1.2  Benefits and challenges

A Procurement Options Analysis that takes account of project characteristics will:

•  minimise the likelihood of problems occurring later;

•  maximise the likelihood of achieving project objectives; and

•  improve management of risk and its consequences.

The procurement methodology must be appropriate for the types of risks and issues the project is likely to face in practice. Optimal project outcomes are more likely to be achieved where an objective assessment of the most suitable procurement option is made based on the characteristics of the project.

A well-developed Procurement Options Analysis is one way to reduce problems such as:

•  selection of an inappropriate or sub-optimal delivery model (overlooking a model that would better meet project objectives or critical success factors);

•  cost underestimation or optimism bias at the outset;

•  unforseen risks materialising; and/or

•  poor project management during delivery.

Some key challenges in determining the procurement method include:

•  ensuring proper planning and risk assessment. In some instances, poor project planning and/or risk assessment has resulted in inadequate consideration of key points required to ensure optimal project outcomes;

•  managing timeframe pressures emerging for projects. Sometimes time pressures lead to premature procurement decisions being made by government.  Even where adequate consideration is given to procurement analysis, sometimes delivery timeframes can unduly influence procurement decisions;

•  managing market sentiment. At various times, a certain method may be the current preference either in the public or private sector. Procurement methodology should be selected based on the necessary up-front analysis and planning to ensure that the project is successful; and

•  focusing on value-for-money drivers. Individual projects should be objectively assessed against all the feasible procurement options, and a decision should be made based on the option that is likely to deliver the best overall project outcomes, rather than one which contractors prefer, or the department or agency can proceed with simply or quickly.