International Journal of Managing Projects in BusinessExploring infrastructure procurement by Australian state governmentsWarren J. Staples John F. Dalrymple

Article information:To cite this document:Warren J. Staples John F. Dalrymple, (2011),"Exploring infrastructure procurement by Australian stategovernments", International Journal of Managing Projects in Business, Vol. 4 Iss 3 pp. 512 - 523Permanent link to this document:http://dx.doi.org/10.1108/17538371111144201

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THESIS RESEARCH REPORT NOTE

Exploring infrastructureprocurement by Australian state

governmentsWarren J. Staples

School of Management, RMIT University, Melbourne, Australia, and

John F. DalrympleFaculty of Business and Enterprise, Swinburne University of Technology,

Melbourne, Australia

Abstract

Purpose – The purpose of this paper is to report on a research thesis that explores how Australianstate government agencies procure infrastructure projects and the extent to which they view theprocurement process as an opportunity to deliver more than just a physical facility. The primarypurpose of this study was to understand the practice of construction project procurement by projectmanagers on behalf of Australian state government agencies and to explore the creation of publicvalue through procurement.

Design/methodology/approach – This thesis presents results drawn from ten case studies of stategovernment organisations that procure infrastructure; either roads or buildings. A total of 37 highlyexperienced project managers operationally responsible for the procurement of infrastructure withinthese organisations were interviewed.

Findings – The findings show that there is considerable scope for improving infrastructureprocurement by Australian state governments and that broader public value creation approaches inthe form of policy by-products are either not considered or inconsistently pursued.

Practical implications – The broader policy implications flowing from the research findingsprovide valuable commentary that inform the practice of infrastructure procurement and point toareas to which improvement efforts may be directed. These areas include the challenge of developingthe next generation of infrastructure procurement managers, applying non-price criteria in a rigorousway, using prequalification registers to engage in supplier development and delivering policyby-products as part of standard procurement approaches.

Originality/value – This thesis presents qualitative data focused on the perspective of procurementprofessionals, a group who have, hitherto, been somewhat underrepresented in the literature.

Keywords Project procurement, Infrastructure, Public value, Public sector, Australia

Paper type Research paper

IntroductionThere is considerable debate in the literature over the rationale for the existence of thepublic sector, and the most appropriate role and purpose for government (Pollitt, 1993;Anderson, 1989; Giddens, 1998; Donnelly, 1999). Donnelly (1999) suggests that the

The current issue and full text archive of this journal is available at

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URL access for the doctoral thesis at School of Management, College of Business, RMITUniversity, 2010, available at: http://researchbank.rmit.edu.au/eserv/rmit:6398/Staples.pdf

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Received 9 February 2011Accepted 12 March 2011

International Journal of ManagingProjects in BusinessVol. 4 No. 3, 2011pp. 512-523q Emerald Group Publishing Limited1753-8378DOI 10.1108/17538371111144201

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purposes and actions of government transcend direct service provision to embracebroader societal aims, which is a view in keeping with Giddens (1998, pp. 47-8) whoproposes broad reasons for the existence of government. Moore’s (1995) seminal“theory of public value” states that the reason the public sector exists is to create publicvalue and that the successful practice of public management should increase the publicvalue produced by public sector organisations in both the short and long run.

Infrastructure projects are an outcome of an organisation’s strategic managementprocess, and as such require aligning with the corporate and or business unit’smissions and objectives in order to achieve value for money (VFM) (Kelly et al., 2002).There is a growing comprehension of the importance of procurement in realising valuefor clients of all types. The public sector invests in physical assets to deliver the goods,services and symbols that society values (Winch, 2002). The procurement of aconstruction project in the form of hospitals, schools and courthouses enablesgovernment to deliver services in the areas of health, education and justice.Infrastructure investment in roads and buildings by Australian state and territorygovernments accounts for over $59 billion in their respective 2009-2010 budgets (ACT,2009; NSW, 2009; NT, 2009; QLD, 2009; SA, 2009; TAS, 2009; VIC, 2009; WA, 2009). Asa result of this very considerable investment, the procurement process has the potentialto deliver very significant public value payoffs to the community.

