Industry Leader Q&A: Alchimie sheds light on Early Contractor Involvement (ECI)

Contributor: Wayne Sharpe
Posted: 07/26/2010  12:00:00 AM EDT  |  0
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Tags: alchimie | wayne sharp | andrew hutchinson | ECI | early contractor involvement | contractor | risk adjusted maximum price | RAMP | selection process | risk transfer | procurement strategy

Joining us today is Wayne Sharp, Strategic Procurement Consultant, Alchimie

Wayne Sharpe is a strategic procurement consultant with a wide background of involvement in the development of major projects in the private and public sectors.

In a nutshell, what do you think are the benefits of applying early contractor involvement (ECI)?  The key benefit of the application of an ECI is the collaborative development and treatment of risk during the development and estimation phase of the project. Then the delivery of the projects is carried out under a traditional method risk transfer model. 

When is an ECI framework appropriate as a procurement strategy? It is appropriate for projects that require collaboration during the development phase where the designer and owner and constructor jointly work together to define and price the project. The delivery of the project can be through a traditional hard money contract with strict risk allocations. 

Where does price competition factor / tie in? And how should you approach cost prioritisation? Price competition in an ECI is demonstrated by two or multiple teams work to arrive at a competitive design and price for a project, whereby the solution and the price will provide VFM to the owner who will either accept the VFM solution (does not necessary mean the lowest price). In a single ECI where there is no completion the independent estimator may price the solution or validate the estimate of the solution on behalf of the owner, in order to demonstrate price or VFM. In certain ECIs the owner if not satisfied by the estimate submitted then the owner could go to market. 

How should risks (including RAMP) and opportunities be determined in an ECI framework? During the development phase the owner with constructor and designer will either de-risk the project through design, where this cannot be achieved then the remaining risks are priced and included in the risk adjusted price. 

What about risk transfer? When the project moves onto the delivery phase the risks is transferred to the constructor at a price accepted by the owner. The constructor is required to manage the risk within the bounds of the contract. The owner has effectively transferred the risks to the constructor for an agreed price, which was jointly determined and accepted. 

Can you share a best practice tip for conducting an effective interview process/ selection workshop? Be very clear what resourced are needed for the development phase and test whether the proponents are providing those skills, and whether they are been provided by the people nominated and the owner participants can work collaboratively with them. 

Where do most teams go wrong? They try and second guess what the owner wants and they think and talk as if the ECI is an alliance. 

Generally – what pitfalls would you alert people to? The right team with a commercial focus wins the day. 

How do you see ECI evolving within the plethora of hybrid collaborative contracting options available? I see greater uptake of ECIs, with the use of double ECIs used to be able to demonstrate price competition. However owners need to consider whether they will pay for the DECI phase and retain IP. The use of Multiple ECIs instead of a double will test the appetite of industry.

Alliance Contracting IQ thanks Wayne for his time.

To learn more about Wayne's experience visit: www.ecimasterclass.com.au He is facilitating a 2 day seminar series across states during September 2010. Alternatively you can listen to a pod cast with Wayne specific to collaborative contracting here. (NB from Editor; to listen to a podcast you will have to become an IQ member).

Click here for information about Wayne Sharpe