Outline of delivery models

Traditional: models that allocate price risk to the contractor and have low to medium levels of integration

Design then Construct
(D then C)

Government procures design consultant to prepare the design to a construction-ready standard (generally issued for Tender/ Construction or Final Design). This design then is the basis for the construction tender, generally on a fixed-price basis

• Reasonable confidence around construction costs for budgeting purposes following construction contract execution
• Highest level of design control and flexibility
• Government can manage stakeholders more easily
• Enables resolution of design complexities before construction contract award
• Low tendering costs
• Attractive to a broad range of contractors

• Requires additional time to complete design before construction tender
• Minimal contractor input to design
• Design not driven by price competitiveness
• Risk of cost overruns, as Government bears risks of design integration, constructability, ground conditions, planning approvals and fitness for purpose
• Little opportunity for contractor innovation
• Limited opportunity for bundling services/maintenance and creating whole-of-life efficiencies

• PMA (Footnote: Project Management Agreement forms )
• MW 21 (Footnote: Minor Works 21 forms )
• GC 21⁠ (Footnote: Potential contract forms)

• Government wishes to retain control over design
• Clear scope definition and little likelihood of scope creep or wholesale changes to requirements
• Little need for innovation from the contractor
• Risks are well known and the contractor can price them readily
• Enough time to complete design before tendering
• Limited need for bundling services/maintenance

• Large pool of potential construction contractors, which leads to increased competition
• Significant scope for competitive construction prices because of design certainty
• Contract value is set before construction starts

Document & Construct

Government engages design consultant to prepare the design to a level enabling it to obtain Development Approval, and then procures a contractor to complete and document this design and to undertake construction, generally on a fixed-price basis.

Contractor is responsible for, and assumes risk for, final design and constructability

• Reasonable confidence around construction costs for budgeting purposes following construction contract execution
• High level of design control and flexibility
• Government has more control over quality than under D&C
• Government can manage stakeholders more easily
• Facilitates Government obtaining Development Approval before entering into construction contract
• Enables resolution of design complexities before construction contract award
• Low tendering costs
• Construction works can commence ahead of full design documentation
• Contractor bears risk on final design and constructability
• Some scope for innovation in constructability, processes and equipment
• Attractive to a broad range of contractors

• No early contractor input to design
• Design not driven by price competitiveness
• Risk of cost overruns, as Government bears design risks
• Little opportunity for contractor innovation in overall design
• Lack of focus on whole-of-life (durability) considerations

• MW 21
• GC 21
• PMA

• Government is best placed to obtain Development Approval
• Clear scope definition and little likelihood of scope creep or wholesale changes to requirements
• Enough time to complete design before tendering
• Risks known and the contractor can price them
• Limited opportunity for bundling services/maintenance and creating whole-of-life efficiencies

• Significant scope for competitive construction prices because of design certainty
• Contract value is set before construction starts
• Potentially, reduced overall project cost for building projects because the contractor can contribute construction experience into the final stage of design

Design & Construct (D&C)

Government procures an integrated design and construction outcome. Procurement generally takes place based on Concept or Preliminary Design (or even no design at all) and fully documented functional, technical and asset performance requirements (an Output Specification). Fixed price and timeline. Under two-phase D&C model, at the end of the design phase, scope, time and budget must meet the Territory’s requirements before entering the construction phase

• Good confidence around construction costs for budgeting purposes
• Strong contractor input to design
• Design partly driven by construction price competitiveness
• Construction works can commence ahead of full design
• Incentives for innovation in design, particularly around constructability
• Contractor motivated to achieve earliest completion
• Attractive to a broad range of contractors

• Price competition may drive low quality of finish and durability
• Government has less control over asset quality than under Document & Construct
• Emphasis on upfront technical and performance specifications is necessary to ensure the asset is fit for purpose
• Longer tender period to allow tenderers to develop designs
• Lack of focus on whole-of-life (durability) considerations
• Enforceability of construction warranty relies on adequate maintenance
• Potentially risky to Government if applying to bespoke or niche projects where the Territory has limited experience and/or internal expertise.

