Examining Multiple Procurement Methods For A Project Construction Essay

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The purpose of the report is to examine multiple procurement methods available which suites the project most.

The client has stated that the building hast to be carbon neutral and must be constructed to the highest aesthetic and qualitative standards whereas value for money given the current economic climate must not be neglected.

The budget to cover the total development cost, inclusive of construction works, external works, roads and statutory and professional fees is estimated to be £35 million. The completion date is critical, as the building requires handover by 1st July 2013 at the very latest, due to conditions in place in relation to the funding which has been acquired for the project.

The proposed site will require the demolition of a number of existing structures along with the installation of a road to facilitate access prior to construction of the new building. The new facility will contain:

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library and ICT

teaching facilities

community activity and meeting rooms

café

swimming pools

health and fitness centre including squash courts

dance studios

sports hall

crèche

medical practice and pharmacy

External facilities will include:

walking and cycling paths

external sports areas including artificial pitches

skateboarding and BMX cycling facilities

community park and playgrounds

floodlit sporting venues

Introduction to Procurements

There are many different kind of risks in construction. These risks include completing a project which does not fulfills the requirements, which is delivered late or ran out of budget which the client cannot pay or fund. All these risks have a very serious impact on the client's core business. The procurement strategy adopted must balance risks against project objectives at an early stage. When considering any procurement, the client must consider the 3 main points which are time, cost and quality. However, the client's responsibility, risk, degree of competition and controllable variation also must not be neglected.

Time (speed or certainty of completion date)

Cost (price level or cost certainty)

Quality (functionality and performance)

The table below shows proportions of procurement strategies used in the UK today

( Adopted from "Construction Planning, Programming and Control" (2009) by Cooke. B and Williams. P)

As can be seen from above table, Design & build is the most popular procurement strategy as it occupy 43% of the overall percentage followed by Traditional procurement method with 37%. Target, Partnering, Management Contracting and Construction Management have a total of 20% added up together.

Procurement Strategies

There are many types of procurement strategy in today's industry however only some of them will be concentrated as they are most likely would offer most practical approach and at the end of this report, only one procurement strategy would finally be appraised for recommendation. These procurement strategies would be;

1)Traditional Method

This kind of procurement method is more suitable for inexperienced or occasional construction clients. It is seen as the least risk approach as there is a level of certainty about design, cost and duration inherent in the strategy if it is properly implemented (R.Morledge & A.Smith & D.T Kashiwagi, 2006). The design has to be completed before any competitive tenders are called to and before the main construction contract is made. As a result, construction cost can be determined with reasonable certainty, assuming there are no changes introduced before construction starts.

Cooke and Williams (2009) state, "A variety of contractual arrangements are available with traditional procurement:

A lump sum contract based on:

Drawings and specification where the builder prepares quantities

Full documentation with bills of quantities

A re-measurement contract based on approximate/notional quantities

The contract price is determined at the end of the contract by measuring the actual work carried out"

As from the above statement, the client must consider a number of decisions before making their final decisions as to which contract they are going to use. If traditional procurement were chosen, it is more likely that a lump sum contract should be used as it gives the client a larger degree of price certainty. Unlike a re-measurement contract, project is completed the final cost will not be known until the.

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The client can use the competitive tendering in order to be sure that he achieved the best value for money. Selected contractors will have to submit a price for carrying out all aspects of the works and usually the contractor with the lowest price will be awarded with the contract. From this tendering method, the client would receive a number of different quotes and the works can usually carried out within the budget cost.

The contractor assumes responsibility and financial risk for the construction of the building works to the design produced by the client's architect, for the contract sum agreed and within the contract period, whilst the client takes the responsibility and risk for the design and the design performance. (R.Morledge & A.Smith & D.T Kashiwagi, 2006). The contractor can seek recompense from the client for additional costs or time to complete the project and in turn, the client could do the same from the design team members responsible, if proved negligence if the works are delayed by the failure of the design team to meet their obligations.

As the client has a direct contractual relationship with the design team, they are able to influence the development of design to suit their requirements. Through the architect, the clients are able to influence but not control the construction process when the construction begins.

The figure below shows the relationship between the client, client's design team and main contractors under a Traditional Procurement Route using JCT 2005 with Quantities Contract.

( Adopted from "Construction Planning, Programming and Control" (2009) by Cooke. B and Williams. P)

The advantages of Traditional Procurement.

Design-led, as the client able to have direct influence, therefore facilitating a high level of functionality and also bespoke quality in the design.

As the design is mostly complete before the tendering begins, cost can be certain providing changes and variations are kept to a minimum throughout the construction process.

Changes are very easy to arrange and the value where the design needs vary due to changes in client need or technology.

The client has control over the design team.

The completion dates are set.

The disadvantages of Traditional Procurement.

All the risks in terms of design and financial risk lies with the client.

The strategy is based on price competition therefore might result in adversarial relationships developing.

In the case of lack of information might present at tender stage then as the project progresses and designs are developed extra works and costs will most probably arise.

Due to the client having to elect a representative before any design work is completed there are often large design fees before any construction work even begins.

2) Management Contracting

Management contracting involves the client employing a management contractor to manage the construction works. The client can request quotes from a number of different contractors for managing the contract and usually the contractor with the lowest rates will be awarded the contract. The contractor is paid a fee for doing so. The management contractor, therefore, bears the responsibility for the construction works without actually carrying out any of that work, (R.Morledge & A.Smith & D.T Kashiwagi, 2006). Some of the common services on sites such as office accommodation, tower cranes, hoists and security, may be provided by the management contractor but in pure management contracting such works are let as a self-contained work package. The client have to bear the risk of the design team de laying construction for reasons other than negligence as the design team is employed by them.

Cooke and Williams (2009) state of management contracting, "The work package approach allows maximum overlap between design and construction activities. As each section of the work is designed, the work package subcontractor may commence the works on site. This tends to result in a reduced overall contract period." As the consequent, it is a strategy with low certainty for the client at the outset. Cost certainty will not be achieved until all works contractors have been appointed.

The Figures below shows the relationships between Client, Design Team, Management Contractor and Sub-Contractors in a typical management contracting arrangement.

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( Adopted from "Construction Planning, Programming and Control" (2009) by Cooke. B and Williams. P)

The advantages of management contracting.

The overall project is relatively time-saving due to the overlapping of design and construction processes.

Changes can be made provided packages affected have not been let and there is little or no impact on those that are already let.

At the time the work is let, the works packages are let competitively at price.

The disadvantages of management contracting

As the design will not be complete until the client has committed significant resources to the project, the client must have to provide a good quality brief to the design team.

At early stage the price certainty offered is very poor and the potential cost commitment depends upon design team estimates.

It reduces resistance to works contractors' claims where such demands are passed on to the client by the management contractor.

Design and Build

Design and build is also another fast-track strategy type of procurement method. Construction can start before all the design is fully complete, but the contractor is at risk. The contractor is responsible for the designing and building the project, in return for a fixed-price lump sum. Although there are several variants of design & build the key properties remain the same.