Performance Based Studies Research Group

by Jeroen van de Rijt and Sicco Santema

The best value Performance Information Procurement System (PIPS) Procurement has been implemented outside the United States by both visionary contractors and clients. PIPS has recently been implemented in The Netherlands by two of the largest construction companies in the Netherlands, Ballast Nedam (procurement of acoustic fencing along railway track) and Heijmans (bitumen emulsion). Currently, the Rijkswaterstaat (the Dutch government agency which is a part of the Dutch Ministry of Transport, Public Works and Water Management, in charge of public works and water management, including the construction and maintenance of waterways and roads) is implementing the PIPS methodology. Rijkswaterstaat has previously done a pilot using modified best value PIPS concepts (on a small scale) and will now be using the PIPS process in a more pure methodology to procure infrastructure construction projects, estimated at €850-1,270M. This is the largest best value test conducted outside the United States.

The road network in the Netherlands (specifically the Randstad area¹) is heavily congested, with journey time for more than one in five journeys being unreliable during the rush hour. Most of the traffic jams in the Netherlands (81% in 2005) are concentrated in The Randstad (source: OECD). In the Netherlands there are extensive procedures preceding road construction. The average lead time from idea to new road is over 20 years. A law was passed called ‘Besluitvorming Versnelling Wegprojecten” (translated: “Decision making Accelerating Road projects”). This law enables Rijkswaterstaat to take some quick measures to reduce congestion on several locations on the Dutch road network. The Dutch Ministry of Transport, Public Works and Water Management has identified 30 major bottlenecks which need to be (partly) resolved by May 1, 2011.

The major reason for using the best value PIPS process is that the procurement of design-bid-build contracts usually leads to high transaction efforts and costs by all participants. At this time the tender capacity in the Dutch industry is limited. Suppliers have asked Rijkswaterstaat to develop a procurement strategy based on quality aspect to lower the transaction costs. Rijkswaterstaat has adopted the best value PIPS Procurement to address the issue.

As speed and quality is of the utmost importance, the best value PIPS methodology will be used to select the best suppliers who will do the infrastructural work on 16 selected projects (typical work: asphalting, making acoustic screens, road signs and signals, lightning, adding extra lanes next to existing lanes, renovating bridges, gantry sign / overhead traffic sign, etc). The 16 projects have been clustered into 6 clusters (see table).

The precise scope of the clusters is yet not defined. Because of the importance of speed, the Ministry will awards the project to the supplier that best understands the project and how they will deliver the project. The PIPS concepts will force only the best value vendors to preplan, to provide dominant value, to come up with the plan to manage and minimize the risk and deviations from beginning to end, before being awarded the contract. The Ministry will work out all further details with that supplier (the actual design & realization). This methodology has some dominant advantages: it is faster, it gives the competitive advantage to the high performers and it minimizes transaction cost for all suppliers. Only one supplier has to do the detailed preplanning.

Cluster	Project(s)	Estimated budget in €M
A	A9 Velsen – Raasdorp A9 Raasdorp – Badhoevedorp A4 Badhoevedorp – Nieuwe meer A10 Nieuwe Meer – Amstel	30 – 60
B	N50 Ramspol – Ens	100 – 130
C	A9 Alkmaar – Uitgeest	15 – 30
D	A1 ´t Gooi A1/A6 Diemen – Muiderberg – Almere Stad West A1 Watergraafsmeer – Diemen	270 – 350
E	A2 Maasbracht – Geleen A2 's-Hertogenbosch – Eindhoven A2 Leenderheide – Valkenswaard A58 Eindhoven – Oirschot	260 – 390
F	A12 Gouda – Woerden A12 Woerden – Oudenrijn A2 Oudenrijn – Everdingen	175 – 310

Total budget : €850 - 1,270M

Rijkswaterstaat has set up 6 project teams who will use the best value procurement process for “their” cluster. There also is a mentoring procurement team who monitors and coaches the individual teams.

Because policies of the Ministry and the constraints of the European law, a slightly adapted PIPS version will be used. In this version the following award criteria are used:

• Price (based on the variables known in the first stage; eg # of kilometers asphalt); 30%
• Quality of the plan to minimize traffic hinder; 15% (this criterion will not be used in all clusters)
• Risk Assessment and Value Added (RAVA) plan: 20%
• Interview: 20%
• Planning: 15%

Rijkswaterstaat is not using the Past Performance filter because a national Past Performance system for the Dutch construction industry is not yet in place. As the process of Best Value Procurement is rather new, Scenter and Rijkswaterstaat have given education sessions on PIPS, discussing the new concepts and the clustering of the projects by Rijkswaterstaat with possible suppliers in a “market consultation” which took place this April, before the start of the formal tender procedures. Almost all suppliers are happy to see that quality (and not price) will be the major criterion in the selection process.. A majority of the suppliers are satisfied with the award criteria (traffic hinder plan, Risk Assessment Value Added (RAVA) plan, interview and planning). The contractors do seem anxious of the heavy weighting of the interviews in the process, mainly due to fears concerning the objectivity of the interviews. Rijkswaterstaat will use the interviews as an award criteria. However, based on the market consultation the weighing of the interviews will be lowered to 20% (instead of the suggested 25%). The selection of contractors for the first clusters B,D and E were started this past August.

About the Authors

Jeroen van de Rijt
Senior Management Consultant at Scenter
rijt@scenter.nl

Prof. Sicco Santema
Director and Managing Consultant at Scenter / Professor of marketing and supply chain management at Delft University of Technology.
s.c.santema@tudelft.nl

Both Jeroen and Sicco are members of the International Advisory Board of the Performance Based Studies Research Group and coordinators of the Netherlands CIB W117 efforts. They are the Dutch focal point for Best Value PIPS practices in The Netherlands. They are currently assisting the Rijkswaterstaat in implementing best value PIPS.

The Procurement officer within Rijkswaterstaat is Wiebe Witteveen: wiebe.witteveen@rws.nl

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