Background and Challenge
An Australian state-government entity engaged the L.E.K. Major Capital Projects Advisory (MCPA) team to assist in evaluating procurement strategy and contracting options for a multi-billion-dollar transport infrastructure project during the feasibility stage of the project life cycle.
Approach and Recommendation
L.E.K.’s MCPA team worked as non-voting members of both the Evaluation and Selection Committees to develop and assess an innovative development partner concept and shepherd it through an Expression of Interest phase prior to a formal Request for Tender.
L.E.K. worked with the client to define the development partner model itself, leveraging its experience in commercial structuring, risk allocation and contract design. This was aided through an analysis of global best practice in project delivery.
L.E.K. then supported the development of the EOI documentation and participated in evaluation of each EOI, which the client then took through to the RFT stage.
This state-government client later re-engaged L.E.K. to provide further assistance on the Project. An L.E.K. Senior Partner acted as Chair of the Tender Evaluation Panel, and the Head of the MCPA practice conduced an independent, ring-fenced analysis of the major risks inherent in the development model.
Our work in this phase of the project involved assigning a probability of the risk occurring, assessing the commercial impact of occurrence, expressing the total commercial impact of all risks as a proportion of the total costs proposed in the model and normalising the value of the RFT bids to reflect the commercial implications of these risks.
Subsequent to the completion of the evaluations, L.E.K. was further retained to review the procurement process and help the client examine the key lessons learned to inform similar efforts in future major capital projects.
Results
With L.E.K.’s assistance, the client thoroughly examined, assessed and tested an innovative procurement model designed to achieve better project quality, cost and schedule outcomes for government. This included testing the ability to transfer risk between the state and private parties and the ways to better align state and private sector objectives to deliver improved Value for Money and Whole of Life outcomes for government.
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