Graycar (2007) comments that in the public sector the policy interventions thatfrequently work the best are often by-products of another policy or practice domain.Graycar (2007) believes it is often these unintended consequences of policy making thatmake the biggest impact, but notes that policy makers are often not well equipped torecognise or capitalise on these by-products of policy making. Government concern withregional development is often focused on sustaining regional centres, providing regionalactivity and retaining youth in the regions. Commonwealth and state governments inAustralia prioritise both these areas in their policy documents. When procuringinfrastructure in a regional location it is possible to advance these policy by-products,whilst not detracting from the functional reason behind creating the infrastructure.However, an approach to procurement based solely on lowest cost ignores plannedpolicy by-products and will be silent on the equity and community engagement withinprojects, on the economic development of regions, and on the retention of youth inregional centres.

Moore (1995) articulates a more proactive and strategic role for public sectormanagers who seek to discover, define and produce public value, instead of just devisingmeans for achieving mandated purposes. An approach to infrastructure procurementbased on lowest cost tendering that focuses on the core business of building a physicalfacility but not necessarily creating additional value as a by-product, fails this test. So,rather than purchasing infrastructure at the lowest price, a public sector client mightdecide to spend slightly more to create proportionately more public value achievingbetter whole-of-government outcomes. This might involve pursuing regionaldevelopment or local supplier policies by selecting building contractors who are morecapable of engaging local small- and medium-sized enterprises as subcontractors orsuppliers, and or training apprentices or providing employment for at risk, long-termunemployed youth.

The objective of the thesis was to examine the practice of infrastructureprocurement in Australian state governments in order to analyse how strategic the

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procurement function is. In doing so, the thesis examined how Australian stategovernment agencies procure infrastructure projects and the extent to which they viewthe procurement process as an opportunity to deliver more than just a physical facility.

Research questionsAnswers were sought to the following research questions:

RQ1. How do Australian state governments procure infrastructure projects?

RQ2. What does VFM mean to Australian state governments when procuringinfrastructure projects?

RQ2(a). To what extent is VFM an objective for Australian state governmentswhen procuring infrastructure projects?

RQ3. What selection criteria are used by Australian state governments whenselecting both building consultants and contractors?

RQ3(a). Are non-price criteria used?

RQ4. How is infrastructure procurement linked to Australian state governmentpriorities?

RQ5. How is supply chain management undertaken by Australian stategovernments when procuring infrastructure projects?

RQ5(a). How are lead contractors and sub-contractors selected?

RQ5(b). How is performance feedback given to lead contractors andsub-contractors?

RQ5(c). How does performance affect future contract/project opportunities?

Background and literatureThis thesis adopts a multi-disciplinary theoretical perspective integratingconceptualisations derived from four research streams; public sector management,construction procurement, transaction cost economics and supply chain management(Table I).

Five major themes (Table I) heavily influenced the development of the theoreticalmodel (Figure 1) and research questions: procurement of infrastructure, VFM, policyby-products, supply chain management and tendering costs.

Figure 1 shows the theoretical framework that guided the research and illustratesthat there were a number of elements identified in the literature that appeared to beimportant when considering the procurement of infrastructure projects in the publicsector. On the right-hand side of the theoretical framework is a continuum whichranges from the lowest cost procurement approach at the bottom to a publicvalue-yielding approach at the top. A lowest cost approach to procurement will stillcreate public value, as the facility will enable a government department to providegoods and services. However, at the top of the continuum, the public value approachrecognises that the procurement process has the potential to create additional publicvalue, as well as just creating a physical facility. It was expected that the approaches

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used will vary along the continuum somewhat, depending on four factors: VFM, policyobjectives, tendering costs and supply chain management.

MethodologyBased upon the nature of the research problem, this research adopts the socialconstructivist paradigm (Creswell and Plano Clark, 2007, p. 21). This research isseeking to socially construct meaning via semi-structured interviews with projectmanagers. It is seeking to understand Australian state government infrastructureprocurement through the experience of project managers. Further, a qualitativecase-study-based methodology is employed (Yin, 2003, p. 13) to explore the perspectiveof the project managers procuring projects across various jurisdictions withinAustralia. The broad nature of the research, combined with the exploratory focus of the

Themes Authors

Construction/infrastructure procurementThe importance of VFM in the procurement processStrategic nature of procurementProcurement shapes value createdLimited understanding of procurement by publicclients