• MW 21
• GC 21
• PMA

• Government can specify its requirements before tender and is unlikely to change them
• Contractor, rather than Government, is best placed to manage detailed design
• Government is seeking cost effective designs
• Opportunities exist for innovation, particularly around constructability
• Risks known and the contractor can price them
• Limited opportunity for bundling services/maintenance and creating whole-of-life efficiencies

• Single point of accountability for design and construction
• Fixed price contract
• Potentially, reduced overall project cost because the contractor can contribute construction experience into the design, resulting in innovation and efficiencies

Design Construct Maintain – short-term (DCM ST)

A Design & Construct contract and typically a separate contract for routine, reactive and preventative maintenance. Two contracts either with the same party or related parties with an interface agreement between them. Maintenance contract typically is up to 5 (and no more than 10) years’ duration. This contract is likely to exclude unplanned asset replacement or refurbishment. The contractor will receive predetermined monthly or quarterly maintenance payments, subject to indexation and possibly abatement for performance failures

• Certainty of maintenance costs and outcomes (other than lifecycle)
• Maintenance contract can prevent poor finish and fittings
• Mitigates potential for disputes over whether problems with assets are due to defects or poor maintenance
• Potential benefits of private sector efficiency in the integration of maintenance with design and construction

• Emphasis on upfront specifications
• High procurement and bid costs
• Limited market locally and possibly more widely
• Limited focus on longer-term whole-of-life (durability) considerations
• Responsibility for asset management split between Government and contractor
• Performance failures can be difficult to detect
• Potential interface risks between D&C and maintenance contractors

• GC 21 for D&C with bespoke Infrastructure Maintenance Services Agreement

• Like D&C, but with scope for bundling maintenance with the design and construction contract and to create whole-of-life efficiencies

• As with D&C, with the additional benefits of greater durability and better maintenance cost outcomes

Integrated: models that are suitable for complex projects and involve a bundling of services and a greater degree of private sector involvement

Some of these models may not be relevant for Tier 2 projects, and all are not relevant for Tier 3 projects

Design Construct Maintain – long-term (DCM LT)

A Design & Construct contract plus a long-term facilities management and maintenance obligation. This model is like the short-term DCM but with a longer-term maintenance obligation of at least 10 years’ duration; and abatements for performance failures. It can be either two separate contracts with related parties or a single DCM contract with an SPV, which in turn contracts separately for the D&C and the FM components

• As for a short-term DCM but with greater certainty, particularly around whole-of-life considerations
• Incentive on contractor to optimise whole-of-life costs
• Interface agreement between D&C and FM contractors mitigates interface risk
• Absence of private finance means that the Government has greater flexibility than under a PPP

• As for a short-term DCM, though with fewer concerns over whole-of-life risks
• Few precedents
• Uncertainty over market appetite (potentially significantly less than for a PPP)
• Generally unattractive to smaller contractors
• Lengthy and costly procurement process
• Performance incentives much less than under a PPP, particularly for asset availability
• Government largely retains fitness for purpose risk

• Bespoke

• Scope for bundling facilities management and maintenance with the D&C contract and creating whole-of-life efficiencies
• Asset performance requirements capable of clear definition and measurement
• Scope for innovation, particularly in relation to whole-of-life efficiencies

• As for D&C and short-term DCM, with the additional benefits of greater durability and better whole-of-life cost outcomes

Design Construct Maintain Operate (DCMO)⁠ (Footnote: Also known in other jurisdictions as Design Build Operate Maintain (DBOM). )

Involves Design and Construction with a bundling of maintenance and operations, of at least 10 years’ duration and typically 20 years’ or more. Generally, involves a single contract between a special purpose vehicle and the Territory

• As for long-term DCM
• Design outcome reflects commercial risk of both operations and facilities management
• Drives innovation
• Drives quality outcomes through application of performance management regime within payment mechanism

