Elon Musk, The Boring Company and the procurement dilemma
When SpaceX and Tesla CEO Elon Musk announced via Twitter that his latest company, The Boring Company, will bid for a new high speed link connecting O’Hare Airport to downtown Chicago, the Twittersphere went into overdrive.
It comes after the Mayor of Chicago, Rahm Emanuel, visited Musk in LA to hear more of the billionaire’s vision for a high speed transport system, and the experimental technology that could dramatically reduce transport infrastructure construction costs. Musk hopes the technology, including the recycling of soil for use as ‘earth bricks’ instead of concrete, will speed up the drilling of narrow shafts to deploy electromagnetic sleds at speeds of 125 mph (200 km/h). An initial test tunnel is currently under construction beneath the SpaceX office in Hawthorne, CA.
The argument for procurement innovation to stimulate innovation
Musk’s announcement is a shining example of market-led bidding, where proponents can influence and shape potential solutions that would otherwise have been fully scoped and prescribed.
But this opportunity is only the tip of the iceberg. Musk has a grander vision for changing the world and humanity and he is likely to share the innovations across his other relevant interests — from building human colonies on Mars to rocket ship transportation across Earth. Musk’s lithium-ion battery power project in South Australia lived up to his gutsy promise to deliver in 100 days or provide it for free. Add “demonstrated project delivery” to the list.
The oxymoron of public sector modernization
Musk joins an array of industry players racing to address global civil and civic problems that governments have not been able to solve. It’s an efficient way to modernize public services that can then be developed for broader social use while creating opportunities for companies to develop breakthrough products and market leadership.
Others merely consider Musk to be a pipe-dreamer who is good at selling ideas. Important to both sides is the delicate decision around balancing risk against technological progress and its benefits (although it is not guaranteed). Risk is a significant hurdle for the procurement of technology. But while it cannot be eliminated, it can be managed.
The issue in this case is whether the stringent two-step RFQ process is flexible enough to let Musk in on the race. Qualification responses close on January 24, 2018 after which top contenders will be issued with the Request for Proposal that is due November 2018. As a public private partnership (PPP or P3), the project is to be financed entirely by the Concessionaire. Presumably bank-rolling will be the least of Musk’s issues, but banking on an experiment will be forefront.
This is the dilemma that will no doubt be keeping the Mayor, The Chicago Infrastructure Trust and the procurement assessors awake at night in the coming months.
Evaluation, uncertainty and the can of worms
The Evaluation Criteria for stage one qualification weights relevant experience as number one, financing capability as number two; team, key personnel and organisation third; approach to project development as fourth and approach to building workforce participation last. The project will be high stakes, and presumably highly competitive, attracting interest from international consortia with proven above or below surface PPP / P3 projects under their belts. The sting will be that short-listed applicants receive no payment for their efforts.
Theoretically, Musk is already wavering on the lower side of qualification with an unproven solution, and an entity with less than 12 months trading. Despite the Request for Qualification process expected to be undertaken with professional integrity and ‘free of lobbying activities’, we’ll leave this interpretation alone.
Musk’s involvement in the South Australian PPP lithium-ion battery consortia shows promise in areas of project finance and relational contracting, and one could draw a bow to his PayPal credentials as demonstrated experience in designing and delivering payment systems. And while the Boring Company itself has no track record delivering transportation projects, its team of advisers do. A final consideration of course is the length of the procurement lifecycle. The Boring Company is in very early stage, with the LA pilot to test tunnel feasibility only at permit application stage. Will this matter? Only time will tell — the Mayor of Chicago has placed no firm deadline for project delivery.
Musk has opened a new can of worms. To what degree will the assessors of this bid take into account Musk’s unproven technology and track record with other enterprises (85% short-fall on delivery of the Tesla Model 3 electric vehicles) against the city’s aspirations for innovation to solve its transport problem? It’s a meeting of like minds that is challenged by the realities of risk management and corporate governance.
This will definitely be one procurement process to watch.
Nyree McKenzie is the CEO and founder of Bidhive, an end-to-end bid management platform built to support an organisation’s ability to tender successfully. Nyree is also the Director of internationally awarded tender and bid management consultancy, Thought Bubble.
@bidhive @ny_mckenzie
bidhive.com
This story is published in Noteworthy, where 10,000+ readers come every day to learn about the people & ideas shaping the products we love.
Follow our publication to see more product & design stories featured by the Journal team.