Kenley et al. (2000), Wong et al. (2000), Tookeyet al. (2001), Palaneeswaran et al. (2003), Loveet al. (2008), Egan (1998, 2008), Latham (1994),Walraven and de Vries (2009), Kelly et al.(2002), Morledge et al. (2006, pp. 51-2), Chanet al. (2001), Waara (2004) and Walker andHampson (2003)

Public value/VFMAn emerging approach to managing in the publicsectorLimited empirical data on its practiceLimited understanding of what public value mightmean in the context of infrastructure procurementVFM is the primary driver of public sector purchasingin the UKGap between the contribution procurement iscurrently making and its potential contribution

Moore (1994, 1995), Murray (2001, 2002),Bozeman (2002, 2008), Kelly et al. (2002),Smith (2004), Stoker (2006), O’Flynn (2007),Alford and Hughes (2008), Rhodes andWanna (2007, 2009), Alford (2008), Luke et al.(2008), Alford and O’Flynn (2009), Potts (2009)Bovaird and Halachmi (2001) and Cousinset al. (2006)

Policy by-productsProcurement represents a significant opportunity todeliver policy goals and by-productsDifferent way of viewing infrastructure procurementSkill set of those procuring crucial

Graycar (2007)APCC (2006, 2008) and Cousins et al. (2006)

Supply chain managementOutsourced model in Australian state governmentsAdversarial relationshipsLittle effort to manage

Furneaux et al. (2008)Latham (1994), Egan (1998), Fisher andMorledge (2002, pp. 210-3), Bower (2000),Dainty et al. (2001), Ellram and Carr (1994)and Vrijhoef and Koskela (2000)

Cost of tenderingCosts incurred on both supply and client sideAnecdotal evidence suggests lead contractors bemoanbidding costsLimited exploration of transaction costs in publicsector

Dalrymple et al. (2006a, b)

Table I.Key literature themes

and references

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research questions, justifies the adoption of a multiple case study approach as thechosen research strategy (Eisenhardt, 1989; Creswell, 1998; Smith, 2000; Yin, 2003). Inthis study, adaptive theory (Layder, 1998, p. 169) is being used, where existingtheoretical ideas and models in the discipline areas of public sector management,construction management, transaction cost economics and supply chain managementhave been used to inform and guide the research questions and focus (as outlined in thetheoretical framework).

This research focuses on the procurement of infrastructure (roads and construction)projects by Australian state governments. A total of 37 project managers wereinterviewed drawn from ten public sector agencies across five Australian states.Participants were involved in the preparation, evaluation and awarding of constructioncontracts through a tender process. A semi-structured interview featuring a mixture ofopen-ended and closed questions was designed to explore a range of issues including;how procurement is undertaken, VFM, selection criteria, government priorities, publicvalue and supply chain management. The research explores whether procurement isbeing utilised strategically, how non-price criteria are used in contractor selection andhow VFM (best value) assessments are made in light of government strategic intents.By interviewing a range of procurement officers from both building construction androads construction organisations in Australian state governments, important insightswere gained into the way value and value creation are considered, and addressed,during the procurement process. The approaches used by the various state governmentorganisations provide valuable insight into this important area. The researchcontributes to the body of knowledge focused on maximising the impact of publicsector expenditure.

Figure 1.Theoretical framework –public value in publicsector infrastructureprocurement

Brouddefinitionoutcomes

Definitionof value

for-money

Narrowdefinition solelyin terms of $,s

Focused solelyon direct policy

activities

Supplychain

management

Passive supplychain

management

Adding costwithout

commensuratevalue

Policyobjectives

Tenderingcosts

Lowest cost tender

Infrastructureprocurement

Active supplychain

management

Optimisedtendering to

minimise waste

Public valueRecognisingopportunities

for policyby-products

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FindingsThe findings showed that the procurement approaches favoured were risk averse andpredominantly traditional, featuring separate contracts with designers andcontractors. VFM was viewed by project managers as a crucial objective ofprocurement activities. However, the perceptions of VFM were relatively restricted,and largely defined in financial terms and focused on the creation of value within clientdepartment domains. Non-price criteria are used, particularly for the selection ofconsultants and designers, but less so for contractors, with lowest priced conformingbids from pre-qualified tenderers often being awarded contracts. Precisely hownon-price criteria are used is an area worthy of considerable further investigation.

