Best Practices - Procurement FIDIC Power Point 2010.pdf

Best Practices - Procurement FIDIC Power Point 2010

1. Best Practice
Procurement of
Engineering Services

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World Trade Center 2
Box 311
CH-1215 Geneva
Switzerland
Tel: [phone]
Fax: [phone]
[email protected]
www.fidic.org
International Federation of
Consulting Engineers
Fédération
Internationale des
Ingénieurs-Conseils

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International Federation of Consulting Engineers
FIDIC is the recognized global
voice for the consulting
engineering industry
Fédération Internationale des Ingénieurs-Conseils
World Trade Center 2 –CH-1215 Genève 15 –www.FIDIC.org
Founded in 1913
with headquarters in
Geneva, Switzerland

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84 Member Associations representing over 1 million professionals
THE SUN NEVER SETS ON FIDIC
Member Associations

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The FIDIC Mission
“To promote the business
interests of members
providing technology-
based intellectual
services for the built and
natural environment.”

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FIDIC Policy
“FIDICbelieves that infrastructure should be
sustainable and, to this end, it is the policy
of FIDIC that during all phases of the project
life-cycle, the overriding concern should be the
quality of the services provided by all parties.”

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FIDIC stresses the pre-eminence of quality in the
selection process. The fees paid to a consultant
are invariably a small fraction of the total project
life-cycle cost, and yet the consultant‟s work is
key to the project success.
FIDIC Best Practice

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Results of Poor Quality Outcome
Hyatt Regency Hotel, Kansas City, Missouri
In July of 1981, two elevated walkways over the
lobby of the Kansas City Hyatt Regency Hotel
collapsed during a party, killing 111 people and
injuring 188 others.
Engineering services for these structures
were awarded on the basis of price.
In 1995 a pedestrian bridge collapsed at the
Maccabiah Games in Israel causing the deaths by
drowning of about 40 athletes.

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World Bank Study Findings
To evaluate the effectiveness of its guidelines on selection of
consultants, The World Bank examined the projects which it
funded in FY2003/2004. Major findings of the examination:
–In 92% of allprojects, QCBS is adopted because
characteristics of other selection methods are
disregarded or because WB recommends QCBS
too strongly.
–Too much attention is paid to price competition
and too little to the quality of services in the
selection process.
–While QCBS contributes to increasing of
participation of local consultants, it discourages
them to focus on quality under low revenue
level.

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World Bank Study Recommendation
Therefore, the Study recommends:
–To stop recommending only QCBS since
the cases for QBS is on the increase,
due to requiring complexity and
specialization of consulting in many
cases.
–To clarify the cases for recommending
other methods than QCBS.
–To balance the cases in such ratio as
QCBS 40%, QBS 35%, CBS25% as
initially intended by the Guidelines.

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Best Practice Procurement
Maximizing Benefits to Clients

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Principles of Best Practice Procurement
FIDIC Guidelines for Selection:
•Quality
•Transparency
•Capacity building
•Integrity
•Fair competition
•Harmonization
•Liability
•Independent monitoring of outcomes

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Client‟s Key Decision
Selecting a consultant is one of the most
important decisions a client makes in the life
of a project; its success often depends upon
obtaining the most able, experienced and
dependable expertise available, at an
appropriate cost.

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Representation of Typical Life-Cycle Cost and Impact on Project Success
ConstructionEngineering Operation & Maintenance
Life-Cycle Cost
Impact on Project Success
Quality in Selection of Consulting Engineers
The procurement of consulting engineer services
has the greatest impact on the life-cycle cost of
the project, yet is the least costly component.
The owner‟s challenge is to get a good “return on
investment” in design services.

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The Parties to Procurement
•The purchaser (client or employer)
•The professional service provider
•The financier
•The contractor
•The public-end users

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Informed Purchaser
An informed purchaser is an owner who either has
the in-house technical expertise or engages outside
experts necessary to:
clearly convey project vision
evaluateand selectconsultants
understand the risks and procedures inherent
in project execution
follow through with proper O&M procedures
and monitoring of outcomes

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Informed Purchaser
The informed purchaser will be better equipped to
incorporate other Quality-Based Principles at the
project development phase, including:
capacity building
sustainability
monitoring of outcomes

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Quality of infrastructure, or rather, decreasing
quality, has been identified worldwide, and by all
stakeholders, as a serious concern.
The Issues

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•General observation that the quality of the
constructed project has been deteriorating
The Issues
•This observation is confirmed by the MDB‟s project
managers, executing agencies and international
consultants
•It is also perceived that good international
consultants are losing interest in MDB-funded
projects
Why has the quality of the
constructed project deteriorated?

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Causes of Deterioration in Quality
•A major cause is the diminished quality of design
•Lower quality design results when engineering
services are procured as a commodity
•The procurement of engineering services in
which cost is a factor (QCBS) promotes
engineering services as commodity services
•Fewer “top” firms pursuing MDB-financed
projects
•Other factors contribute as well, including:
Corruption
Incompetent contractors
Poor project management
Lack of resources to manage contractors

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The Challenge
Lack of sustainability, potential health and safety
problems, cost overruns, delays, an increase in the
number of disputes, and a failure to provide value
for money in completed projects are obvious
outcomes of the lack of quality in infrastructure.

