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Canberra light rail project case study: A Detailed Overview

Question

Assessment Details:
The assignment is designed as an imaginary case study for students to practice procurement and risk management concepts.

The individual assignment has the following major deliverables:

  1. Select a project at your target company
  2. Provide background of the case project
  3. Recommend the best project delivery method for your project based on the criteria that YOU think is most crucial to this project. Be mindful that the types of delivery methods that need to be evaluated are Design-Bid-Build, Design-Build and CM@Risk. You must document all your assumptions and rationale for the selection of the project delivery system. All yours suggested grading (the criteria, weights, and scores) should come with justifications and explain why you gave such grade to each element of the selection matrix.
  4. Evaluate and recommend the best financial contract type for your project based on the criteria that YOU think are crucial to this project. The types of contract that need to be evaluated are Lump sum contract, Guaranteed Maximum Price Contract and Cost-Plus Fixed Fee Contract. All grading must be justified and explained.
  5. Evaluate and recommend the best procurement method for your project based on the criteria that are crucial to this project. The types of procurement that need to be evaluated are Competitive, Negotiated and Best Value. All grading must be justified and explained.
  6. Develop Risk Management Plan including Risk Register, Risk Quadrant Analysis, and risk mitigation plan.

Answer

1. Introduction
1.1 The Need for Light Rail

The project under focus for study and analysis in this module is the Canberra light rail project case study, also termed as the Capital Metro Project. The owner of the project is the Government of Australia and the Capital Metro Agency Company has been set up for managing and controlling the entire project that includes planning, contracting, resource estimation, procurement and others. The plan is to design and develop a new light rail system within the city of Canberra connecting various main and busy sectors like commercial sector, educational sector, industrial sectors and others where the rush of daily passengers is extremely high. This project explored in the Canberra light rail project case study is extremely necessary since the load on the road transport has been increasing everyday causing daily traffic jams as well as delay for the daily passengers in reaching their destinations. The light rail system will reduce the load on road transport and also ensure the daily passengers reach their destinations on time without traffic jams or blockages.

1.2 Objectives of the Project
The objectives of the project discussed in the Canberra light rail project case studyare as follows.

  • To design and develop a new light rail network in Canberra city
  • To reduce load from the road transport
  • To provide a faster way of transport for passengers during the rush hours

1.3 Stakeholders of the Project
From the Canberra light rail project case study analysis, the main stakeholders of the project include the Australian government, Capital Metro Agency board, project manager, design engineers, contractors and other major members of the entire project team. All the stakeholders in the project have major roles and responsibilities that need to be performed as per the plan to complete the project with success.

1.4 Project Budget
The total estimated cost for the project is $783m that is also expected to increase further as the project runs over multiple years and the prices will gradually change due to the dynamic nature of the market.

1.5 Project Scope and Timeline
The scope of the project outlined in the Canberra light rail project case study involves design and development of the light rail network in Canberra City, Australia. The project was first planned out in 2014 and a tentative delivery date has been set in early 2021. A major portion of the route is already complete and has started functioning while the rest of the route will be completed and operational by next year.

2. What is the project delivery methods discussed in the Canberra light rail project case study?
A Project Delivery Method is generally defined as the process by which the project is planned, controlled and managed before finally being delivered to the owners / parent organisation. Different project delivery frameworks are at present being used today. Two common strategies are DBB and DB. In a regular DBB delivery framework, the proprietor goes into an agreement with a firm that specifies in project management. In view of the necessities gave by the proprietor, the firm designs construction archives called plans and particulars for the construction of the project (Franzet al. 2017). These archives are then utilized by the proprietor as the premise to make a different agreement with a construction company. Albeit numerous techniques are utilized for granting this agreement, commonly the proprietor will get bids from the construction company. The construction company will at that point build the project dependent on the records created by the architect/engineer firm. Two separate agreements, with two separate substances, are used to finish one construction project, including two sales and obtainment steps (Weisberg, Krauzeand Crisham 2018). According to the research on Canberra light rail project case study, the project industrial landscape is changing rapidly over short periods of time and the organisations are constantly attempting to meet the basic needs of this dynamic market in order to complete the projects and start earning revenue from the same as well as compete with other rivals in the industry. In an average DB project delivery framework, the project owner gives prerequisites to the predefined project and grants an agreement to one company who will both design and build the project (Engebøet al. 2020). These are solid motivations for looking for elective and inventive intends to get the primary establishments of society and keep up financial steadiness.Along these lines there is just one agreement with one element to finish the project, and one obtainment step.

