4.1  The Choice

The choice of delivery model is a critical step in the project and in the development of the procurement strategy.

The delivery model decision requires:

•  sound understanding of project or program strategic outcomes and their relationships to the various aspects of different delivery models;

•  sound understanding of the project risks and characteristics (identified through the risk assessment and the data-gathering step);

•  detailed analysis to identify which option best optimises project or program strategic outcomes/objectives, which includes achieving value for money;

•  detailed analysis facilitating the alignment of key project risks with relevant characteristics of suitable delivery models to optimise risk management opportunities; and

•  risk assessment of the selected delivery model within the project context.

In determining the appropriate model, departments need to consider which model will:

•  facilitate achievement or optimisation of project objectives and outcomes;

•  achieve the most suitable balance between the level of control the department requires and the degree of risk that is optimal to bear;

•  optimise the schedule, cost and quality outcomes for the project;

•  best suit the characteristics of the project;

•  provide best value for money;

•  achieve the risk management objectives for the organisation and the project; and

•  provide the most appropriate risk allocation between parties.

Factors that may influence the choice of delivery model include -

Design	•  complexity of the design solution •  need for and ability to achieve complete design prior to tendering or construction commencing •  desire for design flexibility during construction •  obsolescence of the design and the ability to upgrade •  scope for innovation and benefits of having competing design solutions
Capacity and capability	•  availability of suitable contractors •  the in-house resources and skills of the principal
Whole of life2	•  merits of bundling capital and ongoing maintenance responsibilities •  how whole-of-life costs will be assessed under each model •  maintenance and disposal responsibilities
Political	•  Government policy and other political considerations
Scale	•  likely cost of the project •  thresholds e.g. for consideration of PPP policy or project alliancing
Cost	•  the need for strict cost control and/or certainty
Certainty	•  what degree of certainty is there about design and achievement of KPIs? •  what is the need for cost certainty?
Project characteristics	•  risk factors particular to a project •  unique or unusual circumstances or factors
Timing constraints	•  what model is likely to best accommodate time constraints? •  are there critical deadlines?

When making the delivery model decision, the department should keep an open mind and, at least initially, consider a range of potentially suitable models.

It is important not to presume that a particular model would be the most appropriate or to bias analysis of the available options.

The chosen delivery model may be a hybrid of several models to optimise project or program outcomes while concurrently managing risks that arise from the project or procurement activities.

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2 Although PPPs and some other models explicitly take account of various whole-of-life costs, it is prudent to consider whole-of-life cost implications of all procurement decisions irrespective of the delivery model.  Relevant whole-of-life costs may include the operations, maintenance, upgrades, energy and environmental costs.