A new motorway service area

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Background

The Report is about the development of a new Motorway Service Area (MSA) at Salteroyd in the county of Yorkshire, North of England. The investor of the project is Baytree plc which is a retail and leisure group and currently investing a huge amount in construction and development for the expansion of their business. Along the construction of new MSA, Baytree have 2 other ongoing MSA projects in the UK which include mid-sized hotels, some multi-sport clubs and some agricultural interests. Due to the simultaneous ongoing projects and their extensive involvement in the construction industry, Baytree plc seems to be quite experienced and well established in this business. To well establish them in the future, Baytree appointed PWF management consultants to research future market trends which may be more beneficial for their construction business.

The research concluded by PWF management consultants was that climate change factors and the reduction to CO2 footprints are very important in the future. Every possible step should be taken forward in the reduction of CO2 and making the construction as climate friendly as possible. PWF management consultants further added that Sustainability issue will affect the buying power of people in the future. If sustainable and environment friendly development takes place, much revenue is expected to be generated. So, to be leaders in sustainable development in the near future, Baytree plc agreed with the research carried out by the PWF management consultants.

Statement of work

According to Kerzner (2009), Statement Of Work (SOW) is considered as an important element of the project. In the procurement context, SOW can help in defining the scope of project, locations of project, objective of the procurement, enlisting the tasks to be performed, grouping of similar tasks etc. In short, SOW provides a clear understanding of the requirements of project and minimizes the chances of future changes.

Following are the key project requirements:

SCOPE OF PROJECT

Baytree plc has proposed the construction of a new Motorway Services Area (MSA) that will facilitate the users of M7.The primary function of the MSA would be to provide the re-fuelling facilities along the facilities of Food and Washing Closet (WC) for a short stay period. The project basically comprises two wings; the Northbound and Southbound site each of the M7.As the project has two wings, the work will be done phase wise i.e. first the work will be done on Phase I accompanied by Phase II.

LOCATION OF PROJECT

The proposed Motorway Services Area will be located along M7 motorway at Salteroyd in the county of Yorkshire. The locality of the site consists of natural beauty and the area comes under the title of Special Scientific Interest (SSI) due to the rare flora and fauna and wild life found in the location. To do any construction in the area of Special Scientific Interest (SSI), Baytree must get the permission from the planning commission so that no alteration is done to the natural beauty.

PHASES OF PROJECT

As discussed earlier, the whole of the project comprises of two phases. Phase I is identical to Phase II with the exception that there will not be any New Build Budget Hotel in Phase II.

Construction of PHASE I

Phase I comprise the design and construction of the MSA on the Northbound carriageway (Appendix 1).Following are the key development components:

  • Slip roads to and from the M7 motorway to facilitate the maximum usage of the area
  • Service area, which will include the retail outlets, restaurants , toilets, coffee shops, convenience stores, car washing and servicing facilities etc
  • Petrol Filling Station (PFS) with associated kiosk, the PFS (Appendix 1) has been designed in such a way that it could easily accommodate all sizes of vehicles i.e. Cars, coaches and Long Vehicles. The fueling facilities of Passenger Cars would be separated to that of Coaches/Long vehicles so that no queues are encountered. The fuel tanks would be subterranean and would be installed away from the Fuel Dispensers.
  • Service Road to provide proper path to all the Northbound site area.
  • Appropriate parking space for Cars, Coaches and Long Vehicles/Trailers.
  • A New Build Budget Hotel having a capacity of 75 bedrooms. The hotel will facilitate the people intending to stay for a night to have rest or long stay.
  • A Pedestrian bridge to access Southbound and Northbound areas
  • Footpaths are constructed throughout the Northbound area to facilitate the pedestrians and to enhance the ecstatic of the area.

CONSTRUCTION OF PHASE II

As discussed earlier, Phase II will be identical to the Phase I i.e. Northbound except New Build Budget Hotel will not be constructed here, all other facilities remain the same.

PRIMARY OBJECTIVES OF CLIENT

Morledge et al. (2006) states that client plays an important role in the construction industry and involves a number of duties and functions, which is not commonly adopted by clients. The client mostly aims to have best value of money, construction phase complete exactly on time and within budget, speedy but perfect work etc. Other than these factors sustainability also plays a vital role and needs to be considered in all stage of construction.

