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This report analysis and evaluation the procurement route appropriate for the development and reconstruction project of the 3 destroyed hotels of Cinnamon Grand Hotel Chain in South East of UK. Method of analysis include pro and cons comparing and client profile analysis to weight benefits, risks and financial constraints of the project
The report draws on key issues that relates to the prescribed objectives, which form the project parameter in establish the suitable route that meet the needs and expectation of the project. Cinnamon Grand Hotel chain is key player of adapting neglected landmark building to its former glamour, however does not have experience executive to advice on the project. And is concern of the project delay and cost overrun.
Based on the analysis, the report recommended Design and Build procurement route variant- develop and construct as appropriate that could meet project performance and client business at the shortest project duration.
To reconstruct 3 destroyed prime located hotels over 2 phases at budget of £120 million. Phase 1 of reconstruction to be complete by 28 Feb 2015 involve roofs, guest rooms, restaurant and swimming pool. In Phase 2 to construct dance studio, health and fitness centre, conference and meeting room with high technology incorporated and business will continue operate as the reconstruction progress.
Project duration is tight and any delays and cost overrun is of concern. Quality is paramount to client as client is repute for quality accommodation and services. The design solutions will be develop along similar lines adopted for previous hotels buildings but to better quality.
The A&A work is complex due to uncertainties in the extent of damages of underground structure and services, prime site setting that will affect machinery mobilization and site access and the involvement of multiple interacting of sub-system in the phases. Nature of damage varies and all sites require demolition of structurally unsound structure it
The project objective is for a speedier delivery with early start of construction works, certainty of performance in term of cost, quality and time, client minimal exposure to risk and has control of design.
There are several project procurement systems available. However, before considering which procurement route to undertake the following attributes should be considered ie,
Cost With project cost certainty on the onset, client can better manage budget and assure cost not overrun.
Quality / Design - Client's hotel chain is of prestigious and good branding. To be in line with client policy on architectural significance and aesthetic of the building, client needs control over the detailed design.
Time - Timely completion enable client an early entry into the market for the continuing function of business to produce an earlier return on capital invested.
Complexity -A&A work involved is inherently complex and the requires interfacing systems of both phases
Client resources - Client does not have experience in-house executive to devote sufficient time to advice on the reconstruction.
Risk avoidance -The probability, impact and contractual obligation should the unforeseen eventuate. Client had highlighted concern of project delay and cost overrun.
Variation -The extent of design completeness at project inception has bearing on the possibility of changes recurring during construction Changes in scope invariably result in increase cost and time. Hence, the flexibility to accommodate design changes when client consider necessary and the extent of the excessive sum incurred in the changes must be weigh.
Each type of procurement (traditional, design and build, management, etc.) has its proponents and inherent strengths and weaknesses. In relevant to this project we shall focus on standard procurement routes, evaluate its strength and weakness and its suitability to meet client priorities especially on the duration of project development, starting time of construction, cost certainty and the allocations of responsibilities between the consultants, contractors and client. For comparison purpose please refer to Table 1
Standard Procurement Routes
Design and Build
Variant of Design and Build
Package deals and Turnkey solution
Develop and construct
Negotiated Design and Build
Competitive Design and Build (two-stage tendering)
Table 1 : - The weakness and strength of the procurement routes.
Design is fully completed by Client's consultants
Conduct contractor tender after completed design.
Lump sum contract
Design completed before tender
Accommodative to design changes
Quality end product
Cost control and certainty for client
Longer process involved in designing stage
Higher construction cost result from changes in design after the tender
Poor relationship between contractor and design team
Design and build
Detailed design and construction is contracted to a single contractor.
Lump sum contract
Suitable for inexperience and less involve client
Inappropriate for complicated projects
Client lead-in time to market is reduced
Concurrent designing and construction thus reduce project duration
Single point of contact and responsibility
Cost is firm before construction
Low time risk
Poorer design output as design is secondary to programme
Design ease constructability and not operability
Inflexible to changes of design as it may impact other on-going work package
Design developed by Client's consultants
Client's engage and pay the construction manager to manage the project.
Final cost of the project may only be accurately known when the all package have been let.
Suitable for experienced client
Cost certainty is not a priority
Shorter project duration with concurrent designing and construction
Accountability of roles, risk and relationship of stakeholders
Accommodative to changes
Cost uncertainty at outset
Needs client active involvement
Require quality brief
Quality subject to project team proficiency.
Design is developed by the client's consultants.
Contracts are between works contractors and management Contractor.
Final cost can only be determined when the last packaged has been let.
Potential time saving in overall project duration
Allows concurrent working
Accommodative to late changes
Medium cost and time risk to client relative to package selection.
Need quality brief
Uncertainty of price
Quality subject to project team efficiency.
No single point of responsibility for design and construction
EFFECT OF DIFFERENT PROCUREMENT SYSTEM ON PROJECT PERFORMANCE
After considering the concept, working process and procedure of various procurement routes, we shall dwell into the advantage and disadvantage and how it affects project performance. The parameter are - time, cost, quality.
Client decided to undertake the project in 2 phases for a quick entry to resume business again. At this juncture, the focus is on fastest project delivery at the earliest entry of construction and of low time risk. Management approach allows time saving in project duration however, this is also achievable with Design and Build as it overlapped design and construction and allows client early lead-in to market. Traditional route due to its sequential approach has the slowest project delivery.
Cost certainty is required in the outset. Comparing the working processes, in Management approach the final cost of project may only be known when all the packages have been let while Traditional approach the contract price (lump sum price) is ascertain at very early stage of the project. In Design and Build the price is also firm prior to construction as a lump sum contract..
Traditional route has higher degree of quality control and functional standard with more time to review and fully develop the design. Whilst in Management approach the experience and knowledge of management contractor or construction manager contributed to a better standard and quality of the completed construction products. Unfortunately design is secondary to programme in the Design and Build route thus it has poorer design output.
Cost, time and quality are the three most important parameters of project performance. It has been stressed that client demand quality, value for money and project completion on time within the project cost. After analysing the various routes on project performance, we concluded the Design and Build variant Develop and construct approach as the preferred procurement route.
It provides an early start of construction, low risk of duration overrun as a single contractor is engage to construct allowing programme control. And it does not require client active involvement during the project construction. In addition it has cost certainty and the risk allocation is on contractor instead of client.
Although generally Design and Build is not being able to support complex design and quality of end product generally being traded off as design is secondary to programme of contractor. However, this could be overcome with its variant of Develop and construct route. Client appoints its own consultant to initially bring the design to more detailed stage affording it control over more of the design. Develop then Design and Build ensure client gets a design to his requirements and the risk of the final design and construction work is assumed by the contractor.
Management approach is not suitable because active client involvement is needed which client lack and it has no cost certainty. As for Traditional approach the working process and procedure could not meet the project deadline.