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Roading Procurement Strategy

Note: This procurement strategy has been structured to meet NZTA’s requirements as described in
the NZTA Procurement Manual July 2009.

1.0 EXECUTIVE SUMMARY

This procurement strategy explains the New Plymouth District Council’s (NPDC) approach to the procurement of Roading Infrastructure and services funded from the Council’s annual plans and from the National Land Transport Programme (NLTP). The intended audience is primarily the Council itself. Other interested parties are suppliers, New Zealand Transport Agency (NZTA) and stakeholders such as neighbouring councils who are in the same market.

1.1 SUMMARY STATEMENT OF KEY ISSUES AND OPPORTUNITIES TO OBTAIN VALUE
FOR MONEY

The Council’s procurement strategy is based on value for money while considering the “whole of life” costs of goods or services necessary to maintain, renew and enhance the road network. Key issues and opportunities include:

• Packaging work so that local suppliers with sufficient capacity/ capability can compete.
• Consideration of joint purchasing arrangements with other interested parties.
• Developing good and, where appropriate, long-term supplier/ client relationships.

1.2 RECOMMENDATION THAT THE NZTA:

Endorses the procurement strategy.

1.3 EVIDENCE OF CORPORATE OWNERSHIP OR INTERNAL ENDORSEMENT OF THE
PROCUREMENT STRATEGY

The Council’s Chief Executive has endorsed this procurement strategy.

2.0 POLICY CONTEXT OF THE APPROVED ORGANISATION

 

2.1 STRATEGIC OBJECTIVES AND OUTCOMES

A procurement strategy is required by NZTA as part of meeting requirements of S25 of the Land Transport Management Act 2003 (LTMA).

The Council’s 2009 Community Plan (Long Term Council Community Plan) community outcomes and their relationship with objectives to achieve them are shown in the diagram below:

DIAGRAM TO COME

The above statements and diagram describe what land transport outcomes the community wants.

The Council’s Roading Asset Management Plan sets out a programme of activities (roads maintenance, road sealing etc) to deliver these outcomes. The procurement strategy will determine how it will procure these activities in accordance with the Council’s procurement objectives and outcomes explained in the next section.

2.2 OBJECTIVES AND OUTCOMES FOR THE PROCUREMENT STRATEGY

NPDC’s Procurement Manual meets all the requirements of NZTA for the procurement of subsidised roading activities.

NPDC has adopted a series of procurement policy statements. These are as follows:

Policy Statement 1: Procurement will only be made in accordance with budgets approved by the Council.
Policy Statement 2: Procurement will be made in an open, fair and transparent manner.
Policy Statement 3: Procurement will be based on value for money, taking into account the “whole of
life” costs of goods or services.
Policy Statement 4: The methods used in procurement will be appropriate to the risks and benefits involved.
Policy Statement 5: There shall be no specific preference given to local suppliers and manufacturers,
however procurement packages will provide full and fair opportunity for local suppliers/
manufacturers to compete provided they have sufficient capacity and capability to do so.
Policy Statement 6: The Council has a commitment to sustainability and environmental protection.

This will be pursued by promoting, where legally possible to do so, purchasing practices which conserve resources, save energy, minimise waste, and will protect the environment and human health whilst maintaining environmental safety and quality.

These policy statements are NPDC’s procurement strategy objectives and outcomes.

2.3 DESCRIPTION OF NZ TRANSPORT AGENCY’S PROCUREMENT REQUIREMENTS

The LTMA forms the basis of NZTA’s requirements. LTMA S25 requires procurement procedures to be designed to obtain best value for money spent. The following provisions influence procurement from a value for money perspective:

• Value for money encouraging strategic planning in order to obtain whole-of-life value for money, rather than a shorter term focus on obtaining the lowest price up front.
• Competitive and efficient markets promoted by procurement procedures that balance effective, long-term competition with efficient procurement processes. This strategy provides for a range of delivery models and procurement procedures to ensure competition is maintained without creating costly inefficiencies through inflexible “one size fits all” rules.
• Fair competition amongst suppliers by allowing everyone a chance of competing for the work provided they have sufficient capacity and capability to do so.

