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Case Studies

Introducing innovation in infrastructure projects is challenging in most jurisdictions and Canada is no exception. Public-private partnerships represent a major opportunity to drive innovation, especially when long-term operations and maintenance are incorporated into the contract.  The following case studies highlight different approaches across various jurisdictions that have successfully enabled innovation in procurement to be utilized in a project in an efficient and effective way.

Going Dutch

Dutch Ministry of Infrastructure and the Environment, Rijkswaterstaat

Rijkswaterstaat set out five objectives around positioning innovation in their targets, leveraging national and international best practice, having a procurement process that selects promising innovations, developing a policy framework for procurement, and eliminating obstacles to innovation procurement. Facing a number of challenges around climate change and aging infrastructure the Rijkswaterstaat introduced a framework in 2015 to promote innovation through procurement.

 

The goal was that each innovative project should reduce lifecycle costs by 30%, increase functionality by 30% and increase safety and sustainability by 30%. The ministry has a goal of spending 2.5% of its budget on innovation and is also looking to set up its own public-private innovation fund with the long-term goal of seeing returns on investments from that fund. One key element of this is a decision flowchart for public procurement of innovation, this emphasized the importance of functional demands over technical specifications. It developed a new system of testing and validation to evaluate applicability of innovations, setting up pilot projects, and arranging competitions to solve specific challenges.

Getting Government and Industry on the Same Page

Construction Sector Accord, New Zealand

In New Zealand the government and industry signed an accord to work together towards a safer, more productive, innovative industry. The government as the industry regulator and a major client recognised the need for a new way of working to meet some of the major challenges faced by the sector together.

 

The accord provides a platform to improve performance, with commitments from government to develop better procurement practices, improved project pipelines, and better regulations. Industry committed to deliver greater leadership and alignment on key issues, better performance, and improved culture. With shared goals to develop the workforce, improve risk management, and a focus health and safety.

Delivering Outcomes that Benefit Patients

Karolinska University Hospital, Solna-Stockholm, Sweden

With a growing and aging population and the cost of care rising, Stockholm County Council commissioned a new hospital to support projected new patients. The design for the hospital was built around delivering a better, more integrated patient journey.

 

The “patient always first” vision shaped the project which was procured as a design, build, finance, operation, and maintenance contract lasting until 2040, with the first patient received in 2016. A number of goals shaped the planning and construction and included: integrated care, research and education to support dissemination of knowledge; attractive environments; healthcare and support services should be optimized; it should permit continuous operational development; should be sustainable.

 

This helped shape the design that allowed a faster response to patient needs, and a focus on recovery.  Factors like light, space, and indoor climate were optimized to deliver a better care experience. By seeking perspectives of doctors, nurses, and technicians, the design team could envisage the flow of care and ensure patients with then highest and most urgent need were located close to MRIs and X-ray machines for example.

Delivering Outcomes that Benefit Commuters

Bank Station, London, UK

With a highly complex upgrade of Bank Station on the London Underground, Transport for London developed a new procurement approach called Innovative Contractor Engagement (ICE). Rather than the usual approach where the winner is typically the one bidding the lowest price for a relatively fixed scheme, the process was flipped on its head with bidders invited to bring ideas to the table to bring greater value for commuters and employees.

 

Giving bidders access to a range of documents including TFL’s business case, all of the detail of the original scheme, including the price risk register. This also outlined a base price and what was most important to TFL in their operations of the station including what was most important to them: reducing journey times and relieving congestion on platforms; providing step free access; and improving station fire evacuation times. Bidders were engaged early and effectively asked – “can you do any better?”

 

This helped to draw in ideas from down the supply chain before the design was too locked in. The market was involved in a protected dialogue where they could share ideas and losing bidders were compensated for time spent and received half the share of any savings their ideas produced. The winning bidder presented a 19 percent improvement in passenger journey times and a 23 percent reduction in cost.

Delivering Better Patient Care

Abbotsford Hospital and Cancer Centre, BC

The primary purpose of hospitals is to provide the best possible patient care. The new 300-bed hospital ensured patient care was central to its design by incorporating specific requirements in the evaluation criteria. Of 100 points on offer the largest portion (30) were offered for clinical operations, efficiency and design. Thinking of the life cycle costs of the hospital, facility management and human resources considerations could earn up to 25 points, with construction only worth 10 points. This scoring framework and the process of acceptable equivalents provides more of an incentive to propose innovative solutions as they are more likely to get accepted and contribute to a good score. It is also much clearer how the solutions put forward would positively contribute value.

 

To score well on the clinical side the design had to take into consideration things like travel distances for nurses and medical staff, daylight and acoustics to promote a healing environment, infection control, and potential recurrent cost savings. This helped to underline that the infrastructure is the location where a service is delivered, and more weighting was given to the operations and maintenance of the hospital which accounts for over 80 percent of the total cost over 30 years.

Going Beyond Pure Cost

Construction Procurement Handbook, Scotland

To help drive better value in construction procurement the Scottish government developed a Construction Procurement Handbook that includes guidance on approaches to evaluation. A key principle is that tenders should be evaluated on the basis of best price to quality ratio, which may include life cycle costing for major projects.

 

They provide guidance in setting this ratio by considering type of work, the contract value, project complexity, requirement for innovation, and if the project is a repeat. They encourage evaluators to use the full range of scoring on quality and not cluster all bids around a score so the award becomes purely about price.

 

Scotland has also moved towards a Whole Life Cost approach which favours innovation. This takes into account all aspects of cost including acquisition costs, operational costs such as energy use, maintenance and end of life costs such as decommissioning and demolition. The Scottish Futures Trust developed a Whole Life Appraisal Tool to help guide contracting authorities to consider a whole life outcome approach as they assess bids.

