• VIDEO

Procurement’s role across the Asset Lifecycle

August 2022

Shane Lamont, Executive Regional Manager for NSW explains how procurement can play a significant role in supporting infrastructure procurement across the asset lifecycle, and explores the different commercial & contracting options available.

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Transcript

Hi, I’m Shane Lamont and I lead our ArcBlue’s Infrastructure procurement practice and myself and my team are really passionate about delivering sustainable infrastructure solutions.

 So, what do we mean by infrastructure procurement? Infrastructure procurement is a process by securing all the goods and services needed to bring an infrastructure project to completion and to achieve whole of asset lifecycle performance and value for money. So why is infrastructure procurement important?

Sustainable infrastructure is essential for society to function. Infrastructure procurement enables sound economic development, job creation, enhances quality of life for citizens, and increases positive community and social impacts. So what is the role of procurement across the asset lifecycle?

An asset life cycle can be broken down into four key stages. Depending on the organization and the asset type, some stages might be more predominant than others. However, procurement has an opportunity to influence and add value to all four stages of an asset life cycle.

So let’s quickly step through those four stages of an asset life cycle and how procurement can add value in each stage:

Stage one is the planning phase of an asset lifecycle. The purpose of the planning phase is to describe the strategic need of the infrastructure project, weigh up the cost of undertaking the project against the expected benefits. These benefits could improve strategic longterm, economic, customer sustainability and community planning benefits.

Procurement can influence the planning phase by providing market insights on the construction and building costs, the level of cost certainty versus vulnerability, the level of supply and market competitiveness, and by identifying supply chain risk.

Stage two is the acquisition or construct phase of an asset life cycle. During this stage, also called the procurement, the asset is acquired, constructed or delivered to the appropriate location. At this stage, a procurement will largely focus on the design and construct of the asset, considering several available contracting, delivery, commercial and procurement options.

Stage three is the operations and maintenance phase of an asset lifecycle. At this stage, the asset has been commissioned and is in use. Further asset maintenance and upgrades may be required, along with other contract and supply chain management requirements.

The final stage of an asset lifecycle is the disposal phase. When an asset has reached the end of its useful life or its operational and maintenance costs become too high, it moves into stage four, the disposed stage of an asset life cycle. This should be done in a planned manner, and procurement may be required to ensure the best financial and environmental sustainability outcomes are achieved. Each infrastructure project is unique in characteristics and selecting the right procurement strategy for an infrastructure project is largely dependent on the strategic nature of the project, the size, risk profile and the level of complexity.

It is important to consider which contracting option, commercial structure and procurement approach will best balance out the need to control project costs, time and risks against achieving whole of asset lifecycle value for money.

Typically, most organizations consider three generic contractor models they are construct only design and construct and design design finalization and construct. However, there are other contracting options that should be considered. They are design, construct and maintain EPC, which is engineering procurement and construction EPCM, which is engineering procurement and construction management the use of ECI or otherwise known as Early Contractor Involvement and Construction Manager at Risk selecting your right commercial structure is also important to your infrastructure projects.

Most organizations tend to use a lump sum pricing model or a schedule of rates. However, there are other commercial structures that are available for consideration. They include cost plus fee, a guaranteed maximum price, which is more of an open book model with an agreed ceiling target price, which is a pain and gain sharing model or a hybrid combination of these options.

Selecting and developing the right procurement strategy for your infrastructure project is critical. Typically, what we see is that most organizations either run with a straight onestage RFT process or sometimes using an expression of interest prior to an RFT.

However, there are other options to consider as part of your procurement strategy. Sometimes a two stage RFT process can get you a great result, or also consider the use of industry briefings and also adopting more collaborative and competitive dialogue throughout your procurement process. At ArcBlue, we often refer to infrastructure procurement as future procurement and the reason is because delivering good infrastructure projects has such a positive impact on communities, on our society and our way of living.

We are passionate about working with clients, about delivering good infrastructure projects that benefit whole of community and our way of living. So please give us a call and let’s explore how we can help you deliver great outcomes.

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