How the RFP process is impacting water and wastewater project financing

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RFPs need to be specific enough to define project scope and essential technical issues and allow engineering firms to address the essential issues and their ability to deliver an optimum solution.

By Jan Korzeniowski

Water and wastewater projects are constantly needed to replace existing utilities and for new development. New developments of housing, commercial and industrial projects are the result of population growth, which has been over 78% since 1970 in Canada, taking us from 21.5 to over 38 million. In some regions, growth has been much higher. The population of Alberta grew 155% between 1972 and 2018, going from 1.70 to 4.33 million.

This growth does not always coincide with good economic trends or government income, which is needed to finance water and wastewater infrastructure. This raises the question of how to cope with the varying conditions of needs vs financial ability.

In recent years, there have been very few water and wastewater projects approved in Alberta. Low oil prices and lack of profitable export abilities significantly reduced the province’s finances. This situation may continue for a few more years. Therefore, there is a need to assess the situation and consider solutions which can minimize the impact of negative economic trends and allow new water and wastewater projects to move forward. The assessment and conclusions can also be useful when the economic situation improves.

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Changes needed are in the process of defining and proceeding with identification, design and implementation of the water and wastewater projects. Projects selected and implemented should be based on the best financial and technical solutions and the optimum use of the finances available. This can be accomplished by a careful selection of project scope and design in relation to available budgets. The current practice of selecting the project’s scope and design does not guarantee the best outcome and sometimes leads to uneconomical and technically questionable solutions.

Project implementation begins with the request for proposals (RFP), which results in the selection of engineering firm, design and construction.

Are the RFPs specific enough to define project scope and essential technical issues? Do they allow engineering firms to address the essential issues and their ability to deliver an optimum solution? Does the RFP concentrate on overall ability of engineering firms and not predominantly on the technical issues to be resolved?

Such RFPs can be misleading to responding engineering firms and it may lead to the wrong selection of the winning firm. They may also oversize the scope, design and cost, and result in inadequate performance of the implemented project.

RFPs are often very elaborate and ask for detailed information on the project work plan, time schedule with milestones, cost breakdown with man-hours, and cost assigned to proposed project team members. Also, a detailed methodology, quality and time and budget control, standby staff and ability to resolve problem issues with time and manpower need to be addressed. Often, however, very little or no attention at all is devoted to the essential technical issues of the project, which may have a profound impact on the project scope, design, costs and performance.

Interested engineering firms must then respond in the format requested and provide the information asked for in detail. This results in compatible and predominantly well-written proposals with the same questions addressed, but likely they will differ in their extent and detail. This can make selection of the proposals difficult.

Other factors, which may be taken into consideration, are the size, presence and knowledge of the engineering firm in the subject area, but often not the essential technical and economic issues of the project in question, if they were not asked for it in the first place. Therefore, it was not addressed in the proposal.

It is certain that every well-established engineering firm can provide satisfactory project management, including work plan, time schedule, budget and quality control. This is evident from the projects executed and the proposed project team. However, significant differences may be in the expertise required to resolve project-specific technical and performance issues. This requires more detailed and specific questions in the RFPs, and evaluation of the proposal, particularly in the area of the specific technical issues.

Technical expertise comes predominantly with the persons directly involved in the project and less from the firm itself. Also, the proposal writer is not necessarily involved in the project execution. Therefore, the municipality may end up with two different products: one the proposal, and the other the execution of the project.

RFPs do not need to have detailed requirements for general information, such as time schedules, time and cost breakdown between proposed team members, cost and quality controls. However, essential information should be provided to outline the current project status, shortcomings, operating issues and costs, compliance with approvals, raw and treated water/wastewater quality records, in order to enable the engineering firm to understand and evaluate the essential issues of the project.

Large engineering firms can afford to employ professional proposal writers and deliver very well-written proposals in general, but not perhaps for specific technical issues. However, if specific technical issues are not underlined in the RFP, the evaluation of the proposal will only rely on the skill in writing and the general information provided as requested.

The other issues are related to the review, scoring and approval of proposals. This is usually done by a proposal review committee, with final approval by council. The proposal scoring is done for required information and issues, and a well-written proposal with more general information will score better then a less elaborate proposal. This, however, is not a reflection of the firm’s ability to resolve specific technical issues if they are not outlined in the RFP.

When and how did we begin to write elaborate proposals? This began in early 1982 after the announcement of the National Energy Program. This had a negative impact on the Canadian economy, predominantly in the energy sector. Large projects were put on the shelf and a shortage of work for engineers began.

Thus, engineering firms began competition for work by writing elaborate proposals and municipalities began demanding such proposals by writing elaborate requests. This is how we began wasting our time and resources instead of using them for research and development of more efficient and less expensive water and wastewater treatment technologies.

It is also essential to note that provincial technical approvals and funding authorities do not contribute to the review and selection of proposals. This raises the question whether there is adequate control exercised over spending public money and whether more and better defined projects can be implemented from available funds.

Jan Korzeniowski, MSc, P.Eng, is with J.K. Engineering Ltd. in Calgary. This article appears in ES&E Magazine’s June 2019 issue.

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