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Changing technologies and developing construction have given rise to ameliorate the current organizational formation. Recession that hit entire world some time back put forward several challenges before the construction industry too. Organizations should develop strategies in order to grow and survive. Organizations should be flexible, opened and adaptive to develop their strategies. A clear understanding of various strategies is required to develop strategies that would enable to identify opportunities and threats. According to Langford and male (2001), the strategy formulation process required conduction of SWOT analysis, which assess the strengths, weakness, opportunities and threats associated with organization. This will help Salfordia's to identify more efficiently the required strategies the organization is looking for. Earl's model has been adopted to provide extensive analysis of the organizations and its goals, opportunities and several other areas. In order to explain and analyze, McKinsey's "7-S Model" has been also adopted.
Salfordia is a medium sized construction management / contracting organization is currently working its project through the "traditional" form of procurement. Salfordia is a family run firm of four out of six members of board. The company has established its processes and procedures some 10 to 15 years back and are rather resistant to organizational change. Salfordia wishes to look at the alternative forms of procuring in UK. But it is more interested in collaborative arrangement with clients through "Partnering" and "framework agreements, but has got very little knowledge about it. One of the members of board wants Salfordia conduct a review of its business strategies. The report will first describe the current organization & culture of Salfordia by conduction SWOT analysis. It will then present the formulation of various strategies and develop strategies for Salfordia which will help them to analyze the impact of future change upon their people, processes, technology & culture looking for more collaborative opportunities.
1. Salfordia's Current Organization & Culture:
Current procurement method of Salfordia is traditional form of procurement. The current culture and organization structure of the Salfordia will be described below:
Salfordia belies that it will be client's first choice for future projects. Salfordia is a medium sized construction management / contracting organization run by 4 out of 6 Members of Board, and the chief executive being family members. Its processes and procedures are established 10-15 years back and so are resistant to organizational change. They are also looking at alternative forms of procuring work in the UK and are more interested in collaborative contractual agreements with clients.
Company's Objective :
Passion for Construction
Consistency in Performance
Team structure & Dynamics
Leadership & Motivation
2.1Salfordia's Current organization Structure:
Historically Salfordia's workload has been obtained through the 'traditional' form of procurement. In this method responsibility for the design and project team is with client. The company works for a fixed lump sum price. It gets involved in the project in tender process or negotiation and then enters into a contract to work for the project. The client appoints consultants for design, cost control and contract administration and the company s only responsible for carrying out the construction work. The responsibility of the latter extends to all workmanship and materials, including work by sub-contractors and suppliers. In some projects the client selects some of the sub - contractors to be engaged with the company. In such cases Salfordia may take full responsibility for their performance, or its responsibility may be limited in some way, in which case a collateral warranty between client and sub-contractor will be essential. The Salfordia usually gets into the through competitive tendering on documents with complete information. However it can also get involved in the projects earlier, either through negotiation or on the basis of partial or notional information.
Advantages of Traditional Procurement Methods:
The design is complete before the tender stage ( ensuring price certainty for the client)
Variations in design during construction are less.
Client retains control over the design and quality can be assured.
Capable of obtaining the best contract price for the full scope of works
All the risk remains to client.
Disadvantages of Traditional Procurement:
The end product is not finished at time.
The budget is overspent as the final account far exceeds the expectation.
Responsibilities for specialists lie with client.
2. Collaborative Contractual Arrangement:
Collaborative procurement has long been seen as the theory to save money. Partnering is one of the methods of collaborative approach. It also focuses on the requirement of the client provided that benefits all the organizations involved in the project. Partnering empowers designer and specialties to build goodwill and trust improving co-operation in teamwork.
Salfordia's Board of Directors is keen to investigate involvement in more collaborative contractual arrangements with clients. As Salfordia are based in Salford and work on construction projects throughout the North West region working for both private and public sector clients ; Collaborative Contractual Arrangement such as 'partnering' and 'framework agreement' are discussed in detail below:
2.1. Partnering (Private Sector):
Partnering is a structured management approach to facilitate team working across boundaries. According to the Construction Excellence) its fundamental components are:
Formalized Mutual Objectives
Agreed problem resolution methods
An active search for continuous measurable improvements.
Partnering is not a new contract but a procedure for improving working relationships. It is based on assumptions that strong players make each other stronger, weak one's destroy each other. It is not only about system and methods. It is essentially about the people, enabling them to operate more efficiently, effectively and economically.
The Reading Construction Forum (1998) in its seminal works 'The Seven Pillars of Partnering' Defined Partnering as:
"a set of strategic actions which embody the mutual objectives of a number of firms achieved by cooperative decision making aimed at using feedback to continuously improve their joint performance."