2.4 OTHER RELEVANT CONTEXTURAL FACTORS

a) Organisational policies. In addition to the Council policy statements referred to in Section 2.2 above the Council has a policy on financial delegations to staff. This policy sets contract signing authority and financial authority limits for nominated staff. The Council is currently developing a Procurement Manual which will supersede the Council’s Contract Administration Manual. The Procurement Manual is a guide to selecting the most appropriate delivery model and supplier selection method. It also establishes a contract management framework, administrative procedures, probity and accountability to ensure that agreed procurement outcomes are achieved.

b) Wider organisational procurement plan. The Council has a procurement team with plans to:

• Develop and implement a procurement strategy for all of its goods and services.
• This Procurement Strategy - Roading is the first step towards developing an organisation-wide strategy.
• Improve procurement processes and systems.
• Provide guidance and direction to Council personnel on how to “procure smartly” in order to get the best possible result for the Council.

c) Regulatory environment. The NZTA Procurement Manual provides the regulatory guideline for procurement of NLTP subsidised roading activities.

3.0 PROCUREMENT PROGRAMME

 

3.1 OUTLINE OF PLANNED PROCUREMENT PROGRAMME

Description of Service
The roading activity involves the maintenance, renewal, and development of roads, kerbs and channels, bridges, street lighting, footpaths and traffic management for all roads (except state highways) in the district. State highways fall under the jurisdiction of the New Zealand Transport Agency.

The Council maintains its roads in accordance with its Roading Asset Management Plan (which aligns with the Council’s 2009 Community Plan) and with the funding agency NZTA. The Council’s roading team is responsible for the management of a diverse portfolio of assets with a gross current replacement value in excess of $1 billion. The New Plymouth district has:

• 1,272km of roads (1,093km sealed).
• 256 bridges (9 pedestrian, 247 road).
• 89 tunnels/underpasses (82 stock underpasses, 5 tunnels, 2 pedestrian underpasses).
• 100 per cent of population reached by roads.

Management of the roading network is undertaken via a contract with an external consultant, while
physical works are contracted out to external contractors.

The procurement programme for significant operational and capital work for the next five years is as
follows:



* Varies annually.
** Currently being considered.
The NZTA Procurement Manual will be used to select the supplier selection method.
Note: The Council has no high risk or unusual procurement activities.

4.0 PROCUREMENT ENVIRONMENT

 

4.1 ANALYSIS OF SUPPLIER MARKET

The Taranaki region is geographically isolated from the rest of the North Island. The supplier market
tends to reside (or have bases) almost entirely within the region rather than work from bases outside
the region.
There are two main categories of supplier:

• Physical works contractors.
• Professional services providers.

Taranaki has a strong dairying and petrochemical economy. These two industries have a small,
steady demand for roading work. Land subdividers also have a small but steady flow of work for road
designers and contractors. Roading physical works contractors and professional services providers
rely on Taranaki’s three district councils and NZTA to provide them with the bulk of their work. The
consequence of this is that the supplier market is limited, particularly for specialist activities.
The main categories of supplier are:
Physical Works: Physical works contractors can be considered to be one of the following:

• General contractors (pavements, earthworks, drainage, traffic signs, berms, footpaths).
• Sealing contractors.
• Bridge contractors.
• Road marking contractors.
• Traffic signal contractors.
• Street lighting contractors.
• Street cleaning contractors.
• Other roading structures (bus shelters and street furniture).
• For the purposes of procurement supplier analysis, contractors are considered as being either:
• Large contractors i.e. those capable of undertaking work valued at >$0.5M/annum, or
• Small contractors i.e. those capable of undertaking work valued at <$0.5M/annum.