In the present Canberra light rail project case study, for this particular project, three main delivery methods have been considered: DBB, DB and CM@Risk.

  • Design Bid Build
  • Design Build
  • CM@Risk

The comparison among the three for this particular project is done in the following table provided within this Canberra light rail project case study.

Criteria for Evaluation

Design Bid Build

Design Build

CM@Risk

Nature of the Project

The contractor or builder often does not control over the design for the project and on the other hand, the owner does not have control over selection and recruitment of subcontractors.

The builder involved in this project needs to fulfil the design details that have been used during the bidding process as selection is made based on the bid documents.

This model based on the readings of Canberra light rail project case study provides appropriate flexibility in managing changes and conflict resolutions between the contractor / builder and the owner.

Score (1 to 10)

6

8

5

Speed of delivery

This method involves approach in a specific sequence that cannot be broken and hence, there is no option for fast tracking or phasing; this type of delivery generally takes a huge amount of time.

This method provides flexibility of fast tracking the tasks through phased approach and hence, delivery is done parts.

There are certain ways to reduce the time of delivery for the project but these ways are unreliable and the project may take more time for delivery than usual.

Score (1 to 10)

5

8

4

Communication

Conflicts between the owner and the building team are frequent resulting in project delays.

Conflicts are less frequent, contractors are more involved in the project and have some degree of freedom regarding the project work.

Conflicts are possible due to less involvement of the contractor in the design of the project.

Score (1 to 10)

3

7

5

Project Timeline

Project timeline for the project basis the Canberra light rail project case study is developed based on traditional project management guidelines and methods like Waterfall or PRINCE2.

Flexible and simple timelines are used for this type of delivery method due to phased approach.

Timelines for this method are complex and variable due to constant changes occurring within the project.

Score (1 to 10)

5

8

3

Cost, budget and financial challenges

The contractor selection is done through selection of lowest bidder during the bidding process; as a result, cost can become a major constraint for the project.

The builder has the freedom of determining budget as long as it is not unrealistic and non feasible; however, cost control is required to ensure there are no unnecessary expenses in the project.

Basic cost saving techniques are utilised; other than that there are not much benefits in this technique in terms of cost and budget.

Score (1 to 10)

6

7

4

Criteria

Weight

DBB

DB

CM@Risk

Score

 

Score

 

Score

 

Nature of the project

20%

6

120

8

160

5

100

Speed of delivery

40%

5

200

8

200

4

160

Communication

10%

3

30

7

70

5

50

Project Timeline

10%

5

50

8

80

3

30

Cost, budget and financial challenges

20%

6

120

7

140

4

80

TOTAL

100%

 

520 (2)

 

650 (1)

 

420 (3)

From the weighted table illustrated above in the Canberra light rail project case study, it is clear that the best method of project delivery for this particular project is Design Build (DB).

3. Financial Contracts
Contracts are defined as agreements done between the owner and a contractor for a particular project. The agreement in a contract generally includes the sum amount of the project, terms of service, type of project, ethical guidelines and others. Once the contract is signed, the contractor is obligated to perform the work as mentioned in the contract and the project owner is obligated to pay the sum to the contract considering the work is done as per agreement. The contract types utilized in DB projects decide the technique for grant for contractor choice. As indicated by Palit and Brint(2020), Guaranteed Maximum Price (GMP) contracts are preferred over other contract types, especially in cases of DB projects. GMP is preferred by the organisations that prefer not to provide flexibility to the project costs and ensure the project is completed within the limits of the final budget. In DB practice, a GMP contract is generally arranged dependent on reasonable arranging records when increasingly itemized plans and determinations utilized for customary serious bidding are not accessible (Nuottila, Kauppilaand Nystén-Haarala 2016). The main problem identified in the context of Canberra light rail project case study with the lump sum contract is that the contractor needs to complete the project within the fixed cost set after analysing project requirements in spite of any unforeseen additional costs occurring in the project. This sort of contract in regards to the Canberra light rail project case study is progressively fitting when the degree the project is obviously characterized (Adlerand Pittz2016).Moreover, scope changes ought to be stayed away from however much as could reasonably be expected in order to empower proprietors to have an early price ensure.

