Innovative contracting for BwN

How to Use

‘The job to be done’ for which guidance is offered is about:

  • How to build organisational and contractual arrangements in order to enhance the realisation of BwN within project boundaries?

At first sight this subject might seem almost trivial compared to issues of how to get and keep BwN on the agenda (see Networks), how to deal with and make good use of regulations and procedures (see Regulatory context) and how to arrange a productive knowledge process (see Knowledge context). Still the proof of the pudding is finally in organizing the project environment in a pro-active manner in order to harvest the seedbed. Without the realization of BwN within project boundaries all the efforts in the end are spoiled. So right from the start, the appropriate ‘Realisation framework‘ should be focused upon.

Some guidance is given on how to use insights in procurement and contracts in order to falititate BwN realization within project boundaries.

Think about procurement early and pro-actively

Some hints regarding the process:

  • Focus upon the realization framework right from the start.
  • Contact the autorities as soon as possible to discuss the needed perspective with regard to (organization of) procurement.
  • Reach out for a clear and shared perspective with regard to the strived for model and process of procurement and the roles of public and private parties across the project phases (include the guidance with regard to types, process, management, ppp and feasability as outined below).
  • Anticipate the consequence for each of the project phases.
  • Anticipate the consequences for the required contractor arrangement and act accordingly.

Strive for progressive types of procurement

The three main types of procurement, ordered from conventional to progressive:

1) Traditional:

The traditional base model involves market parties when the plan is ready, and only some minor issues are to be filled with regard to detail design. Market parties then compete on price, quality and competence to advocate their design.

2) Second generation: Design and construct ‘light’:

The model in which market parties are connected although the plan is not ready yet, however the priority alternative is already selected. In this model market parties compete in the procurement process in their ability and competence to develop and design a public decision. The choice had to be for the most capable supplier that combines developing and design competences. Being able to identify, assess and control risks is of importance.

3) Third generation: Innovative-integration:

The model in which market parties are connected although the priority alternative has not been selected yet. This model requires letting go of the fixed price principle that is often used in the other models. In this model the procedure often starts with a frame of reference that just indicate the qualities and values that are of relevance. Further selection is made during a ‘process of dialogues’, during which the paln is further defined and pricing is agreed upon.

Keep overview over the procurement process

In the second and third generation model the process might include three phases:

  • In the first phase an expert of the proposing consortium or contractor envisions the situation in a short document, based on analysis, and show his ability not only to know and manage risks (which is a traditional procurement criterion) but also to connect opportunities. The latter might even include relation management working towards consensus with stakeholders.
  • In the second phase, the detail planning will proceed in interaction between proposing consortium or contractor and authorities. In the third phase the actual procurement will take place. In phase 1, pre-selection, interested suppliers will position themselves on price, knowledge, competences (including management of perceived risks and perceived opportunities). After the pre-selection the procedure continues with one or two selected consortia. Next steps are not so much about competing but about joint development and negotiations. Showing competences in perceiving, connecting and handling opportunities is of equal importance to perceiving and handling of risks. Avoiding the time trap requires starting the procedure early or avoiding strict deadlines.
  • In the third phase final decision takes place followed by construction.

Realize effective management of the procurement process

Effective handling of the process as described requires:

  • Settlement of sound functional requirements based on system engineering as called for (instead of technical specifications). Sound functional requirements at least include spatial and time boundaries. In a layered perspective, these criteria should anticipate subsequent steps in working towards specifications for implementation.
  • Though sound functional requirements should be sought after, also procedures for incremental changes of functional requirements should be described with regard to their consequences for the cooperation and procurement processes.
  • Define and describe the process: clearly state who is responsible for what, the set of performance indicators as agreed upon, how compliance to performance indicators is measured, the allocation of risks over partners and the pain and gain settlements. Be aware that these monitoring, verification and counting schemes should be regularly updated while the PPP arrangement works itself through the project phases.

Feasibility of innovative procurement

Some further issues to take into consideration:

  • As the traditional model of procurement suits single-organization contractors very well, the more innovative procurement procedures with demanding criteria often will require consortia of organizations that pool competences and act as a supplying consortium. For PPP such criteria are welknown; for BwN criteria have to be added. This requires a pre-assesment. Criteria for such an assessment have to be clear at forehand. Consortia for instance have to show sufficient competences as plan and/or project developer.
  • Making BwN added value “tangible and verifiable” is a prerequisite to reordering roles and responsibilities during the project phases.This incudes both added value with regard to a multigoal perspective as with regard to the perspective of the total costs over all project phases.
  • For this private consortia have to prepare for proving that they can deliver added value at any moment in the described procedures. BwN principles assume added value if development is integral and scale, sector and time boundaries are blurred. An innovative approach to make the BwN component and added value tangible and verifiable is the valuation of ecosystem services and risks approach.

Learn from Public Private Partnerships

  • Public-private financing is often used to overcome the gap between design and execution, and thereby optimizing the financial project development, it can also be used to handle the suggested letting go of the fixed price principle.
  • Also the handling of risks might be an issue that has to be settled. In a typical design and construct case the responsibilities are covered in contract easily. In the situation in which private or ppp consortia cover more phases this might cause concern. Access to private insurance
    There is clear overlap between issues to take into account when working on PPP and those of relevance for BwN.

Some further reading on PPP in practice.

Note: This document approaches procurement of PPP from the perspective of governments. The message in this building solution is that how governments approach private organizations is important, however how private alliances of consultants, constructors approach governments in order to influence procurement and contracting is as important. Also is of importance to focus upon the BwN inherent need for functional specification.

(Additional) information with regard to the topics discussed can also be found on Project phases Planning and design