5.4 Selecting the Non-Owner Participants
Once the decision has been made to use an alliance as the delivery method, the expectation is that NOPs are then selected based on their potential to optimise VfM in subsequent phases (agreeing commercial arrangements and project delivery).
As noted in Chapter 1, there are two broad alternative approaches to the selection of NOPs51 with a range of hybrid selection processes in between.
1. Non-price competition
• Also referred to as the 'single TOC or 'pure' alliance.
• The NOPs are selected on the basis of non-price criteria.
2. Price competition
• Also referred to as the 'multiple TOC or 'competitive' alliance.
• The NOPs are selected using both non-price criteria and outturn price (TOC) criteria.
3. Hybrid
• There are various hybrids between the above approaches that include both non- price criteria and commercial criteria but not full outturn price. These may include competitive selection criteria based on design innovation, overhead and profit margins, budget pricing and commercial framework.
Of the above approaches, the Victorian DTF Alliance Practitioners' Guide recommends the first approach i.e. NOPs be selected using non-price competition.
Key finding 3: Selecting the NOPs - Non-price and price competition Non-price competition It was found that when non-price selection approaches were used to select NOPs: • Owner representatives generally indicated moderate to high levels of satisfaction with the selection process. • Owner representatives sometimes noted that the selected NOP team members were either not made available to the project or left prematurely. Price competition Noting that the number of price competition approaches examined in this Study was limited to two case studies (consistent with current industry practice), it was found that when price competition was used to select NOPs: • Owner representatives reported a significant management demand on their organisation (compared with non-price selection approach). • The total cost to establish a TOC using price competition (two TOCs) was less (of the order of 2% of TOC) than when non-price selection (single TOC) was used. • The TOC was found to be of the order of 5-10% (of TOC) less, relative to non-price competition on the basis that the following items were lower (in aggregate and individually) when using price competition: - On-site overhead costs - Design costs - TOC development costs - NOP profit margins. Owners on all alliances in the Study advised that good relationships had developed and that the participants worked well together as effective teams. No discernible difference was found between alliances that used price competition and non-price competition. It was also found that generally NOPs have a strong preference for alliancing over other traditional delivery methods. Additionally, NOPs have a strong preference for non-price selection approach over price selection approach. |