JOC ARCHIVES

April 3, 2006

Ross Nicholls

Contractor Procurement Procedures are Key to a Project’s Success or Failure

CORRESPONDENT

Construction is more complex than ever before. To ensure projects are on time and budget, and meet safety and management requirements, more owners are establishing strict contractor procurement procedures.

Establishing new procedures or stricter procedures is fine, but owners must make sure they inform contractors and project managers about requirements.

“It needs to be transparent and provide opportunity to all who are interested,” said Ashley Cummings, assistant deputy minister of the building group, department of supply and services, New Brunswick.

Owners often face several commonalities through the construction procurement process, according to management consultant Denis Bobiy of D. Bobiy & Associates.

They want to ensure budgets and schedules are fixed at project announcement dates, they typically experience “sticker price shock” where they have to re-examine expectations, and their preferred expectations are not always realistic.

Bobiy said massive projects which take seven to 10 or 12 years to complete make it difficult for owners because no one knows what the future holds.

Owners must consider the long-term market, adopt strategies for flexibility and keep things simple in this dynamic industry.

“Be more detailed in your plans so all can provide realistic costs and schedules,” he advised those attending a seminar at the CCA conference last week.

Innovation will allow owners and contractors to be successful in their relationships, said Ross Nicholls of Defence Construction Canada. When there are demanding clients who want better, faster with streamlined budgets, negotiating innovative solutions is vital.

For smaller projects, owners may tender out by asking contractors “what can you give me for a million dollars”, then work backwards to determine elements that will be contracted elsewhere, who will take on which elements of risk and what project management aspects will be managed by which party.

Safety, work philosophy, quality plans, scheduling systems and environmental practices are all key elements of the tender process, even before the bid envelope is opened.

Ron McGillis, manager of safety, compliance and contractor quality at Ontario Power Generation (OPG), concurs. In various sectors at OPG, the contractor management documents demand contractors be pre-qualified.

The policy is far reaching, including any subcontractors, and all go through a stringent review process by OPG, even if approved by third party recommendations or the main contractor in the case of a sub.

Although some may criticize that the process excludes rather than includes, McGillis is quick to point out their review system simply ensures contractors and subs are meeting the rules already set out by the Ontario government when it comes to such things as health and safety.

If an owner hires a contractor who is not meeting the law, and a safety issue arises, how can an owner go to court and defend his hiring practices at that point, asked McGillis.

By pre-qualifying and reviewing contractors themselves, “it increased our due diligence.”

To ensure what they are being told is actually on-site practice, OPG performs site audits on contract bidders to see that the programs and management processes a bidder says they have in place is what truly happens.

He said it has worked so well, many companies are now proactively asking OPG how they can improve upon their evaluation scores to ensure they continue to be considered for projects.

This can be vital to contractors as in some OPG sectors, contractors are pre-qualified for master service agreements and then two or three are identified as the approved bidders for projects for a three-year term.

No matter what changes owners may make with the procurement process, Cummings said relationships remain key to any successful partnership.

If owners are open with contractors and can establish fair and equitable systems that are understandable to those bidding, any procurement system is sufficient.

He added there does not seem to be any great desire for owners to reinvent the wheel entirely.

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