Project Management Assignment: Evaluation, Supplier Selection & Contract Management For PMC

Question

Task:
This project management assignment is in two parts:

Part 1 – Evaluation and Supplier Selection
For this part you are preparing the evaluation plan and evaluation criteria to support the selection of a Property Management Company who will manage leasing, cleaning and maintenance of the building fabric, hydraulic, electrical and mechanical services as well external parking areas and landscaping of your Organization's buildings in Australia. Some buildings require refurbishments which will be managed by the PMC. The organisation has previously managed all the facilities within house staff.

Historical data shows the following $$$ spent on cleaning and maintenance in 2019 by location:

For this assignment assume the following:

• All buildings are within the respective CBD's;
• Contract to start 1 January 2021;
• Property Management companies offering all services are to be shortlisted;
• Your company uses a SAP corporate system and would require the successful PMC company to be able to interface with the relevant SAP application:
• Theorganization will retain the current in house asset manager
• The Adelaide and Melbourne buildings are in need of refurbishment starting in 2021which is estimated to cost $ 5 000 000 for Adelaide and $ 8 000 000 for the Melbourne building.

When choosing weightings remember they need to reflect the relative importance of the items against the historical data and organizational values. This will drive the Total Cost of Ownership and negotiation strategy.

You are required to:

• Produce an evaluation plan for this PMC selection, including an evaluation process that incorporates Total Cost of Ownership (TCO) and Value for Money (VfM);
• Design the evaluation criteria and weightings;
• Apply the criteria and weightings to arrive at a recommended PMC; and
• Provide, to be cited in the evaluation plan,at least two academic, professional or corporate references to support your material

Part 2 – Contract Management Plan
You are required to produce a suitable contract management plan for the successful PMC above, containing all of the relevant sections. At least two academic, professional or corporate references to support your material are to be included.

Answer

1. Evaluation Plan
1.1 Introduction
As per the readings of Kurdi, Tharim et al. (2011) undertaken in this project management assignment, it is stated that the maintenance and cleaning are non-core activities of an organization and also the crucial requirements of any business institution. As the business grows managing these activities gets difficult and costly. Outsourcing facilities management reduces expenses and management time overhead.

The organization is a privately held company with buildings spread over major cities in Australia and the firm is looking for a Property Management Company to take over leasing, cleaning, maintenance and refurbishments of these buildings as the need arises.

This document will act as the single source of control for the entire process of evaluation of the PMCs and shortlisting of the best contender.

1.2 Background
The organization has managed leasing, maintenance and cleaning with in house staff members. All the said activities are managed by an in-house asset manager who reports to the infrastructure and maintenance head. The cost of ownership is split into two main headers – maintenance and cleaning. The breakdown of the total cost of ownership – split between maintenance and cleaning across cities – has been laid down below:

Buildings in Adelaide and Melbourne will have to be refurbished with estimated of $5 M and $8 M respectively. The Property Management Company that wins this contract will manage the refurbishments activities.

1.3 Probity
According to Beth (2007, 3), “Transparency and accountability have been recognized as key conditions for promoting integrity and preventing corruption in procurement. However, they must be balanced with other good governance imperatives, such as administrative efficiencyor providing guarantees for fair competition.”

In order to ensure a fair and transparent process of evaluation of the PMCs, the evaluation committee (EC) will adhere to strict guidelines and binding conditions. The EC will work with following key objectives:

• Leverage the professional experience of its team members to evaluate the PMCs under a fair and transparent framework
• Create an evaluation document and recommend the shortlisted PMC to award the contract

The following processes and guidelines will be binding on the evaluation committee:

• Members must declare their conflict of interests, if any, before the evaluation process begins
• EC cannot disclose any details – pertaining to a PMC – to any of the competing firms
• EC will follow criteria laid down in this document to book and spirit
• All the queries directed at the EC from any of the PMCs will be shared with all the stakeholders
• EC will follow the evaluation methodology and timelines set in this document
• EC cannot begin evaluating any of the responses until the response window is closed and acknowledgment is sent to all the competing firms

