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Auckland Transport

Our category approach and delivery models Our category approach and delivery models

Overview of our category approach and delivery models we use to engage with our suppliers.

Category Management

Our category approach

We have adopted a category management based approach to procurement, which acknowledges a combination of organisational structure, the uniqueness of individual category requirements and supplier markets. This will also aid us in focusing on an ‘all of business’ cross functional approach to procurement rather than a siloed approach.

The procurement categories described below form the basis for the development of Procurement Category Plans and the reporting of spend data.

Category positioning

The procurement category positioning matrix assesses the business impact and risk in delivery against relative value. It is a useful tool to help inform the approach to take to market, the type of relationship to be developed with the supplier and the amount of time and resources used in the procurement process.

Supply position Description Value/risk Approach Arrangements
Strategic critical Specialist services or goods
Limited number of suppliers
High/ High Manage suppliers
  • Medium to long term contracts.
  • Contingency planning.
Strategic security Strategically important
Shortage of reliable suppliers
Low/ High Ensure supply
  • Long term contracts.
  • Consider alternatives.
Tactical profit Many potential suppliers High/ Low Drive savings
  • Short term contracts.
  • On-going active sourcing for completion
Tactical acquisitions Routine purchases with many potential suppliers Low/ Low Minimal attention
  • One off contracts.
  • Standard Purchase Orders.

Category descriptions

Corporate category

Corporate Goods and Services (GS)
The GS category includes the provision of corporate goods and services which are procured to support the entire Auckland Transport organisation. This category includes: corporate supplies, utilities, fleet vehicles, finance, procurement, legal, property, human resources, communications and marketing professional services.
Sub Categories Business Services; Finance; Human Resources; Marketing and Advertising; Utilities, Onsite non employees.
Accountability Finance Division – Procurement Department supported by applicable business departments.
Category Positioning Tactical Acquisition (Tactical).
Delivery Models Staged, Supplier Panel and Collaborative.
Supplier Market The GS category has an established market with multiple organisations competing on price and service.
With the exception of some specialist category areas, the supplier market is generally unrestricted, with low barriers to entry and competition from both the public and private sector.
Procurement Approach Value for Money will be achieved through the reduction of transaction costs and simplification of procurement activities. Generally shorter term agreements are better suited to this category so that flexibility can be maintained in a low risk competitive market.
There remains good opportunity to utilise supplier panels and collaborative contracts where available and to leverage demand with Auckland Council and its other CCOs.

Infrastructure categories

Asset Construction (AC) and Physical Works (includes PW1, PW2, & PW3)
The AC category includes construction projects or programmes of work necessary to bring new transport assets or transport facilities into service.
In 2017, the PW category was implemented during the establishment of Physical Works Supplier Panels (PWSP) for construction contractors, where the scope of work includes construction of roads including bridges, streetscape, and traffic signals; construction of transport interchanges including car parks and busway stations/rail stations buildings.
Sub Categories Asset Construction (AC): AC category/ subcategory will be used for all construction projects where scope sits outside of Physical Works Supplier Panel E.g. Marine services projects.
Relocations of utility services (e.g. Chorus or Vector) would be classed as AC category.
Funding agreements associated with asset construction (e.g. funding agreement to other CCOs/ agencies such as AC, CRL, Watercare, NZTA or KiwiRail or any agency whereby we execute a funding agreement related to a project.
Physical Works (PW1): Major construction under PWSP where estimated value is $4M and above to maximum value of $50M
Physical Works (PW2): Construction under PWSP where estimated value is $300k and above to under $4M
Physical Works (PW3): Minor construction under PWSP where estimated value is less than $300K
Accountability Infrastructure Division – Construction, Investment & Development and Roading Groups
Category Positioning Strategic Critical (Strategic) & Tactical Profit (Leverage) Indicative Annual Spend $390m (32%)
Delivery Models Staged, Design & Construct, Shared Risk and Supplier Panel
Supplier Market The AC and PW category has a mature well established supplier market with multiple organisations competing strongly on price and service.
There are several large, highly resourced suppliers competing for large projects, however high entry cost can be a barrier to the entry for new suppliers wanting to compete for such projects. A number of suppliers are available for smaller projects or to act as subcontractors to the larger suppliers.
The supplier market is generally unrestricted with market competition from other central and local government organisations as well as private industry.
Procurement Approach Value for Money will be achieved through the use of collaborative contracting, reduction in administrative overheads, focus on delivery and the selection of the most appropriate delivery model. We expect to make greater use of the design and construct delivery model, including ECI in the future.

