NABERS accredited assessor, Bob Sharon, explains why the procurement model in Australia is broken.
The biggest problem right now in Australia is that new buildings or major refurbishment projects are procured on the basis of the cheapest price. Even mission critical data centre refurbs are procured on the same basis.
Once the specifications have been drawn up, the organization responsible will assign a program/project manager to run the project. They will go to tender with the cheapest builder winning, provided all the boxes have been ticked.
Some people might say that a great LEED, GreenMark or GreenStar rating for a building will bring up the value. However, this is a misnomer as these are predominantly design based standards as distinct from an outcomes based standard such as NABERS (National Australian-Built Environment Rating System).
So what normally transpires is that the typical cheapest builder who wins, will go out to tender to the cheapest electrical, mechanical and other sub contractors getting their parts.
Most of them bid with zero margin hoping to get some scope creep and/or cut corners. This means that the HVAC systems, lighting, heating, electrical and other systems are all the cheapest possible that meets the theoretical on paper specification.
However, because they are cheap, in many cases, the quality of performance, energy consumption, longevity and maintenance cost is quite poor and so often times the reality does not match the design standard. The Program/Project managers typically have two goals in life.
They are to deliver the project on or below budget and deliver on time, that's it. After completion, the building/building refurb is handed over to the facilities or properties people. So one silo palms off to the next silo and the twain shall never meet.
This model of procurement is prehistoric, yet happens so much of the time. So the risks are higher as the companies selected vary dramatically in terms of their customer service quality and focus, particularly as the prices bid are down down down!
In Europe, they are moving to a TCO (Total Cost of Ownership) model along with some early adopters in the US. Given that over time, it costs so much less to maintain and operate a sustainable facility built on a TCO basis, it is only a matter of time before Australia, the US and the rest of the world follows this path which will deliver a far more sustainable outcome.
On a major refurb, the other problem organisations have is that it may take 12 to 36 months to get the CAPEX budgets approved. So the procurement model is basically stuffed as it rewards low upfront cost as compared to long term sustainable outcomes. So how can we fix this problem?
Refurbs as a service with performance guarantees and fully audited by one of the big four accounting firms. Imagine reducing the risk on the project by utilising high quality, high caring customer focused vendors and contractors. Higher upfront price? Absolutely! Lower risk? Absolutely!
But who cares about the upfront price when we deliver savings from day one and there is no upfront price. Oh, what a feeling! Oh, what a quality project delivering a future proofed sustainable refurb!
It's time for major disruption to take place in a market driven by tradition and unsustainable practices. There are too many people talking about sustainability. However, very little of that is reflected in today's procurement practices which are very much related to the 18th century!
About the Author
Bob Sharon is a passionate "Disruptor" with over 30 years of commercial industry experience. He is a recognized industry advisor and expert in energy and infrastructure and has been judging data centres in Asia and Australia since 2013.
He is committed to innovation in building infrastructure design, operations, and processes in order to maximize efficiency and comfort and minimize risk, while saving operating costs and the environment.
Sharon conducted the world's first NABERS (National Built Environment Rating System) energy for Data Centre Infrastructure rating back in 2013 which was for Fujitsu.
Then in early 2016, he was privileged to have conducted the world's first NABERS energy for Data Centre Infrastructure rating at 4.5 star, Australia's most energy efficient data centre at the time.