FIDIC FRI Generalforsamling 7marts2002

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FIDIC
FIDIC Annual Conference Quality Procurement
Workshop Beijing, China September 7, 2005 BEST
PRACTICE PROCUREMENT OF ENGINEERING
SERVICES Gregs G. Thomopulos, P.E.,
FACEC Executive Committee Member FIDIC
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FIDICs Mission
To promote the business interests of members
providing technology-based intellectual services
for the built and natural environment, and while
so doing, accept and uphold our responsibilities
to society.
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Selection Guide Best Practice Principles

• FIDIC emphasizes that quality is paramount in the
  selection of consultants, and that Quality Based
  Selection is the recommended method.
• FIDIC emphasises the need for integrity, clarity
  and quality in the Inviting and Evaluation of
  Proposals for Consultant Selection.

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Guide to Quality Management Guide to ISO 90012000

• FIDIC has published
• Guide to Quality Management in the Consulting
  Engineering Industry
• Guide to the Interpretation and Application of
  the ISO90012000 Standard for the Consulting
  Engineering Industry
• Training Kit Quality Management in the
  Consulting Engineering Industry

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FIDIC
BEST PRACTICE PROCUREMENT MAXIMISING BENEFITS
TO CLIENTS
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The Issue

• General observation that the quality of the
  constructed project has been deteriorating.
• This observation is confirmed by the Banks
  Project Managers, Executing Agencies and
  International Consultants.
• It is also perceived that good International
  Consultants are losing interest in Bank-funded
  projects.
• The current trend in diminished Quality Outcome
  of the constructed project needs to be reversed.

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Causes of Deterioration in Quality

• A major cause is the diminished quality of
  design.
• Lower quality design results in lower quality
  construction and increased variation orders,
  resulting in increased cost of the project.
• Other factors contribute as well, including
• Corruption
• Incompetent Contractors
• Poor Project Management
• Lack of Resources to Manage Contractors.

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Selection Guide Best Practice Principles
Consultant selection is highly critical to the
success of the entire project to save a small
percentage, perhaps 1 or less of project cost,
is not worthwhile, considering the potential
risks.
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Selection Guide Best Practice Principles

• Quality in the process of selection of
  engineering consultants refers to those factors
  which will enable the consultant to produce the
  best value solution to the Clients Terms of
  Reference and includes the Firms relevant
  professional competence and experience,
  managerial ability, financial capability,
  availability of resources, capability of
  designated staff, quality and integrity
  management systems, and demonstrated
  understanding of the Project and the Clients
  Brief.

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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
• evaluate and select consultants
• understand the risks and procedures inherent in
  project execution and
• follow through with proper OM 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 and
• Monitoring of Outcomes.

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Quality Who Needs It?
It is unwise to pay too much, but its 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 cant 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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Quality Who Needs It?

• Client Public Sector
• Spend public money wisely
• Obtain best value, (which is not least cost)
• Have regard to operating and life cycle costs
• Have regard to environment and sustainability
• Encourage innovation
• Encourage development of viable industry
  capacity building
• Avoid disputes, delays, non-productive costs

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Quality Who Needs It?

• Client Private Sector
• Spend shareholders money wisely
• Obtain best value, (which is not least cost)
• Have regard to operating and life cycle costs
• Have regard to environment and sustainability
• Encourage innovation
• Develop partnerships
• Avoid disputes, delays, non-productive costs
• Protect investment by the purchase of quality
  product

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Quality Who Needs It?

• Client Design Build Contractor
• Need to win the project
• Encourage innovation
• Need to satisfy Clients Brief (needs expert
  advice)
• Need to be able to construct for the price
  tendered
• Avoid disputes, delays, non-productive costs
• Develop partnerships

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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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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 Owners challenge is to get a good return on
  investment in design services.

Representation of Typical Life Cycle Cost and
Impact on Project Success
Life Cycle Cost
Impact on Project Success
Engineering
Construction
Operation Maintenance
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(No Transcript)
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FIDIC Principles of Best Practice Procurement

• FIDIC Guidelines for Selection
• Quality
• Transparency
• Capacity Building
• Integrity
• Fair Competition
• Harmonisation
• Liability
• Monitoring Outcomes

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The Steps in the Procurement Process

• Announcement and Pre-qualification (long
  listing)
• Short List
• Request for Proposal
• Letter of Invitation
• Terms of Reference
• Information to Consultant
• The Proposed Agreement
• Preparation and Submission of Proposal
• Receipt and Opening of Proposals
• Evaluation
• Negotiation and Award
• De-Briefing

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Proposals

• It is essential that the consultant addresses the
  TOR and the evaluation criteria faithfully and
  accurately.

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Evaluation

• This is a key feature of the Procurement Process
  which is so often carried out in a questionable
  way, thus frustrating quality consultants and
  penalising the end client.

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Recommended Criteria for the Selection of the
Evaluating Committee Members

• Professional Experience
• Familiarity with Selection and Evaluation
• Objectivity
• The Client Decides on the Number of Members
• Independence

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The Contract Agreement

• The recommended form of agreement is the FIDIC
  Client Consultant Model Services Agreement
  (White Book) or at least a recognised standard
  contract, with appendices filled in as
  appropriate, reflecting the scope of work. The
  final TOR and the agreed methodology shall be
  incorporated in the scope of work. The selected
  firm should not be allowed to change the key
  staff or any major items included in its
  proposal, unless both parties agree that undue
  delay in the selection has made it necessary.

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Result 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 Owners best
  interest.

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Result 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.
• In 1995 a pedestrian bridge collapsed at the
  Maccabiah Games in Israel causing the deaths by
  drowning of about 40 athletes.
• Engineering services for the structures were
  awarded on the basis of price.

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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

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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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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 and
• Mutually beneficial supplier (sub consultant)
  relationships.

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Quality-Based Construction

• Quality principles extend to the tendering and
  construction phase. Means to incorporate quality
  principles include
• Prequalification of contractors
• Quality-based construction management
  procedures and
• Documentation of contractor performance.
• Selection of Contractors to include quality
  elements

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Conclusion A Working Partnership

• The consulting engineering industry remains
  largely responsible for the planning, design,
  construction, inspection and management of the
  infrastructure needed to meet the worlds
  ever-increasing demand for food, water,
  sanitation, shelter, health services,
  transportation and energy. It tackles on a daily
  basis the problems of how to improve peoples
  lives while preserving natural resources in a
  world with a growing population.

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Conclusion

• The incorporation of Quality-Based Principles in
  the execution of projects is essential to the
  achievement of the stated goal a reversal of
  the trend of diminished Quality Outcomes
  on projects.

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Quality
I told you to use Quality Principles to build
this bridge.