There are some instances where standardised non-price criteria are included incontracts to build some additional benefits into the way projects are procured. However,the focus of procurement is delivering what Graycar (2007) called core business,optimising procurement for client departments as opposed to outcomes for governmentas a whole. The evidence suggests that project managers are not relentlessly pursuingvalue creation opportunities via the procurement process and hence not acting asentrepreneurially or innovatively as Moore (1995) advocates. The data show that thefocus of procurement is often on reducing transaction costs, but not on maximising thestrategic contribution or value-yielding potential of procurement. The evidence suggeststhat Australian state governments are not currently delivering the type “joined-up”approach to infrastructure procurement that has the potential to create public valueacross a range of policy domains. There is very little evidence of government influenceinvolving active management of the supply chain, or improvement-related activities incomponents of the supply chain.

The responses from interviewees validated four of the elements of the model (VFM,policy objectives, supply chain management and tendering costs) as being importantelements of public value in the procurement of public sector infrastructure. Theinterviews with managers also suggested that the appetite and willingness of theorganisation to innovate was another crucial element that needed to be considered andon the basis of such (Figure 2). Departments of Treasury were frequently perceived asloathe to devote capital procurement funds to innovation.

The thesis author’s learning journeyWhilst this thesis took approximately 4.5 years to complete, the genesis of the ideasbehind this research was in incubation over a period of some seven to ten years. Fromobserving the move away from compulsory competitive tendering to best valueapproaches in local government in both the UK and Victoria, Australia, and todiscussing the selection of building contractors with Professor Derek Walker in theconstruction management discipline. A scoping study titled: “Feasibility study linkingbest-value procurement assessment to outcome performance indicators” wassubmitted to the Cooperative Research Centre for Construction Innovation (CRC-CI)in 2000, and then approved, and completed in 2003 (CRC-CI, 2004).

After the pilot study, it was hoped to undertake an action research project withpublic sector partners to develop and pilot a rigorous and robust system forinvestigating non-price criteria in the procurement of infrastructure. The feedbackfrom the public sector procurers was that they were not currently viewing procurementas a means of delivery of other government priorities and were perhaps not ready forthe ideas being espoused. However, this finding gave rise to the idea that what was

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really needed was to thoroughly explore how state governments were procuringinfrastructure and what value meant to senior procurement officers.

Over the course of this research, 37 interviews were undertaken, which includedmore than 300,000 words being brought together for transcription and analysis. Thiswas a heavier burden than anticipated, and having collected the data, the researcherfelt a strong degree of attachment to it and investment in presenting the material well.In particular, the compiling of results involved many, many painstaking months ofporing over the transcripts and re-listening to interview recordings, to distil theresponses from project managers into the summaries contained within the thesis. Theresearcher had read qualitative texts and paid attention to experts advising thatqualitative data were rich, messy and complex, etc. but it is one thing to have read thetexts and another thing to have actually experienced the processes described. In thecourse of undertaking a qualitative project of this magnitude, the researcher learnt agreat deal from the process of actually doing the research.

The project undertaken was exploratory in nature. One of the strong elements andsignificant successes of the project was in recruiting participants. Only one participantinvited to participate in the study declined to do so. As part of the research design, thereis a trade-off between the number of cases examined and the depth of research in eachcase, which includes the number of interviewees representing each case. A case could bemade suggesting the researcher focus on fewer jurisdictions. By persevering with thenumber of jurisdictions, a clearer picture of the national procurement processes emerged.

The fact that most of the cases featured highly experienced project managers alsoraises the possibility there might have been some interviewee bias as a result of theorganisations having a role in providing contact information for project managers tothen be contacted. However, the experienced cohort interviewed might actually berepresentative of the wider project manager population.

Placed in the same position as the researcher was at the start of this project, it islikely that the same set of uncertainties would also be faced. As a result, the approach

Figure 2.Revised framework

Broaddefinitionoutcomes

Definition of value-for-

money

Narrowdefinition

solelyin terms of $’s

Focused solelyon direct policy

activities

Supply chainmanagement

Passive supplychain

management

Adding costwithout

commensuratevalue

Policyobjectives

Tenderingcosts

Lowest costtender

Infrastructureprocurement

Unwilling toinnovate

Appetite forinnovate

Active supplychain

management

Optimisedtendering to

minimise waste

Public valueRecognising

opportunitiesfor policy

by-productsInnovation

seeking

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adopted would be very similar, particularly for the recruitment of cases andinterviewees.

