Steps to P3 procurement success

Paul Hollingsworth leads Steer Davies Gleave’s Lenders Technical Advisory effort – and shares the lessons he has learned on the essential steps to success.

The Lenders’ Technical Advisor has a privileged insight into major projects. On behalf of our client, we are involved in the tender and funding, design, construction, operations and maintenance. We can see that the consortium’s bidding process requires significant investment to develop the design, construct a viable program of works, identify opportunities, risks, risk mitigations, and arrive at a winning price.

A successful project has to be viewed from the perspective of the public, the client, the special purpose company promoting the project, the contracting consortium with its supply chain, and the investors. The investment provides for rigorous reviews by potential lenders, traffic advisors and technical advisors.

Getting it right at the bid stage is crucial. Here are some recommendations for achieving the optimum outcome:

The consortium and its supply chain
The consortium: the individual companies must have full agreement on commonality of purpose, be prepared to provide senior and support staff for the bid and for the works, and be ready to appoint the best person for the job. Supply chain: key suppliers need to be brought into the discussions at an early date, for example the electrical and mechanical contractor for a tunnel installation, or steelwork suppliers for major bridges.

Technical advisory team The traffic advisor: engage the traffic advisor at the earliest opportunity to get an assessment of the viability of the project from the consortium’s and lenders’ perspectives. The technical advisor: engage the technical advisor early in the bid to provide potential lenders with a realistic appraisal of the potential for success or failure of design and build to meet milestones. The LTA should discuss risks and their mitigation with the bid team at the earliest opportunity.

Pricing the bid
Whole-life costs: most contractors in a bid consortium focus upon the capital cost, whereas PPP needs as much, if not more, attention to optimizing the wholelife costs. The technical advisor should also have a view of where optimization of the whole-life costs may be achieved.

Risk and risk mitigation: classical risk workshops are obsessed with high impact, low probability events but generally fail to articulate the human side of a successful project: a competent, experienced team where the contracting consortium works in harmony.

Project systems
Each consortium member will have its own quality system, document control and knowledge management system – ‘the way we do things round here’. Each company’s system will be different. A quick examination will reveal much commonality and the outline project system should be developed upon the best practice for each. Many clients want to see the outline management systems in the tender, so attend to them early and get agreement within the consortium.

In all these matters, we know that experience is key to trust, trust is key to relationships, and relationships are key to successful projects. Get the right people on board, and the rest is relatively easy.