The following contractors are available within the New Plymouth market subject to other commitments:

	Large Contractors	Number	Small Contractors	No
General contractors	Fulton Hogan, Downer, Whitaker Civil Engineering, Inframax Construction Ltd, Taranaki Civil Construction.	5	Hurlstone Earthmoving, Burgess Crowley Civil, Civilscape, Darcy Keene Earthmoving, Ireland Roading and Construction, Drainage Plus Contracting, Graham Harris, Contract Landscapes, Keenan, Schick.	10
Sealing contractors	Downer, Ireland Roading and Construction, Fulton Hogan.	3
Bridge contractors			Concrete Structures (NZ), Whitaker Civil Engineering, Total Services 1998, Taranaki Civil Construction, Schick.	6
Road marking contractors	Independent Roadmarkers, Roadrunner Markers, Coastline Markers, Downer, Roadmarkers NZ.	5
Traffic signal contractors			Wells Instrument and Electrical	1
Street lighting contractors			New Plymouth Electrical	1
Street cleaning contractors	Transpacific, Chemwash Taranaki.	2
Other roading structures	Fletcher Construction, Clelands Construction.	2	Cape Contracting	1

In summary:
1. Two large national contractors and three to four large regional contractors provide a good level of
competition for general road contract packages, and several other smaller contractors are
available for smaller packages.
2. There is now good competition for road marking contracts. In the past that hasn’t always been
so, with sometimes only one or two tenders received.
3. There is little competition for some specialist work such as traffic signal and street lighting
construction and maintenance, or for street cleaning.
4. Local and national companies provide a good level of competition for construction and
maintenance of other road structures (bridges etc).

Professional Services: Professional service providers can be considered to be one of the following:

• Network managers.
• Specific design (e.g. construction projects, traffic management etc) consultants.
• Road Assessment and Maintenance Management (RAMM) survey consultants.

The following contractors are within the market and available subject to other commitments:

Professional Services Type	Company name	Number
Network Managers	Opus International Consultants, CPG, Beca, BTW/GHD JV	4
Specific Design	Chapman Oulsnam Speirs, Beca, Isthmus/Richard Bain, CPG, Opus International Consultants, BTW/GHD JV	6
RAMM Survey	Cabal, Bri Ken, Opus, Beca, Shaw	5.

The Council has, since 1998, chosen to outsource its professional services while retaining an in-house management team to ensure professional services and physical works deliver the community outcomes.

In summary:
1. Three large national professional service providers have the capacity and have previously competed for the network management contract. There is now a fourth regional company (BTW) able to compete. This contract is let every three to five years.
2. There is adequate competition for the provision of professional services for specific design and RAMM.

Note:
1. The adequacy of the market to supply the Council’s professional services and physical works requirements is governed, to a large extent, by competing demands from other employment sectors. This demand fluctuates with the rise and fall of the local economy. Generally the market is able to supply the Council’s requirements but contract prices have fluctuated with these competing demands.
2. The Council generally has good relations with all suppliers.

4.2 ANALYSIS OF CURRENT PROCUREMENT SPEND AND PROFILE

The annual costs of managing and providing the district’s roads (physical works, professional services
and administration) are as follows:



For the 2008/09 year physical work, amounting to $13.2M, was divided between the various
contractors as follows:

One contractor (Fulton Hogan) has the major share of work.
For the 2008/09 year professional services, amounting to $2.2M, was divided between the various
suppliers as follows:

One professional services provider (CPG) had the major share of work.

The procurement spend and profile will be little changed over the next ten years (ref. 2009-2019
Community Plan). There are not expected to be any major changes in the way goods and services
are procured over that period of time. However re-packaging of work and joint purchasing
arrangements will be investigated and actioned to maintain a competitive market and achieve best
value for money.

4.3 ANALYSIS OF IMPACT OF PROCUREMENT PROGRAMMES ON OTHER SECTORS

NPDC is the main employer of roading designers and contractors in the New Plymouth district and is a
significant employer within the Taranaki region. Over the next three years the New Plymouth District
Council will spend 25% of money spent on public roads within Taranaki (Taranaki Regional Land
Transport Programme 2009/2012). There is little private work on roads within the region. NPDC’s
roading procurement programme therefore has a big impact on the supplier market and the
procurement programme of other roading organisations (principally NZTA, STDC and SDC) as well as
on minor employers of roading suppliers such as subdivision developers, and the petrochemical and
farming industries. Initiatives to minimise any negative impact on other approved organisations and
entities are described in Section 6.0 “Implementation Plan”.
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5.0 APPROACH TO DELIVERING THE WORK PROGRAMME

 

5.1 CONFIRMATION OF SPECIFIC STRATEGIC OBJECTIVES

The Council’s procurement policy statements are shown in section 2.2. Policy statement 3 refers to “value for money, taking into account the “whole of life” costs of goods or services”. The Council’s strategy is therefore to procure its Roading programme in a way that will sustain the contracting market and achieve long-term value for money. This means wherever possible maintaining competition ready for when new contracts are tendered. In some cases this is no easy task especially when specialist skills, not always available locally, are required.

