REPORT TO ACTIVITIES PERFORMANCE AUDIT COMMITTEE
CONFIDENTIAL
Meeting Date:
27 MARCH 2013
Subject:
PROCUREMENT PLAN FOR CONSTRUCTION OF THE AROUND
THE MOUNTAIN CYCLE TRAIL
File No.:
910/150/9/1
Report by Mr Ian Marshall dated 18 March 2013.
1.
SUMMARY OF REPORT
The report discusses a procurement method for the services, goods and materials
required for the construction of the Around the Mountain Cycle Trail. The method
proposed is to invite selected contractors to bid for individual sections of the work
and to assess the market competitiveness one against the other. This will ensure
there is market price tension in the tender process.
The contractors will be required to operate in a collaborative best for project
environment where individual strengths will be utilised to optimise productivity and
minimise cost. This type of flexibility will be required to meet the time and budget
constraints.
2.
RECOMMENDATION
(a)
THAT THE ACTIVITIES PERFORMANCE AUDIT COMMITTEE RECEIVE
THE REPORT.
(b)
THAT THE ACTIVITIES PERFORMANCE AUDIT COMMITTEE APPROVES
THE USE OF AN ALTERNATIVE PROCUREMENT PLAN FOR
PROCURING THE CONSTRUCTION OF THE AROUND THE MOUNTAIN
CYCLE TRAIL.
Signature
Author
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Executive Staff
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3.
REPORT
3.1
Background
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Now that a funding agreement has been signed with the Ministry of Business and
Innovation to help fund the construction of the Around the Mountain Cycle Trail
(ATMCT) the next step is to obtain competitive tendered prices for the work so that a
full accurate estimate can be prepared.
The ATMCT has some very clear time and budget constraints that will be a challenge
to meet. The funding agreement between the Ministry of Business Innovation and
Employment requires Council to complete Stage 1 of the trail by 30 October 2013.
The Council is also committed to underwriting the completion of the full trail by the
end of 2015.
The Council is not fully committed through the agreement until it makes the first claim
on the funds from the Ministry. Once started the Council is committed to completing
the project. So it is very important that competitive prices are obtained from
competent suppliers to allow a full robust cost estimate for the project be developed.
These constraints mean innovative procurement and management processes will be
needed.
Procurement Policy
The Council’s current Procurement Policy default position is that procurement for this
type and scale of activity will be by competitive tender. The policy does allow for
alternative procurement options subject to:

achieving value for money;

a market assessment;

reviewed by the Executive Team;

and be available to any member of the public on request.
The policy also discusses Local Suppliers in Section 7.4 in particular:
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
ensuring that there is a viable and competitive market able to provide goods
and services now and into the future;

an interest in the economic well-being of the District;

value for money offered by the locally based supplier is at least as good as
suppliers based outside the District;

a need to ensure market capacity and capability in the long term;

benefit from selection of local provider, through stronger commitment and/or
local accountability;

bundle its procurement in a manner that ensures locally based (smaller)
suppliers are able to supply, where this is practical, cost effective and does
not compromise efficient management systems.
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Project Approval Process
The approval process for this project makes it essential for Council to develop a
robust accurate estimate of cost of completion of the whole project that shows with a
high degree of certainly that the project is achievable within the total budget.
This estimate needs to be based on binding tenders submitted by competent
contractors tendering for Stage 1. The prices received will be extrapolated over
Stage 2 and so an accurate estimate of the whole project cost can be developed.
Based on this estimate a report will be prepared for the Council to consider. If the
estimate shows the project is achievable within budget the recommendation will be
for the Council to approve the project proceed. This sequence of events requires
Council to go through a tender process in order to get tender prices to use as the
basis of calculating the estimate. If the project is subsequently approved by Council
the tenders can be let immediately and contracts entered into. Work will get
underway quickly.
Performance and Behaviours Required
As noted above the time and money constraints are very tight on this project.
To meet the time deadline it will be necessary to have several crews working
simultaneously on the trail construction. This means several contractors will be
needed. There are a variety of work types within the project including:

gravel crushing;

vegetation clearing;

track building;

drainage work;

culvert crossings;

bridge construction;

fencing.
It will also be necessary for the contractors to be very clear about who is responsible
for the risks in the various parts of the contracts. This clarity of risk always helps get
work completed for the lowest costs possible.
The contractors will also have to work collaboratively with the Council and with each
other to get the optimal solution. This will mean contractors working across each
other’s sites carrying out types of work that they specialise in. This will also produce
scale of economy savings. For example it is likely that having one or two of the
contractors process all the gravel needed at or near each site will be more efficient
than getting each contractor to be responsible for their own gravel needs.
It will also be better to have the contractors advising the demarcation line for each
contract area and the construction methodology, so development of the final contract
scope will be an iterative process.
These factors shape the procurement method that best suits the project.
The procurement method needs to be iterative, allow for contractor input into scope,
methodology and basis of payment. It also needs to be dynamic so changes can be
incorporated and then quotes for work obtained quickly, analysed against each other
and contracts let quickly so work can get underway.
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Procurement Plan
The Procurement Plan that fits the requirements above is to invite a pool of
competent contractors who have a track record in trail building to participate in the
project. Several such contractors have been identified and a number have been
walked over the site guided by Mike Barnett.
They would be invited to participate in a workshop we will run to outline the project,
outline the mode of operation, outline the behaviours required and develop a plan for
setting the scope and methods in each contract. They would also be made acutely
aware of the time and budget constraints.
Contractors would be required to submit a completed pricing schedule for the work
they are selected for. All the pricing schedules would be compared against each
other and where the elements were directly comparable. This would provide a
process where individual rates could be negotiated down if they were considered out
of context with the market or if a tender overall was too high that contractor’s tender
would be rejected in total. The final step in the process would be to develop a full
project estimate based on the extrapolated costs.
The tension for the contractor pool is that the full project has to be achievable within
the total budget. If the whole thing can’t be built within the budget then nobody will
get any work as the project will not even start.
3.2
Options Considered
The two options considered are to use a conventional tendering process that would
see multiple contractors preparing multiple tenders across the whole gambit of work.
These tenders would have to be based on contract documents developed from other
authorities who have built similar trails.
The second option is the preferred option.
It involves utilising a pool of
suppliers/contractors. The panel of suppliers will be involved in the refinement of the
works specification and the basis of payment options with the intent of having total
transparency of risk. The suppliers would each price the section of work they were
allocated. The set of tender prices would be compared and any excesses rejected.
3.3
Policy and Plan Considerations
The Procurement Policy is the most relevant policy for this report. Key sections of
the policy are discussed above.
3.4
Consideration of Community Views
The community’s views have not been sought on this matter. The intention of the
process proposed is to achieve the best value for money outcome for the community.
3.5
Financial Considerations
As mentioned above the intention of this process is to achieve the best value for
money for the community.
3.6
Legal Considerations
There are no significant legal implications associated with this project/decision to
show that consideration has been made.
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4.
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CONCLUSION/SUMMARY
The conclusion is that in order to meet both time and financial constraints for the
construction of the Around the Mountain Cycle Trail an innovative Procurement Plan
is necessary. Conventional multiple tenders with multiple suppliers will not achieve
the best value for money in the time frame necessary. Using a panel of suppliers
and having them involved in the development process will produce the best outcome.
The prices submitted by each will be compared one against the other to ensure
market competiveness is achieved.
Ian Marshall
GROUP MANAGER SERVICES AND ASSETS
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