Baytree defined the criteria for the successful completion of the project and the complete fulfillment of these criteria, the project will be considered a successful one.

TIME

The construction industry is always full of competitions. No developer wants to delay its projects and have a bad impression in the construction market. The dead line given for the completion of Phase I is May 2012. The Phase II can be completed by May 2013.As it is a commercial project any substantial delay in the project can cause financial loss to the client. Baytree plc has 2 other ongoing MSA Projects and having negotiations 2 other landowners for developing 2 further MSAs over a period of 5 years, so they can't afford to waist their time. In addition, certain time and dates are allocated for certain task in the development stage of project like:

  • Appointing consultants for project
  • Design period of project
  • Finalizing Contract documents of project
  • Site occupation of project
  • Defects liability period
  • Final completion of project

BUDGET

The client has a fixed budget of £34M. Out of £34M, Northbound's Phase I constitutes £16M for construction of roads, PFS, parking etc and £3M for new build budget hotel while Southbound's Phase II constitutes £15M for construction of roads, parking etc. As Baytrees have other 2 ongoing projects of similar nature, therefore it has a tight budget and cannot afford to exceed its limit. Aditionally, cost limits are to be checked for:

  • Design cost of project
  • Construction cost of project
  • Final cost of project

QUALITY AND FUNCTIONALITY

According to Fewings (2005), Quality standards should be setup in the start of a new project so that the quality of project proposed by the supplier should match the level of expectation of the client for the project. The Quality of the project is not limited to the end product only, in fact it accounts for all the three stags of the project i.e. pre-construction, during construction and post-construction.

The location of the new MSA is in the region of Salteroyd, a region of natural beauty and Baytree plc is looking forward to enhance the beauty of the region by investing in a high quality construction. The main aim of Baytree is to satisfy its customers by developing natural friendly and quality projects. The theme for controlling and defining quality is to maintain close relationships with client and stakeholders. The key documentation required for the Quality is:

  • Quality Assurance Certificate
  • Quality Statement and Plan

SUSTAINABILITY

While defining sustainability Muir and Rance (1995) stated that, sustainability is trying to maintain the environment that retains it self and to ensure that it passes safely to our descendants. As discussed earlier, PWF management consultant's research concluded that the future development projects should be sustainable and environmental friendly. Baytree plc want to become pioneers in the sustainable construction and thus, want to establish itself as an environmental friendly firm. It will be a step forward towards reducing CO2 emission and more use of recycled material. All the key issues regarding sustainability will be discussed later in the report but the key challenges that would be faced by Baytrees is that whether the sustainable options could be completed on time and within budget or some additional requirements would be necessary?

SECONDARY OBJECTIVES OF CLIENT

Following are the secondary objectives of the client are:

RISK EXPOSURE

According to Masterman (2002), mostly Risk transfer issues arise due to the change of Team members of the project by the client. In order to complete the project on time successfully, the client should avoid changing the team and should supervise the construction activities of the contractor.

DURABILITY

The durability of the project is much related to the cost and proper planning of the project. In order to cut down the further cost of the project, it should be once be constructed in a way that it is defect free. If any maintenance is required it should be a minor one and should not alter much, the cost of the project.

RESPONIBILITY ALLOCATION

Proper responsibility should be allocated to the project team members in the project. There should be no such case that a single person who is responsible for one task is allocated another task. Such allocations may lead to inefficient work.

SPECIAL REQUIREMENTS

The construction of new Motorway Service Area (MSA) along with other sub-tasks associated with it is subjected to special requirements of the client. Baytree, being very keen in sustainable construction wants special considerations be taken during the development phase. The detail analysis will be done further in the report.

MISSION STATEMENT

Baytree plc is one the UK's popular retail and leisure group which is in the process of becoming the pioneers in the Sustainable construction. Their retail qualities can be configured as they are developing multi-sport facilities club, departmental stores and retail outlets at the new MSA while their leisure popularity can be judged by the construction of an integrated new build budged hotel.

SERVICES STATEMENT

The completed project will be used for users of M7 motorway. The services will include parking for all types of vehicles, petrol filling services, eating and dining, shopping and short stay services. Almost 55% of the budget is allocated to Phase I and remaining is for Phase II.

