Value Creation in Procurement - The Karapiro WTP Case Study

Annual Conference

This paper uses the case study of the Karapiro Water Treatment Plant Upgrade to demonstrate the value that can be obtained through non-traditional procurement methods including Novation.

The Karapiro Water Treatment Plant is a 10.5 MLD conventional plant that services the town of Cambridge and surrounding areas. To deal with growth and a rationalisation of Council’s treatment assets, an increase in capacity of 7 MLD was required by Council.

After conducting a feasibility analysis, a preferred treatment process for the upgrade was defined.

The questions faced by Council at that point included:

  • Does the Council carry out a design based on the preferred process, thus investing a significant amount into detailed design but still be open to receiving alternative technical offers from tenderers, and thus exposed to potential redesign costs?
  • Will a Main Contractor bidding on the full upgrade have the skills or interest to assess alternative technologies?
  • How can Council best assure getting the optimum combination of Main Contractor and specialist process subcontractor?

Council resolved these issues by splitting the works into two separate contracts – an initial Process Equipment Contract and a second Main Contract into which the Process Contract was to be novated to ensure single point accountability.

This approach achieved the following outcomes:

  • The initial Process Contract attracted several process alternatives which were able to be fully assessed before committing to the final process and detailed design. The competitive nature of this tender provided a significant cost saving over estimates for this component of the work
  • Council managed the design process within the Process Equipment Contract, and made the appropriate payments for supply of equipment, thus avoiding the margin that the Main Contractor would apply on such supply
  • With certainty on the scope of process equipment, Council completed the detailed design and novated the installation and commissioning component of Process Equipment Contract to the Main Contract. This provided confidence to the Main Contractor that the specialist process areas had been well developed (not just addressed in a short tender period). For Council it meant a reduced margin on the Process work and single point accountability for the whole project
  • A significant overall project cost saving was achieved, while preserving Council’s flexibility to select an optimum treatment process, and providing an increased choice on selection of both Process and Main Contractor.
Conference Papers

2.00 Value Creation in Procurement The Karapiro WTP Case Study.pdf

pdf
156 KB
09 Nov 2017

2.00pm M Muntisov.pdf

pdf
458 KB
09 Nov 2017