A best value approach (BVA) to supplier selection : A case study of best value procurement (BVP) in the Norwegian construction industry

Abstract

It is a well-known fact that the construction industry has long been struggling with project cost and duration overruns, quality, and safety measures. It is characterized as conservative with low-bid contracting which has led to conflicts, delays, and unexpected additional costs. These issues clearly identify the need for a shift towards a more holistic view and increased focus on quality within the industry. Among other, early supplier involvement, supplier integration, and supplier selection have received further attention. At a time that requires close cooperation between organizational units, as more innovations in the industry come from suppliers, integration could affect industry development. The need to improve supplier selection has led to several new tendering models, and this thesis will further investigate one of these models, called the Best Value Approach. Implementing a new procurement method requires a willingness to change as implementing change often impacts relations of power, work tasks, and professional identity of individuals affected. The objective of this thesis is to understand what it takes to change from a traditional supplier selection based on the lowest bid to alternative selection criteria. Hence, our research question is: “How can a Best Value Approach aid construction client in supplier selection, and what are the potential benefits and challenges of this approach?” To answer this question, we have conducted a case study of the use of BVA in a pilot project in Nye Veier, a newly established public client in the Norwegian construction industry. BVA uses past performance documentation and interviews in addition to price to identify the most qualified supplier. Data were collected through semistructured interviews, observations, participation, and attendance at meetings between Nye Veier and the involved contractors. The findings from the study show a main driver for implementing BVA was the issues related to high total costs in the industry. They confirmed that by using an approach that focus more on quality and past performance, they were aided in identifying the qualification of the supplier. Our study found that the approach showed signs of providing cost-efficient and innovative solutions before project completion. The focus on open communication and transparency contributed to a constructive environment with emphasis on collaboration.