ORGANIZATIONAL STRUCTURE

Kerzner (2009) defines that; the organizational structure (client) should be such that each individual should know about his duty. The project manager must structure the overall Organizational Breakdown Structure (OBS) in such a way that ease in the flow of the project must not be disturbed. This can be done by allocating authority to a person so that it's subordinate work effectively and cost efficiently.

PROBABLE PROCUREMENT METHODS

Morledge et.al (2006) describes procurement strategy as a process in which the main objectives of a project are summarized and then a priority is set for each task. Thus establishment of procurement strategy enables to select the team, how the risk will be transferred, designing the project and how the project will be delivered so that the overall project will be successful.

The selection of a procurement strategy is an important step. If a wrong strategy is adopted then the consequences are hazardous and may end up in a delayed or over budged construction. Hence to select the correct procurement strategy, all the possible procurement options need to be studied to pick the right one. Following are the possible procurement options:

  1. TRADITIONAL (ALSO KNOWN AS DESIGN-BID-BUILD)
  2. This method of procurement involves the designing phase, tendering phase and finally building phase. The start is taken by selection of consultants, usually architect/engineer, who does the detailed designing of the project and prepares drawing. Upon the completion of drawings Bill of Quantities is prepared and invitation to contractors in the form of open or closed tendering is done. Usually the lowest responsive bidder among contractors is selected. The contractor with its sub-contractors manages the construction of the project. (Potts, 1995)

    In this method the client has direct interaction with the design team, so the quality of the project can be adjusted according to the client's requirements but in case of Salteroyd's MSA construction, time is crucial factor (Dead line for Phase I is May 2012) and speeding the process in this method is very difficult.

    According to Morledge et.al (2006), the transparent nature of this method makes it successful in the construction industry but the Client in our case has set up certain requirements (Appendix 1) which are impossible to implement unless the contractor is not involved in the designing phase.

    As rated in procurement method selection metrics of Bennet and Grice (Appendix 3) and Skitmore and Marsden (Appendix 4), the project is not of a complex nature. This method, mostly being used for complex projects fail to be implemented in this case as low complexity means that there would be higher risk level if the project is started before finalizing the design.

    The lowest bid may not be regarded as the right decision because the contractor may have tendered low quality material during tendering to win the bid. If this is the case, then any alteration to the material during the construction phase can contribute to high cost which would not be liked by the contractor.

  3. MEASUREMENT
  4. This is a unique type of procurement strategy in which the value or the price of the work is established after the work is actually done. Therefore it is sometimes referred to as Re-measurement. Morledge et.al (2006)

    In this procurement method, changes can be made in the design during the phase of construction as the bidding was done before the completion of actual design but the disadvantage is that the cost may increase significantly. The construction of new MSA along with other components has a limited budget i.e. £19M for Phase I and £15M for Phase II. So the price uncertainty may lead to higher risk, which is least wanted in this project.

    Never the less, this method is popular but the restricting requirements of the Baytree plc. (Appendix 1) constrains the use of this method as there is very limited contribution of the contractor during the design phase.

    As rated in procurement method selection metrics of Bennet and Grice (Appendix 3) and Skitmore and Marsden (Appendix 4), the project is not of a complex nature. This method, mostly being used for complex projects fail to be implemented in this case as low complexity means that there would be higher risk level if the project is started before finalizing the design.

  5. CONSTRUCTION MANAGEMENT
  6. In this type of procurement, a construction manager is given the responsibility to supervise the construction activities and collaborate with the design team on account of a fee. Thus whole risk is not thrown to the contractor only instead it is shared amongst construction manager, client and contractor. This type of procurement is strongly recommended for experienced clients as it involves client's involvement through out the project life cycle. Morledge et.al (2006)

    Although the client has much influence over other parties of the project because of the ease of communication amongst them but at the same time, the client has a greater responsibility of coordinating the members which ultimately increases the risk factor. Morledge et.al (2006)

    This procurement strategy enables a fast track approach which allows the client to make any change during the design and construction phase of the project which indicated the features of a strong client.

    Construction management approach has many advantages like; it is a very flexible approach in the sense that it allows overlapping of different design and construction tasks. So time can be saved easily by performing multiple tasks parallel to each other yet cost of the project cannot be limited to the target. This could be the main cause of discarding this procurement method.