5.2 THE PROCUREMENT APPROACH: SEGMENTATION OF PROGRAMME

The roading programme is broken down into “urban roads” and “rural roads”. The urban and rural programmes have approximately equal budgets. The physical works programmes for each of these two sections (urban and rural) have the following contracts:

• Maintenance General (value $2.3M urban and $2.2M rural per year). These are three year contracts wth two additional years based on performance. The contracts are let one year apart to allow tnderers sufficient preparation time. These contracts are essentially measure and value cntracts with some items being lump sum payments. This creates appropriate risk sharing between the Council and the contractor to optimise pricing. These contracts also provide a large enough programme of work for contractors to be adequately resourced for what are (arguably) the Council’s most important roading physical works contracts. If the main contractor is not resourced appropriately, sub-contractors are utilised.
• Sealing (value $1M urban and $1.3M rural). These contracts are measure and value contracts.

These contracts have been let annually both with and without preseal repairs included in the contract in order to trial which is best value for money. At present best value is considered to be to exclude preseal repairs from the sealing contract. Longer term contracts are currently being considered.

• Road marking (value $0.4M urban and rural). This contract is measure and value. This is a three year contract which has been let for all work to make it worthwhile for specialist pavement markers to travel to New Plymouth (all suppliers are based outside Taranaki). This means individual contractors don’t have to subcontract this specialist activity with corresponding extra costs.

The above contracts all have a high public profile. The contract evaluation method used for these contracts has generally been weighted attribute as it is very important that road users are not inconvenienced unduly by poor contract performance.

Separate contracts specific to other activities are as follows:

• Bridges, other structures and minor road construction (value $3.2M, urban and rural). These have been broken down into a number of contract packages to allow the many contractors in the market a chance to compete. Most contracts have been lump sum and lowest price conforming.
• Traffic signals (value $0.2M, urban) and Street lighting (value $0.2M, urban) These contracts have been undertaken on behalf of NZTA for state highways as well as for the Councils own roads. They are separate contracts in recognition of different skills needed. Both contracts are measure and value with some items lump sum. The contract evaluation method used has been weighted attribute as the quality of work is crucial to public safety.
• Street cleaning (value $0.2M, urban). This contract is lump sum. The contract evaluation method used has been weighted attribute.

In accordance with the NZTA Procurement Manual, price quality will replace weighted attribute as the supplier selection method used for future tenders for physical works. The professional services contract has a three year term with two additional years based on performance. The contract evaluation method used was the quality based method. The packaging and scope of this contract will be reassessed near the end of its current term.

6.0 IMPLEMENTATION PLAN

 

6.1 CAPABILITY AND CAPACITY

Roads Management is the responsibility of the Council’s Roading Asset Team. The Team currently has adequate planning and operational capacity. The present resourcing level (eight staff) and individual skills of the team members are sufficient to deliver the procurement programme and provide back-up support when necessary. Good performance of the Network Managers is crucial to the success of the Roading Asset Team.

Internal stakeholders include elected members and management staff.
Elected members set the community outcomes, and approve the LTCCP i.e. the community plan and asset management plans to achieve those outcomes. Elected members also approve any policies related to  procurement such as the procurement policy statements referred to in section 2.2. All contracts with a value over $100,000 are reported to the Council’s Monitoring Committee stating the name of the successful tenderer, estimated price, contract price, the tender method, number of tenders and range of tender prices.

