Task A (942 words)

Motorways of the Sea (MoS) project procurement/delivery system proposal

Maritime transport is the backbone of international business or commercial exchanges. As a result of globalisation, there is still more capacity of maritime transport in comparison with road networks. Bottlenecks because of traffic congestion will hinder socio-economic

developments. Motorways of the Sea project is a concept that provides higher quality and reliable Short Sea shipping experiences initiated by the European Commission and the EU Member States. This is to promote cargo traffics from road networks to environmentally friendly sea-based logistical routes. Financial support if available from European Union for Implementation Projects such as port infrastructures, waterways, canal infrastructures; Facilities for logistics, safety, security, administrative, customs procedures, icebreaking and dredging operations and Studies for the project and pilot actions. Construction is the industry that involves in the infrastructure works of Motorways of the Sea. Construction provides the port infrastructures, waterways and canals and all the structures to be sued in the facilities. To be able to construct structures, the project needs materials, equipment, people and other resources that follow efficient progression. This efficiency requires a project delivery system. In this industry, there are common types of project delivery system which are Owner-provided delivery, Traditional design bid-build, Designbuild and Design-build variation. In Owner-provided delivery, owners perform the design services and the construction work. On the other hand, Traditional Design Bid-Build is ideal on projects where the owner needs both professional design services and construction services while the Design-Build the owner contracts with a single company to provide the design and to construct the project according to the design. In the case of the construction of the structures of Motorways of the Sea projects, the ideal delivery system is the design-build. In this system, the client has the single contract for the design and construction in which the design-build contractor has the full responsibility of the whole operation and the owner give all the control of the projects. The projects of Motorways of the Sea involve totally different kinds of infrastructure works that will require various forms of expertise that will call for the interest in using single vendor. Being a single entity of the vendor, there is an easier level to manage for the part of the owner. In this time of system, there is the advantage of time. Lesser time is involved in the whole

process of design and construction compared to the other systems. It is also believed that design-build system can reduce the over-all cost of the project. Cost can be saved in the streamlining the process and the creativeness of the vendor during the design development. The Owner also has the security of a single responsibility compared to the other systems. Base on the history of constructions, this type of system has been always favoured for transportation and communication facilities and industrial projects which are included in Motorways of the Sea projects. This system also has lesser claim exposure, has newer technology and more innovative. There is also an over-all project optimisation compared to design-bid-build system. Other advantages of this system that is applicable to the projects of Motorways of the Sea can be seen on Figure 1.

Figure 1: Advantages of Design-build delivery system

Project procurement strategy and Risks In order to streamline the process of the Design-build delivery system of the projects of Motorway of the Sea, it is best to choose Partnering strategy. In partnering strategy objectives are agreed upon and dispute resolution and plans are established but partners still maintain their respective independence and may individually suffer or gain from the partnership while in alliance the parties develop a single cohesive unit that jointly shares all risks and rewards based on an agreement. Therefore if the project fails parties jointly share the agreed penalty. Alternatively, if the project succeeds both parties share the rewards. Partnering strategy is ideal to be used in the establishing of Motorways of the Sea since this will aim to nurture development of initiatives and encourage private sector involvements. Partnering strategy will support the type of

projects of Motorways of the Sea particularly the requirement of high quality projects which will demand high frequencies and huge investments. In this case, one of the partners will be responsible of the operations of a project of Motorways of the sea. This partner is an equity joint venture that is developed by both partners by their respective capital contributions. Like any most partnering strategy, although the partners retain respective independence there is risk-sharing. One of the risk involve is competition risk. This is a significant factor in Motorways of the Sea as European Governments are unable to enforce legal admission barriers for other competitors even to protect the vested interests in Motorways of the Sea. Therefore, partnering for projects of Motorways of the Sea will not be conformed to franchises as partners are still threatened by competitors like any business entities trading or operating in the same industry. Other underlying risk for partners in projects for Motorways of the Sea is demand risk. This is present due to the fact that there are alternatives routes that

is based on quality-price ratio, reliability of the service and time efficiency. In the case of Motorway of the Sea, demand risk is demonstrated on the change in transport practices of users of the Motorway of the Sea. Another risk is the operational risk that is usually present to moving markets that will compose the partners cost of operation. One of this is the volatile fuel prices, charter rate and ship prices thus compared to road infrastructures which is lower in operating cost and lower volatility.