Road Corridor Maintenance (RM)
The RM category includes maintenance and renewal activities within the road corridor and town centres. Includes: local roads, footpaths, at grade carparks, cycle ways, bridges, retaining walls, guardrails, signs, street lights. Excludes: excludes bulk storm water systems.
Sub Categories Road Maintenance, Street Light Maintenance
Accountability Infrastructure Division – Road Corridor Group
Category Positioning Strategic Critical (Strategic) Indicative Annual Spend $286m (23%)
Delivery Models Staged, Design & Construct, Shared Risk and Collaborative
Supplier Market The RM category has a mature well established supplier market with multiple organisations competing strongly on price and service, including some interest from off-shore firms. Despite high entry costs the supplier market is generally unrestricted with several large, highly resourced suppliers. Street lighting contractors are required to be approved by the network owner and must employ technicians with approved work type competencies. Market competition exists from other central and local government organisation as well as private industry.
Procurement Approach Value for Money will be achieved through a consistent regional approach to contracting using collaboration and a focus on delivery. We have successfully implemented ten regional road maintenance and renewal and five regional street light maintenance and renewal contracts on a longer 4+2+2 or 4+1+1 terms. Competition has been maintained by limiting the number of contracts any one supplier can hold. Cross organisational collaboration also occurs between Auckland Council, Watercare and utility providers to ensure coordination of activities in the road corridor. The maintenance providers may also be called upon to carry out minor construction activities in the road corridor. This procurement approach is consistent with the recommendations of the 2011 Road Maintenance Task Force and 2012 Road Efficiency Group.

Facilities Maintenance (FM)
The FM category includes maintenance and renewal of all Auckland Transport facilities not covered under the RM category. It includes: public transport facilities (bus stations and stops, rail stations, ferry terminals and wharfs), parking buildings and equipment and other Auckland Transport owned buildings and property.
Sub Categories Building Maintenance, Cleaning, Property Maintenance
Accountability Auckland Transport Metro Division – Rail, Bus, Ferry Departments and Transport Services Division – Parking Services Department supported by Property Operations Department and Procurement Department (corporate accommodation)
Indicative Annual Spend Tactical Acquisition (Tactical)
Delivery Models Staged, Supplier Panel and Collaborative
Supplier Market The FM category has an established market with multiple organisations competing on price and service.
With the exception of some specialist category areas, the supplier market is generally unrestricted, with low barriers to entry and competition from both the public and private sector.
Procurement Approach Value for Money will be achieved through the reduction of transaction costs through business wide regional based maintenance and renewal contracts. Generally, shorter term agreements will be better suited to this category so that flexibility can be maintained in a low risk competitive market, however in specialist areas longer term contracts will be established.
There remains good opportunity to utilise supplier panels and collaborative contracts where available and to leverage demand with Auckland Council and its other CCOs.

