The Challenge
A long-standing client had worked with Decision Strategies for many years to make uncertainty assessment a natural and integral part of their major capital project evaluation process across their worldwide operation because they understood the value we could create as an experienced engineering and infrastructure consulting firm. They wanted to carry this thinking into their procurement department, specifically in the manner in which they assessed EPC firms (Engineering, Procurement, and Construction) as part of the major project bid award process.
The client had a well-refined scoring process that they used in bid assessment, but they wished to expand their view to incorporate the outsized risks that are inherent to mega-project construction.
The Solution
During the first high-profile project that would use the new evaluation technique, Decision Strategies took on the lead facilitation role. The selection team was a truly multi-disciplinary one that brought together disciplines in engineering, procurement, commercial, project management, and construction. All meetings were held jointly, as this was key to effectively communicating salient risks.
When leading the analysis, the Decision Strategies facilitators first framed the conversation around two central questions: what could happen and why. Only then did we shift the conversation toward the numerical implications (how likely was the risk, how long would the schedule activity be delayed, and so on). The numbers were necessary for running a probabilistic analysis around each bidder’s submission, but it was the documentation of the conversation that allowed for the results to be turned into effective action by the team.
After each successive bid round and subsequent analysis session, the team not only had a strong feel for the length and cost of the project should it be awarded to each bidder, but they could pinpoint the weaknesses in each submission. Armed with this insight, the team was able to return to each EPC to negotiate contract terms they felt would improve each bid and ultimately lead to a more favorable project outcome.
When the bid process came to a close, the company was confident that they had chosen the bidder most likely to maximize their value in terms of cost and schedule, while carrying a minimal risk of extreme delay or overrun. The winning EPC firm was in a better position to deliver upon their bid terms, thanks to the improvements identified by the company. The individual project team members were prepared to execute the project with a strong understanding of the risks they would potentially face.
