Qualifications Based Selection and the P3 Project Delivery Model

IanRokeby2The following article is written by CJI principal Ian Rokeby, P.Eng., MBA, and was featured in the ACEC Engineering in BC fall 2015 supplement to BIV Issue 1353.

View BIV digital edition.

View ACEC Engineering in BC fall 2015 supplement.

Qualifications Based Selection (QBS) has long been demonstrated to be a superior method of selecting engineering consultants for today’s important projects. This is particularly true in the world of public-private partnerships (P3). The P3 delivery model typically includes the design, construction, finance, operations and maintenance of an infrastructure project by a single party (often referred to as the concessionaire, or Project Co.) over an extended period, typically 30 years. In exchange for providing the infrastructure in accordance with predetermined performance requirements, the owner may, depending on the cost recovery model, make a series of “availability payments” to the Concessionaire over the term of the agreement. P3 has been used for a substantial number of public-sector roads, buildings and other infrastructure projects in the U.K., Australia and more recently in Canada. Arguably one of the more complex infrastructure delivery models, P3 offers public-sector owners significant advantages over other delivery models for many larger projects.

A number of Canada’s consulting engineers have gained substantial experience in application of this model since its Canadian introduction approximately 15 years ago. In order to facilitate the successful procurement and delivery of P3 projects, the owner assembles its team of professionals, including an owner’s engineer, to advise on the development of the project concept and the procurement approach. It is essential that owners select engineering teams for this work on the basis of their qualifications. This will enable owners to secure the requisite experience and competencies, thus setting the stage for successful P3 projects.

Since the P3 delivery model is typically used for large, high-profile projects, which often have unique risks and unusual features, a highly collaborative approach to developing the project procurement documentation is required. This ongoing dialogue and discussion will involve the owners, technical and legal consultants, and business advisers. It has been found that the optimization of the overall project, including financial, risk, commercial and long-term ownership considerations, may require the engineering consultant to adopt tactics that differ from those that might be applied in a more traditional setting. P3 projects exist within a different legal and commercial framework than traditional design-bid-build contracts. With the long-term financing and maintenance obligations to the concessionaire, it is important that engineering consultants supporting P3 project owners have familiarity with some of the basic legal and financial concepts underlying the P3 model. In particular, understanding the transference of risk through performance-based contracting and the ways in which well-intentioned directives to the concessionaire can inadvertently undermine this important feature of P3 contracts are essential to project success.

The increasing prominence of the P3 delivery model for major Canadian public projects requires the successful integration of important project considerations in the technical, legal and commercial/financial realms. Without experience in P3 project delivery, important technical considerations may not be appropriately reflected in the procurement documentation. Ensuring that the public’s interest is protected while obtaining value for public funds requires a thorough understanding of the P3 model as well as the long-term performance requirements of the asset. Achieving a competitive market response from P3 bidders is essential to realizing the benefits of the P3 model. This will depend on the development of appropriate contract terms by the owner’s engineer that secure the required infrastructure performance while facilitating innovation in the infrastructure design. Retaining experienced consultants through Qualifications Based Selection is the only sure way to provide the needed expertise: owners who select consultants without consideration of these important factors may compromise the long-term performance of important infrastructure, with enduring consequences for public-sector owners.

The Consultant and Delivery through Partnership

David CollingsThe following article is written by CJI project manager David Collings, M.Sc., and was featured in the July 2015 ACEC BC Young Professionals Group Quarterly Newsletter.

Simply put, a packaged delivery model is one where a company coordinates multiple disciplines of a construction project. This can add the responsibility of design to that of construction (a design-build or DB). It can further add long-term operation or maintenance of the asset (design-build-operate-maintain or DBOM). If adding financing responsibilities to the mix, it morphs into public-private partnership (P3 or DBFOM). These terms are commonly used in the infrastructure industry here in western Canada.

However, it quickly gets confusing when you move industries or countries. For instance, engineer-procure-construct (EPC) is similar to a DB, but used more commonly in the resource and energy industry. A private finance initiative (PFI) is the UK’s term for a P3.

But enough of boring terminology. Of greater interest is the dynamic these delivery models create between organizations and how they adapt to the move away from traditional design-bid-build contracting. The owner cedes much of its former project responsibilities to a private partner. The contractor is elevated from a pure “doer” role (building stuff) to coordinating the engineer and driving innovation between construction methods and design. The concessionaire provides the overall leadership, financing and input into long term life-cycle costing.

The most profound role change is to the engineer. Research in BC has found that consulting engineers participating in P3s and DBs need to alter business practices to keep up. Engineers will need to adopt less hierarchical and more decentralized organizations. This makes sense because of a fundamentally changed role. Their client shifts from an owner to a contractor; they operate in a more dynamic “fast-tracked” environment with a higher degree of complexity (more relationships between diverse and often international partners).

To illustrate this, picture yourself as an engineer embarking on a new P3 assignment. Your team is awarded the job and immediately backhoes start pushing dirt around. You are expected to produce construction drawings at light-speed and at the same time innovate and dream up new groundbreaking ideas. Wouldn’t it be nice to speak directly with the project manager and other engineers, and avoid all the usual bureaucracy? How else would you know that your new idea is going to work for everyone else on the project? Imagine waiting for head office approval of a new idea while a construction crew is waiting for your drawing?

Perhaps the most exciting change for consulting engineers is the abundance of new opportunities within the DB/P3 project. These complex projects need all parties to understand the technical challenges, while many may lack the expertise to do so. Hence owners, contractors, concessionaires, banks and lenders all hire engineers within their team. As the industry evolves and dabbles with progressive new ways of getting things built, consulting engineers will be relied on to address the problems of the entire industry, not just produce designs.