February 26, 2014
Alberta school procurement halted and restarted
The Alberta government halted and later resumed the public-private partnership (P3) procurement process for the construction of 19 schools in the province, after receiving only a single response to its request for qualifications (RFQ).
“The Redford government’s P3 schools experiment has been all but abandoned by the construction industry,” said Gil McGowan, president of the Alberta Federation of Labour (AFL).
“It’s time for Premier Redford to get her feet on the ground and put forward a conventional plan to build new schools. I’m calling on the province to publicly do as industry has already done – abandon this failed P3 experiment and get busy with a real plan to build Alberta schools.
“The Redford government needs to be honest with Albertans about how and when new schools will be built.”
“Families in new neighborhoods can’t send their children to a school made of government press releases held up by hot air,” he said.
The AFL recently released the findings of a debriefing session that identified and analyzed problems with the RFQ and the Design-Build-Finance-Maintain (DBFM) contract for the construction of 19 schools in southern and north central Alberta.
In November last year, the government announced that Build to Learn, with team leads Gracorp Capital Advisors Ltd. and Bird Capital Limited Partnership, was the single respondent to the RFQ stage for the Building Alberta’s School Construction Program (BASCP).
Despite this, the government invited Build to Learn to enter the Request for Proposal (RFP) stage of the procurement process.
However, the Deloitte report produced in October reveals that the government was already questioning whether or not the P3 procurement process was appropriate for this project.
“The procurement process has been halted and INRA (Alberta Infrastructure) is now considering a range of different procurement options for the 19 schools initially considered for DBFM, as well as nine additional schools, which could include, without limitation any combination of one or more DBFM and/or Design-Build bundles,” said the Deloitte report, which was obtained by the AFL through Alberta’s Freedom of Information system.
The report is based on interviews with developers, contractors and design builders, as well as maintenance and renewal providers, who are active in western Canadian P3 market.
It concludes there are several primary reasons for the low response to the RFQ.
To begin with, there are currently a significant number of non-P3 opportunities with lower procurement costs that market participants are directing their time and resources to secure.
Participants said they expect the construction industry in Alberta to continue to ramp up further and don’t see any slow-down in the near to medium term into 2014.
The increasing price competition on previous P3 projects in the education sector has resulted in a reduction in margins and returns.
This means that this project doesn’t provide enough incentive for proponents to bid.
The number of schools in the BASCP requires a significant number of senior resources to manage the construction component of the project for a single contractor to undertake.
There is a scarcity of such resources in Alberta and companies would prefer to allocate those scarce resources in higher-value-per-location projects.
In other words, contractors would rather assign one project manager/construction supervisor to a single site than numerous project managers/construction supervisors to numerous smaller sites.
Some participants felt that proponents with experience in previous P3 education projects had a competitive advantage and consequently believed this decreased their chances of success.
In addition, there are likely only two teams with the local capacity to be successful for a project of this type and size.
The participants said a higher response rate could be obtained if the delivery model for the project was altered to design build (DB) bundles in staggered procurements from Design-Build-Finance-Maintain.
Small and medium-size contractors like the idea of smaller DB bundles and said they would participate in at least one of them.
Participants also suggested that a limit of two or three schools per bundle should be imposed.
They also said that each bundle should consider different factors such as complexity, location and the total cost.
Others added that larger contractors should be allowed to take on larger bundles of four to five schools in their home market.
The government decided to restart the procurement process after receiving a report from a government appointed fairness adviser. However, the document is not being released to the public.
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