Best Value Procurement –
a change of paradigm
Carlita Vis
Procurement manager
Rijkswaterstaat
Ministry of Transport and the
Environment
Agenda
1. Rijkswaterstaat
2. Priority Road Investment Programme leads to Best
Value Procurement (BVP)
3. Innovative procurement model
• BVP and special framework contract
• Early contractor involvement
4. Discussion – need for paradigm change
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Rijkswaterstaat
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Agency of Ministry of Infrastructure and the Environment
Founded in 1798
Around 9,000 employees
240 locations throughout the entire country
10 regional departments and 5 specialised departments, 35 districts,
1 project department
• Annual budget: 4 to 5 billion euros
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Rijkswaterstaat’s area of management
Rijkswaterstaat manages three National Infrastructure Networks
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Procurement Strategy
• Rijkswaterstaat...
– is a leading client in the Netherlands
– is focusing its attention on the network users
– focusing more on core tasks
– is handing over more work to the market in integrated
contracts to capture value from the market
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Priority Road Investment Programme
• Ambition from Minister of
Infrastructure and the
Environment: 30 starts of work
of road widenings and rush
hour lanes and 10 openings for
road users before june 2011
• Start september 2008
• May 2011:
– 30 ‘shovel hits the ground’
– 10 ‘cutting the tape’
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Innovative market approach
• Award contract (MEAT) with Best Value
Procurement
• Quick tender phase, but risks for the client (Quality,
Time, Cost) need to be mitigated:
– Target price
– A bonus of 2.5% of the target price if the building costs do
not exceed the target price
– 25% of remaining risk-reserve paid after completion
– Bonus/penalty scheme to ensure early opening
• Personal commitment of key players
• Uniform contract
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Innovative approach
Traditional
Parallellization…
Sequencing…
…or Entwinement
Phases
Initiative
Exploration
Plan elaboration
Realization
Concept Decision
Initial Decision
Preference Decision
Spatial Decision
Delivery Decision
Decision Points
Procurement
Contract
preparation
Contract
Tender
preparation
Tender
Contract
Implementation
Design
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Construct
Design & Construct
Supply Chain: We work in Silos
Technical Details
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Clients
Suppliers
Contractors
Contracting
Designer
Planning / Programming
30K Foot Level
Paradigm Shift: contractors should have minimal technical risk and should
minimize risk that they do not control
Us
Me vs. Them
Risks
Risks
Non-technical
Risk
Nontechnical
Risk
Technical
Risk
Technical
Risk
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Minimizing risks from the beginning!
Use of information and logic
Project
Risk
Time
Risk
Risk
Manage and minimize from the
beginning, by monitoring risks
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Selection Phase Filters and Clarification Phase
Filter 2
Past
Project
Performance Capability
Information
Quality of Vendors
High
Filter 3
Filter 4
Interview
Prioritize
(Identify
Best Value)
Criteria
Criteria
-Project
Capability (PC)
-Risk
Assessment (RA)
-Value Added
(VA)
-Cost
-Schedule
-Cost
-Interview
-PC
-RA
-VA
-PPI
Filter 5
Dominance Clarification
Phase
Check
Dominance
Check
•Minimized
decision
making in
selection
-Best Value is
within cost
range
-BV dominant
information is
valid
Low
Time
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-Vendor clarifies
proposal
-Client concerns
addressed
-Detailed
Schedule
-Risk activities
-RMP
-Performance
metrics
-WRR
Award
Filter 1
PIPS process
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Evaluation of market approach
• Acceleration achieved!
– 6 contracts awarded, each in 5 months
– Tender phase reduced by 50%
• Costs 60% lower
– Vendors: 50% to 75% lower costs
– Rijkswaterstaat: estimated reduction by
half, development costs for the contract
excluded
• May 2011: On average 1 year earlier
completion date per project
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Lessons Learned
• ECI transforms procurement strategy: think ‘supply chain’
• BVP ensures tenderers keep interest of the client in mind
• Paradigm change is needed, this takes time to implement: core team
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Problem with Priced Based Systems
“The lowest possible quality
that I want”
“The highest possible value
that you will get”
High
High
Performance
Contractors
Performance
Owners
Low
Minimum
Low
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Maximum
Industry Structure
High
III. Negotiated-Bid
II. Value Based
Performance
Owner selects vendor
Negotiates with vendor
Vendor performs
Best Value (Performance
and price measurements)
Quality control
Contractor minimizes
risk
IV. Unstable Market
I. Price Based
Specifications, standards
and qualification based
Management & Inspection
Client minimizes
risk
Low
Perceived Competition
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High
Discussion statement
Best Value Procurement adds value in any delivery model but
needs a directed paradigm change.
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