• As for long-term DCM
• Performance incentives much less than under a PPP, as no capital is at risk

• Bespoke

• Scope for bundling operations and maintenance with the design and construction contract and creating whole-of-life efficiencies

• As for long-term DCM with the addition of operational efficiencies

Availability PPP – Design, Construct, Finance, Maintain (DCFM)

Involves Design and Construction with private finance and a bundling of maintenance and support (non-core) services usually for a period of between 25 and 40 years

• Design outcome reflects commercial risk of facilities management (and operations for DCFOM)
• Private finance due diligence investigations provide additional robustness
• High innovation
• Financial certainty through pre-determined service payments
• Drives quality outcomes through application of performance management regime within payment mechanism

• Very high procurement and bid costs
• Requires a high level of expertise within Government for development, procurement and monitoring performance
• Low flexibility after financial close, due to need to negotiate with multiple parties
• Generally, only attractive to major contractors and specialist developers
• Complex contract management
• Long term commitment to a fixed payment stream

• Bespoke, though there are standard commercial principles and many precedents

• Capital value of at least $150 million
• Complex and long-term infrastructure
• Outputs capable of clear definition and measurement
• Scope for innovation
• Whole-of-life asset management is achievable and cost-effective
• Strong market interest
• Opportunities for appropriate risk allocation to private sector
• Opportunity for bundling contracts
• Significant service component
• Complementary commercial development

• Sufficient scale and long-term nature
• Complex risk profile and opportunity for risk transfer
• Whole-of-life approach from integration of design, construction, maintenance (and operation for DCFOM) over the life of an asset, in a single project package
• Innovation
• Appropriate third-party use of facilities, reducing net cost to Government
• Efficiency of contract management

Availability PPP – Design, Construct, Finance, Operate, Maintain (DCFOM)

Involves Design and Construction with private finance and a bundling of operations (core services) and maintenance usually for a period of between 25 and 40 years

User Charge PPP⁠ (Footnote: Previously known as Build Own Operate Transfer or BOOT PPP. )

Involves Design and Construction with a bundling of operations and maintenance, usually for a period of between 25 to 40 years. Private finance. Private sector has economic ownership of the asset over the contract duration and receives user charges, bearing revenue risk

• Extremely high innovation
• Financial certainty for Government
• Private finance due diligence investigations provide additional robustness
• Drives quality outcomes
• User charges fund all or a substantial proportion of the capital costs

• Extremely high procurement and bid costs
• Requires a high level of expertise within Government
• Low flexibility after financial close
• Generally, only attractive to major contractors and specialist developers
• Financiers very wary of taking revenue risk
• May require a Government subsidy if economically strong (BCR well above 1) but not financially viable
• May require a Government minimum usage guarantee

• Bespoke, though standard commercial principles and many precedents

• Major economic infrastructure projects such as toll roads, with capital values of at least $250 million, but also can be used for small projects (e.g. hospital car parks, waste treatment plants) with capital values of under $50 million
• Complex and long-term infrastructure
• Robust, predictable revenues from user charges
• Scope for innovation
• Whole-of-life asset management is achievable and cost-effective
• Strong market interest
• Complementary commercial development

• As for Availability PPP
• Revenue from user charges strongly links returns to user experience
• Even stronger benefits of integration, innovation and private sector efficiency

Flexible or Relationship: models that are suitable for projects where the private sector cannot bear full price risk. Relevant where scope is unknown or has the potential for variation

Some of these models may not be relevant for Tier 2 and Tier 3 projects

Project Management Agreement (PMA)

The PMA is a flexible delivery model that can provide client-side services ranging from full design and construct to construct only. Current arrangements involve the sourcing of a Project Manager (PM) from a Panel under a Work Order. The PM receives some fixed payments for its on-site reimbursable labour costs and an agreed percentage fee for off-site overheads and profit. The PM is the principal contractor and engages and manages subcontractors, suppliers and consultants