Management has a hierarchy of approvals. The Chief Executive is able to award all purchases as described by the approved community plan and approved policies. Financial delegations are granted by the Chief Executive to other staff based on staff position and area of responsibility. The Council’s Roading Asset Team and its professional service providers (including the Network Managers) are trained in the use of the Council’s current procurement procedures. The Council has a training and development programme to ensure staff also
receive other procurement management training relevant to their work.

Other approved organisations and entities include NZTA (highways) and other local road controlling authorities. There is a minor level of common procurement between the Council and these organisations. Common procurement includes the following:

• Street and sump cleaning (urban areas) – joint procurement with NZTA (highways).
• Street lighting maintenance – joint procurement with NZTA (highways).
• Traffic signals – joint procurement with NZTA (highways).
• RAMM – joint procurement with South Taranaki and Stratford district councils.

Other joint procurement arrangements with one or both of the South Taranaki and Stratford district councils have been used previously and discontinued where value for money wasn’t being achieved.

Street lighting maintenance, road marking and professional services for roading network management are recent examples of joint contracts that have been discontinued. The Council has not been discouraged by this and will continue to explore opportunities for better value through joint procurement with road controlling authorities in the Taranaki region.

NZTA (funding) has an interest in the Council’s compliance with the National Land Transport Programme from which a significant part of the Council’s roading activity is funded. NZTA funding is subject to Council compliance with the requirements of NZTA’s Procurement Manual.

Capability and capacity gaps. Approximately 27km of state highways are in urban areas of the district. At present they are managed separately under the applicable state highway contracts. There is opportunity to have common management and common work contracts for all roads, including road openings, within urban areas, regardless of whether they are state highway or local roads. Further joint procurement with the other Taranaki road controlling authorities, bundling of work and review of contract terms will also be considered as will the possible staggering/coordination of work programmes.

6.2 INTERNAL PROCUREMENT PROCESSES

The Council’s Roading Asset team engages professional service providers to manage the procurement process. The Roading Network Managers (currently Opus but previously CPG for the period to 2008/09 inclusive) are the professional service providers that undertake most of this work.

Council’s Procurement Manual establishes the procurement processes used. Parties to these processes and their respective roles are described as follows:

• The Roading Asset team selects the type of contract and approves the contractor selection method. The professional service provider prepares the contract documents and manages the tender process.
• Tenders are received and opened at the Council’s offices. They are evaluated by a panel selected by the Roading Asset team. Approval to let the contract is given by the Council’s Chief Executive (or staff under delegated authority) in accordance with budgets approved by the Council.
• The professional service provider manages the contract.

6.3 PERFORMANCE MANAGEMENT AND SUCCESS MEASURES

Performance monitoring will be based on:

• Reporting performance against the performance measures of the Council’s Community Plan,
• NZTA audits to compare performance against other road controlling authorities, and
• Surveillance of “tenders” reports to the Council’s Monitoring Committee to observe trends of
  number of bidders and actual costs versus estimates.

6.4 COMMUNICATION PLAN

Elected Members: The Council has formally adopted the Community Plan, the roading asset
management plan and the procurement policy statements. These form the foundation of this
procurement strategy. There are no further decisions that elected members need make that influence
this strategy.
Elected members are also provided with the following procurement-related reports:

• Weekly news items in an emailed “Friday Flash.” These include information on major projects including procurement.
• Quarterly performance reports and annual reports – measured against the Community Plan/annual plan community outcomes.
• Delegated authority contracts - reports on tenders received and contracts let of a value more than $100,000, reported to the Council’s Monitoring Committee which meets at six weekly intervals.
  

Management: The three main tiers of management are executive, group and team. Each tier has weekly meetings at which information is shared within and between tiers. This information sharing is in addition to the procurement-related reports for elected members to which all staff have access.

Other Organisations and Suppliers: NPDC maintains extensive engagement with NZTA (highways), and the South Taranaki and Stratford district councils. This engagement occurs through quarterly state highway meetings, occasional general discussion meetings, joint contract meetings and frequent informal meetings. The New Plymouth District is geographically more isolated from other neighbours (Waitomo and Ruapehu districts) so similar council procurement synergies are unlikely.

NPDC staff also regularly attend national conferences and seminars such as the RCA Forum that are
held throughout the year.

