Public value in public sector infrastructure procurement

There is a growing comprehension of the importance of procurement in realising value for clients of all types. The public sector invests in physical assets to deliver the goods, services and symbols that society values (Winch 2002). The procurement of a construction project in the form of hospitals, schools and courthouses enables government to deliver services in the areas of health, education and justice. This thesis examines how Australian State Government agencies (roads & construction) procure infrastructure projects and the extent to which they view the procurement process as an opportunity to deliver more than just a physical facility. Moore's (1995) 'Theory of Public Value' articulates a more proactive and strategic role for public sector managers who seek to discover, define and produce public value, instead of just devising means for achieving mandated purposes. An approach to infrastructure procurement based solely on lowest cost tendering that focuses on the core business of building a physical facility but not necessarily creating additional value as a by-product fails this test. This thesis presents results drawn from ten case studies of State Government organisations that procure infrastructure. Thirty-seven highly experienced project managers operationally responsible for the procurement of infrastructure within these organisations interviews were interviewed. A semi-structured interview featuring a mixture of open-ended and closed-ended questions was designed to explore a range of issues including; how procurement is undertaken, value-for-money (VFM), selection criteria, government priorities, public value, and supply chain management. The transcribed interviews were coded thematically using provisional codes developed from the research questions (Miles & Huberman 1994, p.58). The qualitative software package NVIVO was then used to help enable inductive coding to further develop the provisional coding structures including the identification of sub-themes and the nature of linkages between themes and sub-themes. The findings showed that the procurement approaches favoured were risk averse and predominantly traditional featuring separate contracts with designers and contractors. Value-for-Money was viewed as a crucial objective of procurement activities by project managers. However, the perceptions of value-for-money were relatively restricted, and largely defined in financial terms and focused on the creation of value within client department domains. Non-price criteria are used, particularly for the selection of designers, but less so for contractors, with lowest priced conforming bids from pre-qualified tenderers frequently awarded contracts. Precisely how non-price criteria is an area worthy of considerable futher investigation. There are some instances where standardised non-price criteria are included in contracts to build in some additional benefits into the way projects are procured. However, the focus of procurement is delivering what Graycar (2007) describes as core-business, optimising procurement for client departments as opposed to outcomes for government as a whole. The evidence suggests that project managers are not relentlessly pursuing value creation opportunities via the procurement process and hence not acting as entrepreneurially or innovatively as Moore (1995) advocates. The data shows that the focus of procurement is often on reducing transaction costs, but not on maximising the strategic contribution or value yielding potential of procurement.