Transport Professional Services (PS)
The PS category includes all engineering and transport related professional services typically provided by consulting engineers to the Infrastructure, ATMetro, Transport Services, and Strategy and Planning divisions. This includes transport strategy or policy development, planning, investigation and design services.
Sub Categories Design, Engineering, Management, Planning, Research, Review
Accountability Finance Division – Procurement function supported by applicable business departments
Category Positioning Tactical Profit (Leverage) Indicative Annual Spend $102m (8%)
Delivery Models Staged, Supplier Panel and Collaborative
Supplier Market The PS category has an active well established supplier market with multiple organisations competing strongly on price and service. There are several large, highly resourced suppliers who deliver across multiple disciplines and many smaller to medium sized suppliers who specialise in specific services. Except for some specialist areas, the supplier market is generally unrestricted with low barriers to entry and has market competition from both public and private sector.
Procurement Approach Value for Money will be achieved by developing and maintaining competitive tension in the supplier market and reducing transaction costs through business wide regional based contracts. We have implemented Traffic & transportation engineering PS Panel, Technical Support Services and Traffic Monitoring Services Supplier Panel. As these panels come to the end of their terms it is expected that some rationalisation of these panels will occur, allowing a more business wide approach to procurement to occur. There remains opportunity to utilise supplier panels and collaborative contracts where available and to leverage demand with Auckland Council and its other CCOs.

Technology category

Business Technology (BT)
The BT category includes provision and support of all business technology and communication network systems, equipment and services. It includes: technology hardware and software, communication network systems, CCTV, traffic signals, electronic information signs, ticketing and pay and display equipment and intelligent transport systems (route scheduling, real-time and ticketing) and associated professional services.
Sub Categories Hardware, Software & Applications, Technology Operations, Technology Professional Services, Information Security, Digital Architecture
Accountability Business Technology Division
Category Positioning Strategic Security (Bottleneck)
Delivery Models Staged, Supplier Panel and Collaborative
Supplier Market The BT category market is relatively constrained within NZ, with a limited number of key players who are able to provide the level of support required by our business. These suppliers are comprised of both global powerhouses and small niche service providers. As technology becomes more embedded in the daily operation of our business, the supply base will expand to incorporate an increased number of less traditional technology providers.
Procurement Approach Value for Money will be achieved by taking a flexible approach to procurement which recognises the increasing impact of technology across our business and the rapidly changing nature of the market. Commodity based and common technology requirements will be procured through traditional means, but more complex and specialised systems will need careful planning as price tension may be limited and the cost of changing suppliers will be prohibitive. Within the common technology market there remains good opportunity to utilise supplier panels and collaborative contracts where available, and to leverage demand with Auckland Council and its other CCOs.

Services categories

Public Transport Service Delivery (PT)
The PT category includes the provision and operation of rail, light rail, bus and ferry public transport services including concessionary fare subsidy schemes such as total mobility, super gold and general fare subsidies (senior, child and tertiary fares discounts). Also includes associated access agreements and maintenance of Auckland Transport owned rolling stock, vehicles and ferries.
Sub Categories Bus, Fare Subsidies, Ferry, Rail, Light Rail
Accountability Auckland Transport Metro Division – Rail, Bus, Ferry Departments supported by the Auckland Transport Metro Commercial Department 
Category Positioning Strategic Critical (Strategic)
Delivery Models Staged and PTOM Partnership Indicative Annual Spend $324m (26%)
Supplier Market The supplier market for the PT category is constrained, with bus services limited to major cities and Wellington being the only other region with metropolitan rail and ferry services. The markets are dominated by a few, or in some cases one, major operator with a number of small-to-medium sized operators. There are significant barriers to entry due to the substantial capital outlay required to enter the market.
Procurement Approach Value for Money will be obtained by implementing contracts under the PTOM partnership delivery model, which aims to reduce the per passenger subsidy by growing the commerciality of public transport services. This collaborative approach recognises that we and our suppliers, are reliant on each other for delivering affordable public transport services that our customers want to use.

Service Delivery (SD)
The SD category includes operational services at all Auckland Transport facilities. Includes: security services, parking enforcement and HOP retail services.
Sub Categories Harbourmaster, HOP Retail, Parking
Accountability Auckland Transport Metro Division – Rail, Bus, Ferry Departments, Transport Services Division – Parking Services, Network Operations & Safety and ATOC Departments and Finance Division – Auckland Transport HOP Department
Category Positioning Tactical Acquisition (Tactical) Indicative Annual Spend $49m (4%)
Delivery Models Staged and Collaborative
Supplier Market The TO category has an established market with multiple organisations competing on price and service. With the exception of some specialist category areas, the supplier market is generally unrestricted, with low barriers to entry and competition from both the public and private sector.
Procurement Approach Value for Money will be achieved through the reduction of transaction costs through business wide regional based contracts. Generally shorter term agreements will be better suited to this category so that flexibility can be maintained in a low risk competitive market, however in specialist areas longer term contracts will be established. There may be opportunity to utilise collaborative contracts where available and to leverage demand with Auckland Council and its other CCOs.