1.4 Methodology
The entire process will be carried out in the following stages:

1. Request for Quotation
   • The organization will issue a Request for Quotation (RFQ) to leading Property Management Companies operating within the CBD limits
   • The PMCs will be required to submit a response to the RFQ in the prescribed format and within set timelines.
   • Responses after the set date and time will not be considered for further evaluation. No amendments to the submitted responses will be accepted after the closing date and time.
2. Evaluation
   • The Two Envelope System: The EC will follow a two-envelope system for the evaluation. The pricing will not be scored until all the non-pricing scores are finalized and recorded
   • The bidders must have a history of providing all the services mentioned in the evaluation criteria
   • The Evaluation Committee will create a recommendation document with the name of the bidder and rationale for selection. The rationale is to be broken down into following headers:¹
     • Price
     • Quality (Value for Money)
     • Summary – Consolidated Score
   • The Evaluation Committee will close the evaluation and selection process once the recommendation document is approved by the Chairman of the organization.
3. Contract Award
   The bidder with the highest cumulative score will be shortlisted for the contract. The organization will notify all the bidders about the outcome of the evaluation.This will be followed by contract sign-off and transition kick-off post approval by the management committee/chairman of the organization.

1.5 Evaluation Schedule
All the stakeholders will adhere to the activities and their respective timelines as laid down below:

• Accountability of the Activities

  Procurement Team: RFQ Preparation and Issue, Notification to Bidders

  Bidders: Queries and Response Submission

  Evaluation Committee: Evaluation of Responses, Recommendation Document

  Asset Management Team: Transition Kick-off with the PMC

  Managing Committee/ Chairman of the Organization: Approval of Recommendation & Contract Sign-Off

2. Evaluation Criteria
According to Lundberg and Bergman (2011, 2), “Using both price and quality in tender evaluation can enhance the efficiency of public procurement – but it also adds complexity to the procedure.” This segment defines the combination of price and non-price evaluation criteria which the evaluation committee will adhere to.

A PMC must offer all the necessary services – refurbishments, leasing, cleaning and maintenance – to be shortlisted for evaluation. The PMC with the total score (score A + score B) will be shortlisted. The outline for evaluation of the PMCs has been drawn out below:

2.1 Price Evaluation Scoring– Overall weight to be 40%

Normalised Score Calculation

The normalized score for the prices quoted by the Property Management Companies is determined using the following relation:

Normalised Score of PMC – 1 = (V1 x 10) / (Minimum of V1, V2 and V3)

Normalised Score of PMC – 2 = (V2 x 10) / (Minimum of V1, V2 and V3)

Normalised Score of PMC – 3 = (V3 x 10) / (Minimum of V1, V2 and V3)

These scores are then further weighted down to 40% as the overall weight of Pricing

2.2 Non – Price Evaluation Scoring – Overall weight to be 60%

• Scoring

  The bidders will be scored on a 10-point scale. 10 being the best score while 1 being the worst. The following schema can be followed a broad guideline for scoring purpose:

  1-2: Deficient | 3-4: Poor | 5-6: Satisfactory | 7-8: Good | 9-10: Excellent

• Normalised Non-Price Criteria Score
  The normalized scores for this section will be calculated like the pricing scores. The following relation will be used for the purpose of normalization

  Normalised Non-Price Score PMC -1 = (S1 x 10) / (Maximum of S1, S2 and S3)

  Normalised Non-Price Score PMC -2 = (S2 x 10) / (Maximum of S1, S2 and S3)

  Normalised Non-Price Score PMC -3 = (S3 x 10) / (Maximum of S1, S2 and S3)

• Criteria Headers
  Previous experience of the bidders will be a crucial element of the evaluation. The previous engagements will be examined on dimensions like – response time, quality and completeness of service, communication and number of renewals awarded to the company.

  The technical capacity of the bidders to handle such projects will also be assessed by the evaluation committee. Bidders are expected to outline their expertise in response to the Request for Quotation (RFQ) which will be issued.

  Since the organization’s buildings are spread over multiple cities, a 20% weightage has been given to organization and project management capabilities of the bidders. Dimensions like geographical and property portfolio of the PMCs can be used as a proxy for this evaluation. Firms with more diverse geographical presence will be better positioned for this contract. Similarly, a diverse property portfolio is a good proxy for expertise in handling full range of services like – managing building fabric, electrical, hydraulic and mechanical services; managing parking spaces and landscaping.

  In absence of immediate oversight seamless communication between the PMC and the organization is imperative. Sharing exhaustive data with precision and frequency is very crucial. The bidders must outline their plan around maintaining seamless communication – frequency, media and level of detailing.