Proposing Alternatives

US Departments of Transportation: Alternative Technical Concepts (ATC)

An ATC is approach used in procurement phase when a proponent team can propose an innovation specific and confidential to their team only that will be amended into their contract during Preferred Proponent phase of the Project. ATC’s have been provided on:

  • Equivalent or Better – process already exists through Acceptable Equivalent;
  • Cost Benefit Analysis – sometimes ATC’s are utilized to relax overly stringent requirements identified in the contract (can be for technical or functional items) that from the proponent team’s experience will not be required. In other instances, they increase the costs but provide a better functional solution.
  • Schedule Analysis – impacts to schedule by the proposed ATC

 

All the above are evaluated for impacts (social, environment, economic) along with rationale. Detailed drawings are provided and the ATC (if required) has separate meetings with the client for Q&As and are accepted prior to technical submission. This helps alleviating the concerns noted above.

 

ATC’s have become an essential tool in delivering greater value and cutting costs on US highway projects. One ATC accepted on a Mississippi bridge projects brought estimated savings of US$ 7.4 million. Caltrans estimates it saves 10% on its design build projects due to ATCs. One recent example in the US saw US$111 million in savings from proposed ATCs being accepted.

Providing a Pathway for Smart Ideas

Ontario Energy Board, Innovation Sandbox, Ontario

To help drive the adoption of ideas, solutions, products and services that can benefit consumers, the Ontario Energy Board developed an Innovation Sandbox. This concept has been rolled out by regulators in Singapore and the UK and gives utilities and companies a point to come forward with ideas, questions and proposals.

 

The Ontario Energy Board provides guidance and can grant temporary relief from a regulatory requirement that may have been acting as a barrier to innovation. If a proposal is adopted this enables utilities to get proof of concept in a real-world environment and also allows the OEB to gain insight on innovation in the sector and keep pace with regulations.

Collaborations and Alliances

Rantatunneli, Tampere, Finland

Around the world alliance contracting is being used increasingly to promote greater collaboration between owners and contractors. It has been used for the expansion of Heathrow Airport Terminal 5 and the London Olympics in the UK; on over A$30 billion of public sector projects in Australia and most recently for the Integrated Project Delivery crossing in Kingston, Ontario. In Finland the approach was used around a complex tunnel project that looked to reduce accidents, have less impact on land use, reduce traffic noise impact, and improve the flow of traffic.

 

Originating in the oil industry, the concept includes a number of aspects to promote a better partnership on projects between all involved including flexibility to adapt to changes on largescale, complicated projects; a no fault, no blame attitude to disputes to move away from adversarial dispute resolution; alignment of interests under one performance framework; transparency of information and costs; and a unified collaborative agreement on sharing pain and gain. The payment provisions usually involve reimbursing all direct costs on a transparent basis to avoid any cutting corners, contribution to corporate overhead, and a risk/reward compensation model that incentivizes both owner and contractor through the performance on key results areas.

 

For the Rantatunneli project in Finland, the key result areas were designed so that the minimum requirement was the industry average (this included schedule, safety record, traffic disruption, and public image). The gain share was built around improved performance: reducing traffic during construction, limiting damage, securing accolades and reducing life-cycle costs. Negative considerations included: traffic disruptions to neighbouring roads, disrupting a nearby trainline, and use of grey economy workers. The result was a reduction in expected cost, and the schedule was cut by six months.

Enabling Innovation in Healthcare

Harbour Mental Health Hospital, Blackpool, UK

The National Health Service in the UK has been a pioneer in using a type of contract known as NEC that encourages collaboration. In 2014, the NHS delivered a new 154-bed mental health hospital in Blackpool UK. The new facility provides integrated specialist care and therapy.

 

The NEC contract provided a foundation for early collaboration that helped reduce costs and maintain high levels of quality on the £39.5 million facility. This early engagement meant together the healthcare trust and the contractor were able to increase capacity by 11 beds and reduce floor area by 10% and subsequently helped reduce operating costs.

 

The pain share/gain share mechanism within these contracts incentivized innovation that enabled the building footprint to be reconfigured, a shift from steel frame to load bearing masonry, and the use of off-site manufacturing delivered £5 million in savings.

Learning and Improving – Post Completion Reviews

Infrastructure Australia

Once a project has been delivered and is operational Infrastructure Australia works with partners to gather lessons to improve future project planning, project delivery, and risk mitigation. This helps to develop a culture of continuous improvement.

 

They look at whether or not the project delivered on its objectives, if net benefits laid out in the business case were realized, if assumptions in the cost-benefit analysis were appropriate, and if outcomes could have been achieved more effectively. Although these reviews are held in confidence, and not published, they are still seen as an important aspect of the process.

 

In British Columbia a post contract evaluation is required for all contracts valued at over $50,000. This looks at deliverables and outcomes; contractor performance; and the internal management team performance.

Building a Learning Legacy

Crossrail, London, UK

For London’s Crossrail, a C$26 billion new rail line under the heart of London, one of the main objectives was to draw lessons from the project that could be used for the benefit of other projects. To do this they specifically set up their Learning Legacy which shares lessons and innovations on a range of challenges, including sponsorship and delivery models, supply chain management, and procurement strategies and assurance.

 

Crossrail was relatively unique in that it was one of the first megaprojects to have a standalone innovation strategy. The scale of the project enables more collaboration, and a four-strong team dove the program to establish a culture across the project. Light touch governance process for innovation enabled shared ideas to be examined and funded and could provide lessons for future projects with a clear flowchart for decision-making. The learnings on innovation helped shed some light on the challenges of innovation and procurement, but also highlighted the need for leadership, clear process, collaboration, and use of effective incentives.