Six years to go before the Summer Olympics in London, and the approach used this August to pick a management team for more than $4.5 billion of its planned construction is already record-setting. That selection was the U.K.’s first use of “competitive dialogue,” a new style of negotiated procurement that is aimed at delivering one of Europe’s most ambitious building programs on time and on budget.
The new approach was tailored for complicated projects. Few qualify as well as construction of venues, facilities and infrastructure for the 2012 Olympic Games, as well as the Paralympic Games for physically challenged athletes, first held in London in 1948. Most building will take place on a 500-acre brownfield in east London that will first cost hundreds of millions to clean up.
The London Organising Committee, which is staging the 2012 Games, set a tall order for the Olympic Delivery Authority (ODA), the public agency responsible for facility and infrastructure construction and reuse after events end. The committee promises “inspirational” games that will “leave a lasting legacy.” According to its Website, that includes the “most spacious” accommodations in Olympic history, “the best-ever” transportation system for at least 500,000 daily spectators and a push for community redevelopment and sustainability.
To reach the finish line in that mammoth task, ODA set out to hire a private-sector program management team as its “delivery partner.” That contracting mission, a six-month-long procurement process, was the London Olympics’ first use of competitive dialogue. It resulted in a $200-million contract this summer to CLM Delivery Partner Ltd., a consortium of CH2M Hill Inc., Denver; U.K. contractor Laing O’Rourke plc, Dartford; and construction manager Mace Ltd., London. The team bested an array of leading global construction industry contenders (ENR 9/11 p. 18).
Laing O�Rourke Chair Ray O�Rourke, ODA CEO David Higgins, Organising Committee Chair Sebastian Coe, former ODA Chair Jack Lemley and CLM CEO Ron Brooks (left to right) had key roles in Olympic contract award.
Competitive dialogue “allowed us to get to know project partners over a number of months,” says David Higgins, ODA chief executive. Morag Stuart, the agency’s head of procurement, adds that the process was aimed at achieving “a clear understanding of what ODA wanted and the individual solutions that each participant could offer.” Strict ODA confidentiality rules ban CLM executives and other contractors from interviews and public comment on how the process worked for competing teams.
As in the U.S., negotiated procurement has been a public contracting staple in Europe but is evolving to overcome perceived flaws as projects grow larger and more complex. “The flexibility of the negotiated procedure has given rise to some concerns,” according to a report by London law firm Freshfields Bruckhaus Deringer. “These include the risk of disclosure of confidential information among bidders and possible discriminatory effects if negotiations take place after a preferred bidder has been chosen.” The firm is one of ODA’s outside advisors, which also include top accounting firm Ernst & Young.
Partly to deal with such concerns, the 25-nation European Union adopted competitive dialogue in April 2004. Member nations, including the U.K., had to legislate it by January 2006. The approach was tailored for complex projects on which owners might be unable to specify objectives or procurement options. This could apply when bidders are asked to provide private financing, such as for build-operate-transfer deals.
In traditionally negotiated procurement, prequalified groups submit bids, negotiate terms and make best-and-final-offers. “There are two significant changes introduced by competitive dialogue,” says Stuart. There is no preferred bidder stage, and once the process is done, no significant changes can be discussed or negotiated, she adds.
France and Germany were among competitive dialogue’s first users, mostly on privately financed projects. The approach has spread to other nations, including The Netherlands, where it was used to procure the second Coentunnel BOT contract. “It is really an output-based procurement procedure,” says Stuart. “You set out your envelope and have separate confidential discussions with each participant, allowing you to reach different acceptable solutions.”
Stuart claims that ODA had a clear view of desired results. It prepared position papers along with invitations for teams to participate in the Olympics procurement. For example, documents “set out what ODA expected of key personnel, including length of time it expected [them] to be contracted,” she says. Competitive dialogue allowed understanding “of issues that many participants faced” and enabled ODA to develop solutions that the agency and competitors “were comfortable with,” says Stuart.
"Once the process is done, no significant changes can be...negotiated.."
— Morag Stuart,
Head of Procurement, Olympic Delivery Authority
After the competitive dialogue period, competitors were asked to present individual proposals that included such criteria as team structure, approach to supply chain management and length of availability of key management staff, explains Stuart. Evaluation criteria were laid out prior to the tendering process. All necessary documents, including contract terms, were included in the invitation to bid, at which point no negotiation was allowed. “At the point of selection of a preferred bidder, all discussions and any small clarifications, excluding anything that may have an impact on cost or risk, have been made,” she says.
ODA advertised the program management contract in February and shortlisted four teams through May 18. The June 9 invitation to participate led to three weeks of competitive dialogue that ended July 7.
The agency then ran “team simulation exercises” to assess competitors’ team dynamics, attitude toward ODA’s approach, “cultural fit” and capacity to innovate and adapt. “They were designed to reflect real situations faced by the ODA management team,” says Stuart. Next, the agency held “clarification” meetings before receiving bids later in July. Oral presentations followed before ODA started bid evaluation on July 28.
ODA used four broad criteria to evaluate competitors. Staff deployment accounted for 30% of the score. Partnering ability and management systems were each worth 28%, with miscellaneous items valued at 14%. Written proposals counted for 61% of the evaluation, with oral presentations weighted at 27%. The team simulation exercise was worth 12%.
Stuart says competitive dialogue “proved very satisfactory.” It helped ODA choose the right team and provided the delivery partner “with...a very clear understanding of our objectives. She says it will speed mobilization.
Stuart feels competitive dialogue will be crucial to large and complex procurements in Europe and will be used again in Olympics contracting, although she did not identify projects. ODA is negotiating a design-build contract, awarded last month, for the Olympic stadium. The Velodome will likely be next, but its procurement method is not yet known.
CLM’s selection as delivery partner was one reason former ODA chairman and U.S. contractor Jack Lemley cited in quitting Oct. 18 after just one year. He had been praised by Organising Committee Chairman Sebastian Coe for promising to have all venues ready a year before the Games.
Lemley’s schedule had called for two years of site preparation, four years of construction and one year of testing. His departure was a surprise in London, where he was best known for his role in building the Channel Tunnel, until 1993. “ODA is ready to move to the next stage,” Lemley said. “I have every confidence that London will stage a superb… Games in 2012.”
But in returning to his home base in Boise, Lemley hinted in The Idaho Statesman that the Olympic construction program might not meet its deadlines. He complained of squabbles over the main stadium’s legacy use and “a huge amount of local politics” threatening to “confuse and frustrate the process.” The article prompted London legislators to summon him to a special meeting on Nov. 15 to explain his comments, but Lemley has turned down the invitation. He could not be reached for comment.
Even so, ODA is maintaining a stiff upper lip. “It is a strength of the project that we have been having a debate about long-term legacy use of 2012 facilities now rather than years in the future,” says an agency spokesman. “We have hit all our major milestones…[and] have begun work on site, on time.” Already, crews are busy installing underground high-voltage transmission lines there, the spokesman points out.