3. Sample Assessment
TCO & VFM Analysis of Three Bidders – Spotless IFM, Cushman & Wakefield and Programmed FM

• Pricing Score – Score A
  The tender value for a 3-year contract has been tabulated below and normalized price scores have been calculated as outlined in section 2.1.

	Tender Value	Normalised Price Score	Weighted Price Score (40%)
Spotless IFM	148500000	7.4	2.98
Cushman & Wakefield	110500000	10.0	4.00
Programmed FM	130500000	8.5	3.39

 

• Value for Money or Non-Price Evaluation – Score B

Criteria	Weights		Spotless IFM	Cushman & Wakefield	Programmed FM
Experience	15%	Score	9	7	8
		Weighted Score	1.35	1.05	1.2
Technical Capacity	10%	Score	8	8	6
		Weighted Score	0.8	0.8	0.6
Organization and Project Management Capability	20%	Score	9	6	7
		Weighted Score	1.8	1.2	1.4
Stakeholder Engagement and Communication Competency and Capability	15%	Score	9	6	7
		Weighted Score	1.35	0.9	1.05
Total Weight	60%
Total Non-Price Criteria Score			5.3	3.95	4.25
Normalised Non-Price Criteria Score			10.00	7.45	8.02
Weighted Non-Price Criteria Score			6.00	4.47	4.81

 

The total score (A+B) for each of the three bidders are as follows:

• Spotless IFM – 8.98
• Cushman & Wakefield – 8.47
• Programmed FM – 8.2

Based on the overall score Spotless IFM is best option for awarding the contract.

4. Contract Management
4.1 Objective
The objective of this Contract Management Plan (CMP) is to outline how PMC-1 (Property Management Company awarded the contract) will manage the contract for leasing, maintenance, cleaning and refurbishments of the properties – as mentioned in this document – owned and hitherto managed by the Organization.

4.2 Contract Summary
4.2.1 Background
This contract is to govern the service engagement for leasing, maintenance, cleaning and refurbishments of its buildings in multiple cities in Australia. The award of the contract is based on evaluation of bids which were submitted in response to a Request for Quotation (RFQ) by some of the leading Property Management Companies operating in the region.

4.2.2 Scope
PMC-1 will manage leasing, maintenance, cleaning and refurbishments requirements of the properties in the following cities –Perth, Sydney, Brisbane, Melbourne, Adelaide and Darwin. The maintenance activities include maintaining fabric, hydraulic, electrical and mechanical services, external parking areas and landscaping of the buildings.

4.2.3 Pricing and Payments
The fixed pricing plan as submitted by PMC – 1 and approved by the management committee will be paid by the organization on a monthly basis. Service provider should raise an invoice at the end of each month. The organization will process the payments within 15 days of receiving the invoice.

Invoices are to be submitted to the Organization’s procurement manager and raised in the name of ‘XYZ’ (Organization’s Name).

4.2.4 Contract Commencement and Duration
The contract will be in effect from January 1, 2021 and will remain valid for 3 years subject to adherence to the conditions laid down in the contract which will be annually reviewed. The outcome of annual review will be communicated to PMC-1 and if the service conditions are not met, the contract will stand terminated with 30 days of notice.

The contract can be extended by a year depending on the recommendation of the review team. The decision to extend the contract will be communicated to PMC-1 at least 30 days before the date of termination.

4.3 Contract Administration
4.3.1 Roles and Responsibilities
The list of roles pertinent to monitoring and maintaining the contract engagement has been laid down below:

• Contract Manager: The CM will be responsible for monitoring the contract and its terms on a monthly basis. The annual review will be led by the CM and recommendations will be forwarded to the procurement department of the organization.
• Asset Manager: The in-house asset manager will be retained by the organization and will be the single point of contact for all the staff members and leads working on behalf of the PMC.
• Site Manager: The site manager will represent the PMC and all its staff members as the single point of contact for all the communication.

4.3.2 Governance
The services provided by the PMC will be reviewed monthly by the asset manager with the site manager. The services will be evaluated against the pre-defined parameters as mentioned in this document under section 4.4 Performance Management. The outcomes of these review meetings are to be documented and maintained by both the parties.