  7. MANAGEMENT CONTRACTING
  8. Management contracting approach is different than the construction management approach because here management contractor is selected by the client to manage the work contractors. The work contractors are selected by the management contractor through tendering so that different work packages are allocated to each work contractor. Wood (2009, Cl)

    The client gives a fee to the management contractor in order provide the professional service. Like construction management, management contracting also allows the client to make amendments during design and construction phase as it will not make much difference in the final cost of the project. This makes it a fast track approach as overlapping of different activities is allowed in this procurement method.

    In management contracting, client is responsible for hiring the design team which includes engineers, architects, quantity surveyors etc. and if by chance the design team is inefficient or delays the design part of the project then, the risk is ultimately transferred to the client which makes it a risky business. Morledge et.al (2006)

    This method may prove successful if only time is considered, but cost cannot be neglected as cost certainty is very low in this method, so this method proves not to be a good choice.

  9. DESIGN AND MANAGE
  10. This procurement method is identical to management contracting with the exception that here the client selects the contractor and pays him the fee in order to handle the design team as well as the works contractors. Morledge et.al (2006)

    In design and manage approach, the client gives all the responsibility to the contract and ultimately transfers all the risk to him. So the client waves off the major portion of difficulty from his shoulder and is able to concentrate of other key issues of the project. So the contractor can start the construction even before the completion of the design as it has already taken the risk.

    According to Morledge.et.al (2006), the client must have good communication with the contractor as it is the only party the client has to deal with. This will be helpful in establishing good understanding between the design and construction team. The client has already given responsibilities to the contractor and is at a risk so what ever quality of material is set by the contractor, the client has to accept that

    The time can be saved easily in this procurement type but the final cost of the project is uncertain till the last piece of work is done. As graded in Grice and Skitmore (Appendix 3 & 4), cost is of prime importance making this procurement not suitable for construction of new MSA project.

  11. DESIGN - BUILD

According to Morledge et.al (2006), in design and build the contractor takes the risk and starts building even before the design has been finalized. Thus the contractor takes the responsibility of designing and building the project at a lump sum (fixed) price. Therefore the client transfers the risk to the contractor

If the development of new Motorway Service Area (MSA) is done using this method of procurement, then the problem of cost uncertainty will be distinguished once the final designed are finalized which was not the case in previous methods. Once Baytree plc gives the charge to the contractor, it means the contractor has accepted the risk and may start the project even tough the design is not complete yet.

Design and Build method is very flexible as the client can mould it according to its requirements. For instance the client can hire a Project Manager to keep an eye on the project that everything is working as stated in the specifications. Potts (1995)

Time is a crucial factor in this project and the contractor can save a lot of time by overlapping different activities of design and construction which are possible to run parallel to each other. Likewise Baytree plc should decide about the design on the first stand as later alteration in design or materials used can cause disturbance in the budget of the whole project thus a delay in the project may arise. Finally, this procurement method is quite similar to design and manage in the sense that this method also allows single point communication (with contractor).

WHICH METHOD TO SELECT?

After a detailed analysis on the possible procurement methods, it can be summarized that the Traditional method is very famous in the construction industry but the requirements of Baytree plc (Appendix 1) constrains the use of this procurement method simply because much of the risk is associated with time, which is neglected in this method.

On the other hand, in the management approaches, time is very easily handled by running different design and construction activities parallel to each other yet cost uncertainty remains an important issue in these approaches. Information sharing between the client and the management teams is much essential to the success of the project, lacking this will cause much trouble. Although from the procurement selection matrices of Skitmore and Bennet (Appendix 3 and 4) shows that management approach may be adopted yet the above mentioned factors are considered for the final decision.

If Design and Build approach is selected by Baytree plc then all the risks of time and cost are thrown upon the contractor. Due to the early involvement of the contractor, the design can end up being more economical than other approaches and the surety of the date of completion is also given.

Design and Build is not highest rated method in the Skitmore and Bennet (Appendix 3 and 4) charts as these methods are nearly empirical, so time and cost certainty together are the key success of the project and hence DESIGN AND BUILD Procurement method is adopted of the construction of new Motorway Service Area (MSA).

THE PROCUREMENT METHOD ADOPTED

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