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FIDIC Best Practice
FIDIC advocates the
Quality-Based Selection
method (QBS) as the best
practice for selecting
a consulting firm.

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In Quality-Based Selectionthe client selects
the consultant on the basis of:
professional competence and
experience
managerial ability
availability of resources
professional independence
integrity
quality management system
fairness of fee structure
The QBS Method

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“QBS encourages clients to view
consultants as „trusted advisors‟who
share their priorities and interest in
achieving the best outcomes for their
project.”
Best Practice

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FIDIC Best Practice
The best project results
are achieved when
there is a professional
relationship of trust
between the client
and the consultant.

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Quality
Low cost and lack of integrity inevitably
lead to poor design and poor quality in the
completed project.

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Results of Good Quality Outcome
•Quality in selection produces quality designs
•Quality designs produce quality projects
•Quality projects have fewer variation orders
during construction
•Fewer variation orders result in lower
construction costs
•Quality designs and lower construction costs
result in lower life-cycle costs
•Quality in selection is in the owner‟s best interest

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FIDIC
“…selection of an Architect or Engineer solely
on price-competition basis provides the potential
for reductions in quality due to initial
underestimation of the costs and resources
required to adequately perform the work.”
U.S. House of Representative
Subcommittee Report on Structural Failures
“…selection of an Architect or Engineer solely
on price-competition basis provides the potential
for reductions in quality due to initial
underestimation of the costs and resources
required to adequately perform the work.”

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Capacity Building
•Improves the quality outcome of the
constructed project.
•Fee competition is detrimental to capacity
building.
•As a result of fee competition, local firms are not
adequately compensated.
•Banks may want to examine the need for
“set-asides” of projects for local consultants.
•The procurement for such “set-asides” should be
based on quality principles.

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Sustainability
•Sustainability integrates the environmental, economic,
and social dimensions of development, and is
therefore fundamental to a quality outcome.
•The FIDIC Project Sustainability Management (PSM)
process provides a framework for the owner and
engineer to balance project vision against cost and
available alternatives, and select appropriate project
goals and indicators for sustainable development.
The indicators are linked back to higher level goals
such as global warming, biodiversity, access to fresh
water, and materials and energy use.

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Quality-Based Project Management
FIDIC recommends that consulting engineers
adopt a Quality Management System, and that
owners have regard to this policy during selection.
A Quality Management System is a formalized
project management structure that incorporates:
•Customer-focused leadership and organization
•Employee involvement
•A process and factual approach to decision making
•Continuous improvement
•Mutually beneficial supplier (sub-consultant)
relationships

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“To operate successfully in an
increasingly global world, the operations
of a firm will have to conform to generally
accepted best practices. In particular,
ethical behaviortoward all the firm‟s
stakeholders must be key and visible.”
FIDIC and Integrity

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Business Integrity Management
•Corruption undermines the achievement of a
quality outcome, and the practice of business
integrity is crucial to fighting corruption.
•FIDIC recommends that consulting engineers
adopt the FIDIC Business Integrity Management
System (BIMS), and that owners have regard to
this policy during selection.

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FIDIC believes that quality and integrity
management are intimately related.
For that reason, it advocates that member
firms should engage in integrity management
as an extension of their quality management
systems.
A FIDIC Policy

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Conclusions
•Quality-Based Selection (QBS) is the preferred
way to select an engineer as the “trusted
advisor” to the Client in many developed
countries. It should be no different in the less
developed countries on projects financed by the
MDBs.
•Major clients in some developed countries have
recently migrated from QCBS to QBS (New York
City is a good example). MDBs should be doing
the same.
•FIDIC and the MDBs need time for greater
collaboration between all parties on how to
promote Best Practices Procurement.

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Conclusions
•A re-examination of the impacts of the current
procurement method preferred by the MDBs
(QCBS) on the diminished quality of the
constructed project.
•The World Bank study(mentioned at earlier
pages)is a good first step, but other studies on
the impacts of QCBS on a project‟s life-cycle cost
and variation ordersduring construction are
needed.
•MDBs and borrowers need to ensure that
engineering services are not procured as if they
are commodities.

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Conclusions
The incorporation of quality-based principles
in the execution of projects is essential to the
achievement of the stated goal:
This reversal can be accomplished by
reverting to Best Procurement Principles –
Quality-Based Selection.
A reversal of the trend of diminished
quality outcomes onprojects.

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Quality
“It is unwise to pay too much, but it’s worse to pay too
little. When you pay too little, you sometimes lose
everything because the thing you bought was incapable
of doing the thing you bought it to do.”
“The common law of business balance prohibits paying a
little and getting a lot –it can’t be done.”
John Ruskin (1819 –1900)
British Poet, Scientist and Philosopher
“Price has no meaning except in terms of the quality of the
product.”
Dr. W. Edward Deming (1900-1993)

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“I told you to use QBS to Select the Engineer for the
Design of this bridge.”
Quality

40. Thank you