What is the ideal procurement model?
By David BowcottRisk Management
The debate continues...
Right across the country and throughout the world, the debate over the “right” way to procure and operate assets continues to rage on. Owners have a myriad of options when it comes to financing, designing, building, operating and maintaining their assets as illustrated in the diagram below.
So which one is the best? The answer continues to be elusive, as special interests behind every delivery model often cloud the truth in this debate to better serve their own selfish motivations. Owners, design firms, and contractors deserve better. And more importantly the project and all touched by the project deserve better.
In December of 2014, the national media covered two major stories related to two of the most popular construction delivery models in today’s marketplace. One story was focused on the so-called excessive debt costs associated with public-private partnership delivery models (P3s, or as we call them in Ontario AFPs —Alternative Financing and Procurement), where the private sector is responsible for raising financing. The other story focused on the traditional design-bid-build delivery model and apparent massive cost overruns associated with one high-profile project that used this model. The media slammed both delivery models equally strongly, vilifying both and leaving the reader with the impression that each model should be immediately halted in order to “make better use of taxpayer money.”
After reading and viewing much of the coverage associated with both stories, it became apparent that the real story wasn’t “Why P3s might cost more because they are using private debt,” or “Why the design-bid-build work done in Toronto was 40 per cent over budget.” Rather, the real story was about the lack of detail and fact around each individual story, and more importantly, around the pros and cons of each delivery model used.
These were stories intended to attract readers and viewers, and as is often the case with today’s media, the facts were secondary to the fiction that attracts media consumers. The “If it bleeds, it leads” mentality.
That mentality really gets in the way of the unbiased reporting that could spur real debate and—who knows —maybe actually uncover the truth about which delivery model is best for which type of project, helping owners spend their stakeholders’ money more efficiently.
So if “real debate” is our destination, then how do we get there? Well, rather than coming up with a ten-point plan on how to get truth and transparency back onto the table when it comes to debating the ‘ideal” delivery model for various asset types, I’m going to focus on one key point in how to get there: developing a standard approach to measure asset procurement performance and asset operational performance. Once we have a standardized way to measure success and failure, we can then have real debate around which model is ideally suited to which asset type.
Governments and corporations should be investing their money, time and energy into developing such standards in order to provide their taxpayers and shareholders with the highest levels of transparency and accountability when it comes to providing a rationale for their decisions. There are several initiatives under way globally to standardize the measurement of asset management performance in all phases of the asset’s life. We should be paying close attention to these initiatives in order to develop national and global standards which could act as the foundation for sound decision-making.
David Bowcott is senior vice-president, national director of large/strategic accounts at AON Reed Stenhouse Inc. Send comments to firstname.lastname@example.org