Procurement delivery models

A delivery model is the relationship established between Auckland Transport and a supplier to enable the purchase of the output required to deliver an activity. Each delivery model has a different approach to contracting, work methods and risk allocation to suppliers.

In selecting the appropriate delivery model, we will assess the activity against the following criteria:

  • Complexity.
  • Innovation potential.
  • Scale.
  • Risk profile.
  • Timing and urgency.
  • Supplier market.
  • Stakeholder requirements.
  • Uncertainty.
  • Level of our involvement.

Delivery models we use

Note 1: Shared risk and Supplier panel are considered advanced delivery models by the Transport Agency. Use of these models for Transport Agency funded activities will require specific approval by the Transport Agency.
Note 2: A Public Private Partnership (PPP) financing model may be used where an Auckland Transport or private business venture is funded and operated through a partnership between Auckland Transport and one or more private sector companies.

Staged

Under a staged approach, activities are delivered through a staged series of separate contracts (e.g. investigation only, design only or construction only). This is a well understood and widely used approach to procurement and is often described as the ‘Traditional’ approach. It is best suited to small, simple and low risk projects.

Design and construct

A traditional design and construct delivery model uses a single contract to complete the detailed design and construction. This usually involves a lump sum price arrangement where more risk is accepted by the supplier. An Early Contractor Involvement (ECI) approach engages the contractor after the initial investigations and seeks to maximise the value that can be achieved from a design and construct model. Under design and construct individual stages are generally awarded as separable portions, conditional on the successful completion of the previous portion. The exact number or separable portions will be dependent on how far the project has been developed prior to the design and construct delivery model being implemented. These approaches are best suited for medium to large projects with innovation potential.

Shared risk

A shared risk delivery model uses an integrated team comprising of the buyer, consultants and contractors and material suppliers. The team members are incentivised to work collaboratively and impartially to deliver what is best for the project and to achieve high performance standards. Successful collaboration demands that all parties commercial interests be aligned. Risk is shared by all parties with only two possible outcomes to working together: either all parties succeed, or all parties fail. No team member can win at the expense of another. An Alliance is an example of the shared risk delivery model and is best suited to large, complex and high risk projects.

Supplier panel

A supplier panel delivery model appoints a group of suppliers that, as a panel, offer the best combination of skills and experience required to deliver a specified group of outputs. The supplier panel model uses a two-stage process. In the first stage, suppliers are appointed to the panel through a competitive process. In the second stage, tasks are allocated to panel members. Tasks may be allocated to a preferred panel member by either direct appointment, or through a competitive process involving two or more panel members.

Public Transport Operating Model (PTOM) partnership

PTOM is a new delivery model created as a result of amendment to the Land Transport Management Act in 2013. The PTOM delivery model sets the framework for building more effective public private partnerships with public transport service operators that focus on customer needs. This will include a mix of collaborative planning, joint investment and risk and reward sharing.

Collaborative

Under a collaborative delivery model, activities are delivered by leveraging arrangements already put in place by other organisations, including MBIE and Auckland Council and its CCO’s. Common collaborative arrangements include All of Government (AoG) contracts, Syndicated and Common Capability contracts. We will look to utilise these contracts where appropriate as it is expected that these contracts will offer direct savings as well as a reduction in procurement overheads.
A practical application of delivery models

The diagram below illustrates the main differences between the staged, design and construct and shared risk delivery models from a conceptual construction perspective.

As the complexity of the delivery model increases the number of contracts decreases. This in turn creates an opportunity to increase the speed of delivery of the project.

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