• Non-adversarial: PM provides client-sided advice
• Fixed on-site and off-site costs
• Capacity to engage PM without a design or detailed scope of work (a form of Early Contractor Involvement)
• Provides for an early commencement and potential fast tracking of early works on projects with multiple sites and work fronts
• Transparent financials: the PM operates under an open book arrangement
• Reliance on the PM’s ACT Builders licence ensures compliance with statutory requirements

• Relatively unique delivery model used in the Territory, requiring the contract manager and Partner Agency to have a developed understanding of the PMA and how it operates
• Financial and time risk remains with the Territory
• Relies on the PM obtaining competitive quotations from subcontractors and suppliers
• PM requires design management skills when undertaking design and construction
• Projects for delivery under the Panel have an upper limit budget of $5 million

• Work Order under the standard terms and conditions of the Panel

• Limited scope of works provided and/or the PM to refine the scope of works
• High risk projects where materially adverse site conditions and/or scope changes due to design refinement are likely

• Off-site costs for profit and overheads, together with the reimbursable costs of the PM’s on-site staff, are known in advance
• PM does not have capacity to claim variations or extension of time delay costs for its benefit
• PM required to deliver the scope of works within the nominated time and budget
• PM cannot spend or commit funds that are not in the approved budget

Managing Contractor (MC)

Government appoints a managing contractor, typically early in the delivery process to manage the scope definition, design documentation and construction. The MC engages subcontractors to deliver the works. The MC is responsible for administering these subcontracts and normally accepts some delivery risk.

Contract typically has a fixed management fee (often a percentage of subcontract values) plus reimbursement of subcontractor costs. Often, there is a performance incentive for delivery within the timeline and budget

• Relatively fast procurement of MC
• MC is single point of reference
• Full scope definition not necessary
• Competitive tendering for individual works packages
• Can use varying pricing model for each works package (i.e. fixed, target, open)
• High visibility of subcontractor pricing
• Enables early contractor involvement
• Government retains influence over the project, including selection of subcontractors
• Flexibility in risk transfer to the MC (e.g. all design errors retained by the MC)

• Often an expensive delivery model
• Total construction costs typically negotiated rather than competitively tendered
• Generally unattractive to smaller contractors
• Government retains substantial time and cost risks until award of construction contract
• Reduced Government control

• ACT Modified Defence Managing Contract form
• Bespoke

• Complex or high-risk projects with uncertain scope, risks or technology
• Need for maximum design flexibility throughout the project

• Flexibility in delivery to manage uncertain risks
• Maximising government input to manage risks where appropriate
• Managing Contractor has incentives to achieve cost and schedule targets

Pure Alliance

Government enters into an Alliance with one or more Non-Owner Participants (NOPs), selected on qualitative criteria. The basis of an Alliance is a ‘no fault, no blame’ culture. The parties work together to determine the best for project solution and to deliver the project. The NOPs develop a Target Outturn Cost (TOC) under an Alliance Development Agreement and then the parties share both upside and downside of the actual cost against the TOC, on an open book basis.

Competitive Alliances now preferred over Pure Alliances

• Sharing of downside with NOPs
• Can deliver projects with substantial uncertainty, such as developing scope and latent conditions
• High degree of knowledge sharing between participants
• Can accommodate technically challenging, complex and high-risk projects with limited market appetite under other delivery models

• No price competition
• Government bears majority of project risks
• NOP downside sharing limited to profit margin
• Sharing of upside
• Complex, high-cost contract management
• Generally unattractive to smaller contractors
• Significant cost and time to establish

• Bespoke

• Complex and high-risk infrastructure projects
• The solution is unclear or there is a significant likelihood of scope changes
• A high level of innovation is necessary
• Risks are unpredictable and best managed collectively, with costs of transferring risk prohibitive
• Close involvement of Government, which can add value
• There is mutual strategic benefit in long-term relationship building between the parties

• Elimination of costs of adversarial conduct, claims and disputes (the ‘no fault, no blame’ culture)
• Culture promotes innovation, integrated planning, design and construction process with early contractor and consultant involvement