However, that is not to suggest there is no opportunity for improvement. One of themost profound learnings from the research came from the experience of usinginterviewing as a research data collection approach. There is considerable complexityand skill involved in being a good interviewer and upon reflection it seemed apparentthat the quality of the interviewing improved as the interviewer gained more experience.

The project could have been achieved differently by focusing the level of analysis asthat of the construction project by perhaps focusing on historical project data andanalysing how various procurement approaches led to different levels of public valuebeing created. This would have constrained the project to a smaller set of issues, andfocused less on the perspective of the project managers whose role is to procure forgovernment. One prominent scholar suggested to the researcher that this would havebeen a good way to proceed but ultimately the researcher felt more connected to, andengaged with, the project that has been undertaken.

The doctoral programme at RMIT UniversityThe Doctor of Philosophy (PhD) programme within the School of Management/Collegeof Business at RMIT University involves producing an examinable thesis typically ofbetween 50 and 90,000 words (upper limit 90,000 words) based on original researchwhich demonstrates a significant and original contribution of knowledge of fact and/ortheory, independent critical thought, and the capacity to work independently ofsupervision. Higher degree by research (HDR) scholars in the College of Business arealso required to undertake two coursework subjects in the areas of research methodsand data analysis. HDR scholars are allocated a supervisory team consisting of a seniorsupervisor and a second supervisor. HDR scholars are required to confirm theircandidature generally within 6-12 months of initial enrolment in the programme bysubmitting a written research proposal and giving an oral presentation about theirresearch to a panel of academic subject area experts and the wider audience fromwithin and outside the School of Management. Before submitting hard copy theses forexamination by external examiners, an oral presentation in the form of a completionseminar is then given to a panel of academic subject area experts and the wideraudience from within and outside the School of Management.

Outcomes from the thesisThe outcomes from this thesis included four refereed conference papers and one bookchapter. It is planned that refereed journal articles in the areas of public sectormanagement and construction management will flow from the thesis:

(1) Staples, W.J. and Dalrymple, J.F. (2008), “Current issues in public sectorconstruction procurement”, Proceedings of the 22nd Australia New ZealandAcademy of Management Conference, Auckland, New Zealand, 6-9 December.

(2) Staples, W.J. and Dalrymple, J.F. (2007), “Best value public sector constructionproject procurement: challenges and opportunities”, paper presented at theEighth International Research Conference on Quality Innovation andKnowledge Management, India Habitat Centre, New Delhi, 12-14 February.

(3) Staples, W.J. and Dalrymple, J.F. (2006), “Developing a ‘best value’ approach topublic sector construction procurement”, Proceedings of the 20th Australia

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New Zealand Academy of Management Conference, Yeppoon, Australia, 6-9December.

(4) Dalrymple, J.F., Boxer, L.J. and Staples, W.J. (2006a), “Cost of tendering: addingcost without value?”, in Brown, K., Hampson, K. and Brandon, P. (Eds), ClientsDriving Construction Innovation: Moving Ideas into Practice, Chapter 9, CRC forConstruction Innovation, Brisbane.

(5) Dalrymple, J.F., Boxer, L.J. and Staples, W.J. (2006b), “Cost of tendering: addingcost without value?”, Proceedings of the Second International Conference for theCRC for Construction Innovation, Gold Coast, Australia, 12-14 February.

ConclusionsThis paper introduces a recent PhD and provides a story that explains the context,outlines relevant background literature, presents the adopted research approach andprovides some insights into findings and conclusions from the thesis.

An important element of the “Thesis Research Report Notes” is that it also providessome insights into the PhD journey, the motivations and reality of undertaking such astudy. This paper provides those insights and articulates some of the PhD journeyoutcomes.

It is not the intention of these types of paper to provide extensive details about thethesis and readers who are interested should follow the link to the URL where they canfind the entire thesis.

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Further reading

Kelly, J., Morledge, R. and Wilkinson, S. (2002), Best Value in Construction, Blackwell, Oxford.

Staples, W. (2010), “Public value in public sector infrastructure procurement”, PhD thesis, Schoolof Management, RMIT University, Melbourne.

Corresponding authorWarren J. Staples can be contacted at: Warren.staples@rmit.edu.au

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