Suppliers have the opportunity to make submissions to the Council at any time. Other contact is made
through periodic meetings with local contractors to inform them of issues such as the Council’s
programme of works, new codes of practice etc.

6.5 IMPLEMENTATION PLAN

The preceding sections are a reflection of the Council’s current procurement strategy so no significant
changes to the current management of procurement are required. The new delivery models and supplier selection methods in the NZTA Procurement Manual will be adopted by NPDC following NZTA endorsement of this Procurement Strategy.

6.6 CORPORATE OWNERSHIP AND INTERNAL ENDORSEMENT

The Procurement Strategy – Roading has been endorsed by NPDC’s Chief Executive following consultation with other organizations (see attached correspondence).

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CONSULTATION WITH OTHER ORGANISATIONS ON THE DRAFT STRATEGY:

The following emails were sent on 14 July 2010:

1. To Physical Works Contractors and Professional Services Providers

I attach a draft copy of the New Plymouth District Council’s “Procurement Strategy – Roading.” We
now invite you to comment on it.

This draft procurement strategy explains the Council’s intended approach to the purchase of goods
and services for physical works (maintenance and construction), and professional services for all
roading works.

The draft strategy has been written in compliance with the New Zealand Transport Agency’s (NZTA)
requirement that all approved organisations (e.g. councils with local roads receiving funding from
NZTA) shall have their strategies endorsed by 1st October 2010. NZTA has already seen the draft
strategy document and their comments are incorporated in the attached version. However we wish to
seek comment from others before we finalise the document.

Suppliers of goods and services, have an essential role in the provision of roads in our district. As you
are one of them, your feedback on the attached draft document will be valuable to us.

We therefore invite you to email your comments to John Sutton (suttonj@npdc.govt.nz) by 30 July
2010. Please contact John by phone 06 759 6079 if you wish to discuss.
Max Aves
Manager Roading Assets

2. To Neighbouring Councils

I attach a draft copy of the New Plymouth District Council’s “Procurement Strategy – Roading.” We now invite you to comment on it.

This draft procurement strategy explains the Council’s intended approach to the purchase of goods and services for physical works (maintenance and construction), and professional services for all roading works.

The draft strategy has been written in compliance with the New Zealand Transport Agency’s (NZTA) requirement that all approved organisations (e.g. councils with local roads receiving funding from NZTA) shall have their strategies endorsed by 1st October 2010. Steve Winters, NZTA’s Senior Advisor Procurement, has already seen the draft strategy document and his comments are incorporated in the attached version. However we wish to seek comment from others before we finalise the document.

You are one of our neighbouring councils and are consequently in the same market to purchase roading goods and services as we are. It is therefore important that we receive your feedback on the attached draft document.

We therefore invite you to email your comments to John Sutton (suttonj@npdc.govt.nz) by 30 July 2010. Please contact John by phone 06 759 6079 if you wish to discuss.

Max Aves
Manager Roading Assets

3. To NZTA State Highways (Wanganui)

I attach a draft copy of the New Plymouth District Council’s “Procurement Strategy – Roading.” We now invite you to comment on it.

This draft procurement strategy explains the Council’s intended approach to the purchase of goods and services for physical works (maintenance and construction), and professional services for all roading works.

The draft strategy has been written in compliance with the New Zealand Transport Agency’s (NZTA) requirement that all approved organisations (e.g. councils with local roads receiving funding from NZTA) shall have their strategies endorsed by 1st October 2010. Steve Winters, NZTA’s Senior Advisor Procurement, has already seen the draft strategy document and his comments are incorporated in the attached version.
However we wish to seek comment from others before we finalise the document.

You are the manager of state highways in our district and are consequently in the same market to purchase roading goods and services as we are. It is therefore important that we receive your feedback on the attached draft document.

We therefore invite you to email your comments to John Sutton suttonj@npdc.govt.nz by 30 July 2010. Please contact John by phone 06 759 6079 if you wish to discuss.

Regards
Max Aves
Manager Roading Assets

NOTE:
One reply was received (from BTW Company Ltd). Minor amendments have been made to the draft as a consequence of that reply, and the writer has been informed.

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