The preference or choice of contract for a project depends upon the amount of risk the owner wants to take as well as the preferences of the contractor. Different contracts have different types of benefits as well as drawbacks and hence, for selection in a project, the extent of benefits needs to be considered for that particular type and nature of the project. For example, Lump sum contract will empower proprietor to get the cost seriousness, yet may control the creative contribution from contractors as proprietors need to give more design data to cost assurance, which additionally prompts longer project span.

DB projects utilizing GMP contracts are bound to have better calendar and cost execution when contrasted with projects with lump sum arrangements, however, it is trying for proprietors to set the price cap with fundamental automatic necessities.Besides, an assortment of elements may influence the determination of contract types and ought to be thought about during the dynamic. For instance, private DB proprietors frequently use GMP while open proprietors lean toward lump sum contract. Distinctive obtainment techniques (for example low bid or best value) may likewise require distinctive contract types to encourage contractor assessment(Nuottila, Kauppila and Nystén-Haarala 2016). Thus, choosing fitting contract types for DB project is not esteemed as a simple undertaking.

The options to be considered for this project regarding the type of financial contractors include the following points mentioned in the next section of Canberra light rail project case study:

  • Guaranteed Maximum Price Contract
  • Cost Plus Fixed Fee Contract
  • Lump Sum Contract

Contract Criteria

Guaranteed Maximum Price Contract

Cost Plus Fixed Fee contract

Lump Sum

Project scope (20%)

This type of contract offers no flexibility on costs as it is based on fixed cost only and is applicable for projects with fixed costs. This is not suitable for projects that are conducted over a long period as they involve changing costs.

Unlike firm fixed price contract, this type of contract offers flexibility in the project budget mainly due to uncertainty in the project scope and high complexity in the project. This is suitable for large scale projects that are spread over multiple years.

The contract terms vary depending on time and material requirements of the project. This is suitable for less complex projects that high chances of risks that are shared between the owner and the contractor.

Score

2 - 40

8 - 160

6 - 120

Risk owner (30%)

Contractor himself

Project owner

Shared between contractor and project owner

Score

6 - 180

7 - 210

8 - 240

Delivery speed (30%)

Fixed timeline for project delivery.

The timeline of the project can change subject to various factors like nature and complexity.

Timeline is fixed for this contract.

Score

4 - 120

7 - 210

4 - 120

Cost control (10%)

Cost is strictly controlled as the contract price is fixed.

Cost is not strictly controlled as it is variable and changes frequently.

Cost is not strictly controlled as it is variable and changes frequently.

Score

8 - 80

6 - 60

6 - 60

Delivery method (10%)

DB

DB

DB

Score

8 - 80

8 - 80

8 - 80

Total

500 (3)

720 (1)

620 (2)

From the above weighted table, it is evident that the most suitable contract type for this particular project is cost plus fixed fee contract.

4. Procurement Methods
Procurement methods are defined as the techniques used for purchasing and procuring materials required for the project. The options for procurement methods in this project are listed as follows.

  • Competitive Bidding
  • Negotiated Contract
  • Best Value

The weighted table for these methods is as follows.

Criteria

Competitive Bidding

Negotiated Contract

Best Value

Time (40%)

Very time consuming, often drags on for days(Fleming 2019)

Less time consuming and fast tracked process

A bit time consuming but less than competitive bidding

Score

5 - 200

9 - 360

7 - 280

Quality (30%)

Well defined details during the bidding process itself

Details are sorted out during negotiations(de Araújo, Alencar and de Miranda Mota 2017)

Well defined details during the bidding process

Score

7 - 210

6 - 180

8 - 240

Flexibility (20%)

Low flexibility

High flexibility

Limited flexibility

Score

4 - 80

8 - 160

6 - 120

Involvement Capacity (10%)

Multiple bidders are involved

Involvement of only pre selected contractor

Multiple bidders are involved(Rane, Narvel and Bhandarkar 2019)

Score

6 - 60

8 - 80

6 - 60

TOTAL

550 (3)

780 (1)

700 (2)

As per this weighted table provided in the Canberra light rail project case study, the most suitable procurement method for the project is negotiated contract.