Competitive Alliance

Like a Pure Alliance, but the TOC forms part of the selection process

• As for Pure Alliance, but with competitive determination of the TOC

• As for Pure Alliance, but with competitive determination of the TOC
• Higher tendering cost than Pure Alliance

• Bespoke

• As for Pure Alliance

• As for Pure Alliance, with the further benefit of competitive determination of the TOC

Early Contractor Involvement (ECI)

Government develops Functional Design Brief, which informs a concept design and a pre-tender estimate for construction. Tenderers bid fixed price to develop detailed design, and target price (with fixed preliminaries, margin and overheads) for construction. Contractor then develops design and finalises fixed construction price. Government either accepts this price, or tenders Construct-Only contract. Often used for enabling works for a major project

• Low tendering costs
• Ability to switch to Construct-only contract if contractor’s price not acceptable
• Government owns detailed design and can tender construction competitively if necessary
• Early collaboration provides opportunities to resolve design and other risks
• Significant level of input from contractor on constructability of design
• Opportunities for innovation
• Can be used with a variety of subsequent delivery models

• Program delays if contractor’s fixed price is not acceptable
• High level of Government input required to ensure that the project is value for money
• May over-engineer the design
• Generally unattractive to smaller contractors
• Can be inflexible in construction phase

• Bespoke ECI Deed with generally standard construction contract (e.g. GC21)

• Government able to develop concept design and reasonably accurate pre-tender estimate
• Contractor best placed to manage detailed design engagement with Government and take risk on final design
• Contractor unwilling or unable to provide a fixed price tender for D&C
• Scope for innovation

• Single point of accountability for design and construction
• Potentially, reduced overall project cost because the contractor can contribute construction experience into the design, resulting in innovation and efficiencies
• Partly competitive process for determining construction price
• Early collaboration provides opportunity to resolve design and other risks

Construction Management (CM)

Government engages a Construction Manager to manage the construction as its agent. Government prepares the scope and engages the designer and contractor directly

• Rapid procurement and commencement of construction
• Tolerant to developing scope and multiple variations

• Government bears extensive risks
• Construction Manager typically does not bear project risks
• Lack of price certainty
• No single line of responsibility
• Extra cost of Construction Manager
• No focus on whole-of-life considerations

• Bespoke

• Government needs to retain overall control of the project and design
• Low value projects with significant uncertainty
• Government needs to contract out project management

• Large pool of potential construction contractors, which leads to increased competition
• Competitive determination of construction price
• Flexibility in delivery to manage uncertain risks
• Maximising Government input to manage risks where appropriate

Delivery Partner (DP)

Government engages a Delivery Partner to assist in project planning, programming, design management and construction management, typically for a Program of projects, in return for a management fee. Generally, the Government precludes the Delivery Partner from performing design and construction work for projects, requiring it to tender them competitively and to engage the contractors directly. The DP model may have an incentive or ‘gain-share, pain-share’ structure based on target costs and completion dates, and on quality measures

• ‘Gain-share, pain-share’ mechanism financially motivates the Delivery Partner to help Government manage costs, timing and quality risks
• Efficient and potentially cost effective for Programs of projects or projects with multiple works packages; with multiple interfaces and challenging time constraints
• Government has some control over appointment of subcontractors
• Flexibility, particularly in programming

• Low cost and time certainty at the time Government engages Delivery Partner
• Generally unattractive to smaller contractors
• Delivery Partner only bears project risk to the extent of its ‘pain share’

• Bespoke, with generally standard construction contract (e.g. GC21)

• Large Programs of projects or projects with multiple works packages
• Government willing to manage integration and other risks to achieve time outcomes
• Ability to manage large Programs or projects where time constraints apply, and scope is not sufficiently well defined to warrant a D&C

• Competitive procurement of design and construction packages
• Flexibility
• Financial incentive on Delivery Partner to manage cost, timing and quality risks
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