Project Partnering :
This approach is seen to be appropriate to the public sector since it only allows an openly competitive process of selecting contractors to be adopted. It should be adopted by clients who do not build occasional and are not in position to enter into a long - term partnering relationship. Case studies show that project partnering can deliver substantial benefits but it takes time and the experience of several projects for the full benefits to be realized.
Strategic partnering means firms supporting project teams in partnering of series of project. Given time and experience it develops into the most efficient forms of partnering, which we call strategic collaborative working. The various strategic approaches are sometimes described as 'strategic alliance' or an inter-firm alliance'. Its purpose is to enable all the project team to carry out projects effectively by acting and thinking long-term. It provides benefits than simple project partnering and enables project team to deliver greater value to clients and earn larger and more secure profits.
It takes time to establish partnering starting from traditional practice. However, it may take ten years and many projects to move from traditional approaches through project management, project partnering, strategic partnering to strategic collaborative working and achieve the large benefits.
Evaluating Benefits of Partnering:
It can be incurred that traditional procurement systems, promote segregation and antagonism with participants working, in some cases against each other, to avoid losses (Latham, 1994). Procurement systems involving partnering arrangement have positive effects on performance by fostering cooperation, teamwork; commitment and a proactive attitude of participants (Packham et al 2003).
Benefits of partnering:
Working Together increases the efficiency of the project
Minimum changes schedule helps in completion of the project within time.
Entire focus of team is on requirements of the client and cost efficiency.
Even though there are benefits for the partnering, final cost is not agreed and hence there is high cost uncertainty in this procurement approach as compared to other approaches.
2.2Framework Agreement (Public Sector):
'A Framework is an agreement with suppliers to establish terms governing contracts that may be awarded during the life of the agreement. In other words, it is a general term for agreements that set out terms and conditions for making specific purchases (call-offs)'. Framework covers the provision of generic group of goods, works or services or a combination of both. (Construction Excellence).
If a contracting authority needs strategic partnering with the supply chain over a long period they should use framework agreements. Framework agreements can be awarded through open, restricted or in certain circumstances, negotiated or competitive dialogue processes can be used. Cartlidge states 'The framework establishes the terms and conditions that will apply to subsequent contracts but does not create rights and obligations.
Benefits of Framework Agreement:
It forms a flexible procurement tool
Repartition is avoided while procuring of similar items.
Long term relationship and partnership can be established.
Whenever a specific contract call-off is to be awarded, the public body may simply go to the framework contractor that is offering the best value for money for their particular need.
Reduction in procurement time and cost.
Early involvement of supply chain is possible in procurement process when value can be added.
3. Alternative Procurement Methods and their effect on Salfordia Organization:
As Board of Directors wishes to look at alternative forms of procuring work in UK, let us discuss alternative procurement methods and their effects on Salfordia Organization:
3.1Design & Build Approach: (Integrated Approach)
Design and build is one of the most popular procurement routes in construction now-a-days. In this procurement method the client appoints one contractor who is solely responsible for both design and construction. This helps to minimize the authority of responsibilities and client do not have to blame different parties for any problem if arises. The contractor takes all the responsibilities of design development and also plays a role to supply work and material. Here contractor appoints designer, consultants and other working organization and so he is responsible for any addition and alterations in the design and during construction. As one single firm is responsible for all aspects there is proper communication and co-ordination between the members of the team. Design and build helps to satisfy client's requirements and deliver the project as fast as possible and at a lower cost.
3.2 Management Method: (Management Approach)
The most common method among the several management procurement practiced are management contracting and construction management.
In management contracting the management contractor is appointed early in the design stage through tenders and interviews
Management contractor is not directly responsible for the construction work but is responsible to manage the execution of the work.
The contract for individual work packages is between Managing contractor and the individual sub-contractor.
Even though cost plan is utilized to control the development costs, actual cost cannot be obtained until the final work packages has been awarded.
Here also project benefits from the early involvement of the contractor.
In this method client will appoint a management contractor who will purely carry management function.
The construction manger will be responsible for co-ordination of design, tender and construction process.
There is a high risk of Cost as there is no fixed cist at the start of the project; only a cost plan is prepared by quantity surveyor.
A number of procurement systems have been developed. Although each procurement path offers certain advantages and disadvantages, the same actors are involved; it is only contractual relationships that vary, (Gameson 1992). Thus the issues concerning the building of a collaborative culture within the team are omnipresent regardless of the type of the contract used.