5. Risk Register
Some of the main risks regarding the delivery of the project associated with the scenario of Canberra light rail project case study are listed in the following risk register table with mitigation plans included.

Risk #

Risk Name

Probability (1 to 5)

Impact (1 to 5)

Score (P * I)

Risk Owner

Mitigation Plan

1

Improper project design

4

5

20

Design Engineer

Use advanced simulation software for design (Muriana and Vizzini 2017)

2

Inaccurate time estimation

5

4

20

Project Planner

Use scheduling software for accurate schedule estimation (Chapman 2019)

3

Budget overshoot

4

5

20

Finance Manager

Cost monitoring and control

4

Poor quality materials

3

5

15

Contractor

Select reliable vendor after thorough background checking

5

Team conflicts

4

4

16

Contractor

Discuss ideas in team meetings and avoid conflicts through compromise and cooperation (Willumsenet al. 2019)

The amount of total impact of the risks on the project can be identified based on the risk matrix shown below within this Canberra light rail project case study.

Risk Matrix

6. Conclusion
Finally, the report on Canberra light rail project case study is hereby concluded by stating that for this project, design build delivery model will be followed and the cost plus contract type will be utilised. Additionally, for procurement purposes, negotiated contract model will be used. The criteria for selection of these techniques mainly involve calculation of weightage. Now, the weightage results may not necessarily produce 100% accurate results for the project due to consideration of only a limited number of factors for analysis. As presented in the above context of Canberra light rail project case study, there are multiple other factors that may have major impact over choice of the models or types of systems that are being discussed. However, the weighted scores do provide a clear idea about which models and systems are suitable for which types of projects that in turn help to select some for this particular project as well. ?

References
Adler, T.R. and Pittz, T.G., 2016. The importance of managing strategic IT project contracts using a business process approach.Canberra light rail project case study International Journal of Information Technology Project Management (IJITPM), 7(4), pp.52-63.

Chapman, R.J., 2019. The rules of project risk management: Implementation guidelines for major projects. Routledge.

deAraújo, M.C.B., Alencar, L.H. and de Miranda Mota, C.M., 2017. Project procurement management: A structured literature review. International Journal of Project Management, 35(3), pp.353-377.

Engebø, A., Lædre, O., Young, B., Larssen, P.F., Lohne, J. and Klakegg, O.J., 2020. Collaborative project delivery methods: a scoping review. Journal of Civil Engineering and Management, 26(3), pp.278-303.

Fleming, Q.W., 2019, January. Project procurement management: contracting, subcontracting, teaming. Project Management Institute.

Franz, B., Leicht, R., Molenaar, K. and Messner, J., 2017. Impact of team integration and group cohesion on project delivery performance. Journal of construction engineering and management, 143(1), p.04016088.

Muriana, C. and Vizzini, G., 2017. Project risk management: A deterministic quantitative technique for assessment and mitigation. Canberra light rail project case studyInternational Journal of Project Management, 35(3), pp.320-340.

Nuottila, J., Kauppila, O. and Nystén-Haarala, S., 2016. Proactive contracting: Emerging changes in attitudes toward project contracts and lawyers’ contribution. Journal of Strategic Contracting and Negotiation, 2(1-2), pp.150-165.

Palit, N. and Brint, A., 2020. A win-win supply chain solution using project contracts with bargaining games. Operations Research Perspectives, 7, p.100130.

Rane, S.B., Narvel, Y.A.M. and Bhandarkar, B.M., 2019. Developing strategies to improve agility in the project procurement management (PPM) process. Business Process Management Journal.

Weisberg, J.L., Krauze, R.M. and Crisham, P.C., 2018. Opening communication lines: Evolving project delivery methods to promote collaboration. Construction Lawyer, 38(2), pp.14-21.

Willumsen, P., Oehmen, J., Stingl, V. and Geraldi, J., 2019.Value creation through project risk management. Canberra light rail project case studyInternational Journal of Project Management, 37(5), pp.731-749.

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