Procurement

We outsource the majority of works and services for our asset improvement and asset management projects. Our approach to procurement uses a range of delivery models. These models have been developed based on international best practice and adapted to the New Zealand context. With this selection of models we are able to:

• select the best model to deliver optimal value for money based on specific project and market characteristics
• develop strong, collaborative supplier relationships
• develop a strong skill base and understanding of the supplier market, including competitive rates, capabilities and commercial processes and
• avoid the potential for supplier manipulation of a single process.

The policies and processes fundamental to procurement within the Transport Agency are detailed in the following documents:

• Procurement manual
• State highway procurement strategy
• Contract procedures manual

View all upcoming, advertised and awarded contracts.

A project specific procurement strategy is normally prepared in advance of the commencement of procurement for projects over $50,000. The level of detail required in the procurement strategy [PDF, 193 KB] depends on the size and complexity of the project.

Delivery model guidance

The criteria for selecting a delivery model is provided in NZ Transport Agency's State highway procurement strategy.

Capital contracts

The Transport Agency’s capital project contract types are traditional, design and construct, alliance and early contractor involvement. The selected contract type is a function of the project’s delivery structure.

Project risk and the potential for innovation are the key criteria for selecting a projects delivery structure. While there is no definitive point for moving from one delivery method to the next, the trend is to move towards full delivery as the risk and potential for innovation increases. There is also room within each of the delivery models to develop alternative methods which best suit the complexity and risks associated with a particular project.

Delivery model selection diagram

Traditional method

This method depends on how well the scope of the works is defined. If the scope is:

• well defined, then a single package for the investigation, design and construction phases is appropriate. This can be achieved by either making the design and supervision phases provisional for later negotiation, or by agreeing a lump sum at the start of the contract and allowing escalation to apply
• not well defined, it is preferable to procure a stand-alone investigation contract followed by the design and supervision of a single contract.

For complex projects, it may be appropriate to break investigation phase into two parts:

• scoping and option analysis to identify the best option, followed by
• analysis of the best option.

While preferable to have lump sum contracts and include the phase(s) provisional activities it may be appropriate to complete the subsequent phases on a time writing basis if there is substantial uncertainty.

Full delivery method (alliancing)

This method comprises a single contract for taking the project from the current phase to completion. As a full delivery model can be implemented at any time it may be appropriate to use the other delivery methods to complete the preceding phases such as using the traditional method to complete the project’s investigation phase.

Project alliancing is an approach aimed at creating mutually beneficial relationships between all parties to ensure best project outcomes. Unlike traditional forms of contract where risk is allocated to different parties, under a ‘pure’ project alliance, the alliance participants take collective ownership and equitable sharing of all risks associated with the delivery of the project.

The risk/reward arrangements are designed so that exceptional performance will deliver excellent outcomes for all parties while poor performance will result in poor outcomes for all parties. Alliance principles are founded on the following core principles:

• Primary focus on business outcomes whereby all parties either win or all parties lose.
• Collective responsibility for performance with an equitable sharing of risk and reward.
• A peer relationship where all participants have an equal say.
• All decisions must be best for the project.
• Clear responsibilities within a no-blame culture.
• Full access to the resources, skills and expertise of all parties.
• All transactions are fully transparent.
• Innovative thinking with a commitment to achieve outstanding outcomes.
• Open and honest communication - no hidden agendas.
• Visible/unconditional support from all levels of each participant.

Alliances are developed and implemented in two stages (note: no contract in place during the selection process).

The interim project alliance agreement (IPAA), akin to a simple form consultancy agreement, will provide the legal vehicle through which the non-owner participants will be reimbursed for their services during the interim alliance period.

Once the target cost, target programme and the remaining details of the pain-share/gain-share regime are agreed, and provided the NZ Transport Agency still wishes to proceed with the project under an alliance, then the participants will enter into a single project alliance agreement (PAA). The PAA sets out the participant’s collective and respective rights and obligations under the fully formed alliance.

Design - construct (DC) method

The way to package a DC depends on where the project is at in its life cycle. To decide this, find out if:

• a preferred scheme has been lodged for designation
• the preferred scheme is a fundable project (eg does it have a benefit cost ratio greater than the current cut-off? What are the social and environmental issues?)

If the answers to these questions:

• are both yes - complete an investigation contract and engage the principal’s advisor to prepare specimen design, seek resource consents and procure and manage the DC supplier.
• are no to the first question and yes to the second question - renegotiate investigation contract to extend its scope (material changes) to include the principal advisor’s role. Prepare the specimen design and seek resource consents and designation as well as procuring and managing the DC supplier.
• This approach should be used if the project is being started at the project feasibility report (PFR) stage.
• are both no - conclude the investigation contract at the point of confirming its designation.

Early contractor involvement (ECI) method

The flexibility of the ECI method ensures that you are well-equipped to deal with change, as the scope will not be completely defined.

An ECI method should be considered if:

• you are looking to fast track a project and the expected estimate is generally under $50 million
• there is uncertainty around scope and there could an opportunity for staged design and construction to occur allowing an earlier start on some enabling works
• there is a strong probability that you might need to add other package(s) of work during the design phase
• it is felt that the involvement of construction expertise in the development of a project could ensure that decision-making in the planning and designing is appropriately balanced with constructability issues (eg complicated traffic movements).

As this is a quality based procurement method to ensure value for money is achieved you will need to engage with an independent parallel estimate peer review and conduct a reconciliation process.

Additionally you may also need to engage with an external design peer reviewer to ensure the best value design is selected from an independent perspective.

Maintenance contracts

The maintenance and operations space has moved from the existing traditional, hybrid and performance specified maintenance contracts to a primary supplier model. This model brings professional services and physical works components into one contract, called the network outcomes contract.

For further information contact SM030@nzta.govt.nz.