NZ Report / Proposal Template - State Services Commission

5.54 This issue is not just a matter of good process for two main reasons. The first of
these is that CWA potentially exposes the client to financial risk unless the CWA approach
is well managed. To the extent that CWA was discussed with the Steering Group in the
context of Northland, it is clear that the potential benefits of CWA were described. What
is less clear is whether the risks and costs around CWA were explained along with the
critical factors that must be achieved in order for a CWA to work well and in the client’s
interests. The lack of paper trail makes this difficult to evaluate but our impression is that
the benefits of CWA were emphasised to a much greater extent than the potential risks
and costs involved.
5.55 The second reason why the relative lack of consideration of procurement options
is an issue is because prior to Northland, the Department had no knowledge or
experience of alliancing. The need for rigorous consideration of this and other
procurement options is even greater, the lesser is the knowledge and understanding of
something new.
5.56 These comments should not be interpreted as a criticism of the CWA
methodology. Indeed, we note advice from the UK National Audit Office (NAO)
recommending that departments not use traditional forms of procurement for construction
projects unless it can be demonstrated that this form of procurement will provide better
value for money ahead of design and build, or alliancing (the closest form of which is
6
described as “prime contracting” by the NAO) or PFI. Moreover, the comments should
not be interpreted as saying that CWA was the wrong choice. In this regard, we note that
the Auckland Women’s project appears to have been delivered on time and within budget.
In the case of the Spring Hill and Otago projects, independent advice provided to the
Department in October 2005 advised that the Department should not depart from the
CWA path to another form of procurement unless as an absolute last resort (although this
advice was tendered at the time when construction of Spring Hill and Otago was well
underway). 7
5.57 Notwithstanding these points, we consider that the choice of procurement
approach for any given project should be made on a case-by-case basis. In this regard,
there are several factors that need to be considered before choices regarding
procurement method are made. Below, we set out some high-level characteristics that
would tend to favour use of CWA in preference to traditional NZS 3910 forms of
procurement. CWA is more likely to be preferred when the following conditions are
characteristics are present.
• The best way of achieving desired outcomes, in terms of the choice of
technologies and processes, is uncertain. In the context of the regional prisons,
their design was markedly different to that which had gone before and reflected a
desire for a different approach to the management of inmates. By implication,
however, there was uncertainty around the details of design and how this would
interface with operational requirements.
• There is a high degree of complexity in design, construction, technology and/or
development which cannot be satisfactorily scoped at project commencement.
Complexity per se does not favour CWA over other forms of procurement, but
6 National Audit Office (2005) “Improving Public Services Through Better Construction” , London,
p23.
7 Peter Waterhouse 31 October 2005 “Report to RPDP on Construction Costs and Alternative
Procurement Strategies”
Methodology and Processes: Design, Costing, Procurement and Scheduling 38