate for projects with tight timeframes, where the owner can provide value through involvement in the delivery and implementation of the project or in the case of challenging stakeholder issues that need to be managed.

There are two different procurement approaches to delivering a project via an Alliance model. The PAA signed after either one of these procurement processes is identical.

1. The Single Target Outturn Cost (TOC) Alliance has two phases:
2. RFQ – three bidders are shortlisted based on their relevant historical experience and proposed key individuals.
3. RFP – a preferred proponent is selected. The RFP evaluation is focused on three main areas:
4. Personal experience and demonstrated performance of team members;
5. Approach to delivering value; and

iii. Demonstrated leadership and collaborative behaviours.

No design work is undertaken during the RFP phase, minimizing bidder effort and expense. As a result, the RFP phase is shorter than a traditional Design-Build RFP. After the RFP phase, the owner and the preferred proponent work together to develop the project’s design, schedule, and target cost, comprising the project proposal. If the owner accepts the project proposal, the parties enter into the PAA.

1. The Competitive Alliance has three phases:
2. RFQ – same as the Single TOC Alliance.
3. RFP Phase 1 – two bidders are shortlisted based on brief proposals and participation in behavioural assessments.
4. RFP Phase 2 – a preferred proponent is selected. The RFP is focused on three main areas.
5. Demonstrated behaviours of key individuals.
6. Comprehensive technical submission.

iii. Comprehensive financial submission.

The Competitive Alliance process involves two bidder teams competing for a much longer period of time. The benefit is getting comprehensive technical and financial submissions under competitive tension, but it is a process with a high opportunity cost for the bidders. It also requires significantly more effort from the owner than a Single TOC Alliance procurement process.

Infrastructure BC assisted Island Health in procuring the Cowichan District Hospital Replacement Project using a Competitive Alliance. Infrastructure BC has also supported the Ministry of Transportation and Infrastructure in procuring four separate projects in the BC Highway Reinstatement Program via a Single TOC Alliance. Currently, on behalf of Fraser Health, Infrastructure BC is the procurement manager of the Burnaby Hospital Phase 2 and BC Cancer Centre Project, which is being procured as a Single TOC Alliance.

Infrastructure BC is committed to exploring the Alliance procurement model for upcoming infrastructure projects and welcomes the opportunity to continue to inform the market on potential projects and procurement models.

To learn more about Infrastructure BC and projects on which the organization supports project owners, visit www.infrastructurebc.com.