4.3.3 Best Practices
The reviewing committee will assess the PMC-1 adoption of industry’s best practices and continuous improvement of its services. Leveraging technology to determine the best leasing opportunities, gathering and sharing data with the organization and focus on integrating operations to reduce cost on ongoing basis are some of the dimensions on which the PMC will be reviewed.³

4.4 Performance Management
According to Amaratunga (2000, 264), “using performance variables, facilities management administrators can be equipped with an effective tool to determine the value and level of acceptance of each factor contributing to facilities management and to the overall organization performance.” The following segments outline the performance variables which will be monitored by the asset manager in a timely manner.

4.4.1 Key Performance Indicators
The service engagement will be monitored against the following performance indicators:⁴

4.4.2 Reporting and Monitoring
PMC-1’s site manager will be responsible for gathering of data pertaining to the service engagement and sharing it with the asset manager in a timely manner. The asset manager will monitor the services against using the KPI’s defined in the section above and create a monthly report.

4.5 Relationship Management
4.5.1 Stakeholders
According to Antoniouet al. (2012, 449), “The number and type of contractual relationships between the major participants are crucial in terms of time, cost and quality achievement of the resulting project.” The stakeholders and their respective mapping are crucial to maintain seamless communication channel and monitoring framework. Following is the stakeholder mapping between the organization and the service provider:

4.5.2 Communication
The site manager appointed by the PMC will be the single point of contact mapped with the asset manager of the organization. All communications – data, invoicing, updates – are to be directed to the asset manager.

4.5.3 Escalation
The following escalation ladder will be followed for any unresolved issues: Site Manager -> Relationship Owner -> Business Unit Head.

4.6 Contract Variations
All the contract variations will be led by the contract manager through a pre-defined contract variation process. Contact variation request raised by the service provider must be submitted to the contract manager who will evaluate the request and recommend changes, if any. The variation request will then be forwarded to the procurement department for approval.Once approved, the revised contract document will be in effect. The document version will be updated on Contract Summary page – Annexure 1.

4.7 Transition
The transitioning phase will be led by the in-house asset manager from the organization’s end and by the transition manager from the PMC’s end. The following transition schedule will be followed:

Annexure 1 – Contract Summary

References
1. Antoniou, Faniet al. 2013. “Complexity in the Evaluation of Contract Types Employed for the Construction of Highway Projects.”Procedia – Social and Behavioral Sciences74(2013): 448-458. https://doi.org/10.1016/j.sbspro.2013.03.048

2. Amaratunga, D et al. 2000., "Assessment of Facilities Management Performance", Property Management,18 (4): 258-266. https://doi.org/10.1108/02637470010348816

3. Lundberg, Sofia and Bergman, Mats A. 2011.“Tender Evaluation and Award Methodologies in Public Procurement.”SSRN. https://ssrn.com/abstract=1831143 or http://dx.doi.org/10.2139/ssrn.1831143

4. Department of Finance, Government of Australia. “Evaluation Report Template.”Accessed May 7, 2020. https://www.wa.gov.au/organisation/department-of-finance/about-procurement.

5. Hoffman, Steve et al.2019.“Emerging Trends in Facilities Management Sourcing.” Mckinsey& Company. Project management assignment Accessed May 7, 2020. https://www.mckinsey.com/business-functions/operations/our-insights/six-emerging-trends-in-facilities-management-sourcing.

6. GEP Worldwide. “Facilities Management.”Accessed May 8, 2020. https://www.gep.com/white-papers/facilities-management-key-elements-pursuit-cost-effectiveness;

7. Crabb, Eric. 2020.“Facility Asset Performance: What Scorecard Metrics Should I Consider?”Cushman & Wakefield. Accessed May 8, 2020. https://www.cushmanwakefield.com/en/united-states/insights/us-articles/2020-01-amer-facility-asset-performance

8. Department of Finance, Government of Australia. “Contract Management Plan, Goods and Services Templates.”Accessed May 8, 2020. https://www.wa.gov.au/government/document-collections/goods-and-services-templates.

9. Beth, Elodie. 2007.“Integrity in Public Procurement: Good Practice from A to Z. Organisation for Economic Co-operation and Development (OECD).” SSRN: https://ssrn.com/abstract=987026

10. Kurdia M.K. et al. 2011. “Outsourcing in Facilities Management- A Literature Review.” Procedia Engineering 20 (2011): 445 – 457. https://doi.org/10.1016/j.proeng.2011.11.187