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Unfortunately, a recent period of bad weathers and severe storms significantly destroyed three Cinnamon Grand Hotels. The hotel management board decided to reconstruct the destroyed buildings.
The client has decided to obtain finance from a commercial bank for this project. All sites will require the demolition of a number of existing structures that are not structurally sound enough to retain. Sunrise consultants firm had been appointed as the main consultant for this project which would be carried out in two phases.
In phase one, the focus would be on the reconstruction of the hotel's key area. However, the completion date is critical as the buildings require handover latest by 28th February 2015 and a few deadlines to meet.
In phase two, the intention is to enhance opportunities for health and well-being of the visitors through the newly constructed facilities.
The objectives and priorities of a client need to be matched to a procurement system. To do this effectively, it is essential that the characteristics of various procurement systems and selection methods available are understood by clients and their advisors before a procurement method is selected.
Scenario Analysis (Client, Project/Final Product)
A privately owned large hotel chain in UK, Cinnamon Grand, specialized in heritage hotels offers high class accommodation; therefore they are very passionate on outlook of their hotel buildings. Although the client is experienced at renovation of buildings, but they do not have in-house executive who is either experienced or able to devote sufficient time to advise the reconstruction of their properties and they outsourced to decrease risk.
The client is in the hotel business; therefore they are highly concerned about project delays. Cost control and price certainty is most important as their budget comes from a bank loan which the loan is estimated to be at £120 million and if the capital cost overrun, it will affect the room rates which will in turn affect the client's reputation. Value for money given the current economic climate is also another key consideration. They also have certain architectural policy which they will be able to advice on the design such as façade, architecture, finishes and interior.
All 3 destroyed hotel buildings that needs to be demolished and rebuild are located in prime locations in town settings where accessibility during the construction would be an issue and it would be of a certain quality and therefore high cost.
Phase one, the completion date is critical as the buildings require handover latest by 28th February 2015. The planned start date on site is 1st March 2014 and reopening is scheduled on 1st April 2015. Therefore priority to be given to rapid reconstruction of keys areas of the hotels such as roofs, guest rooms, restaurant and swimming pools within this short period of time.
Phase 2 construction is not critical for the opening of the hotel. Facilities such as dance studios, health and fitness centre and also conference and meeting rooms would need to be constructed in this phase. In addition, the conference and meeting rooms would require high technology multimedia facilities. The client would also like to create a vibrant and attractive environment better than before in terms of facade or design. During the reconstruction, must provide good service to their hotel guests while the construction is going on which will affect the time taken and cost increase.
For the success of any construction project, the correct choice of procurement route is important . There are a number of different procurement routes but choosing the appropriate route would be based on the details of each and what are their advantages and disadvantages.
As such I have shortlisted General Contracting , Design and Build , Partnering Contract, Construction Management and Management Contract as the possible procurement options.
General contracting is the traditional procurement route where the contractor agrees to build the design provided by the client. The contractor has no responsibility in the design and is solely responsible for producing the building(s) as per the design and specification. As the client has a budget, this route would offer some price certainty when the design has been fully scoped out before construction which gives the client greater control of the design as the client controls the design team.
Design and Build comes in various types but is exemplified by the contractor taking the responsibilities of both design and construction. This procurement method is suitable for any project of any size where a fixed cost and fixed time are required.
Partnering Contract is suited to large projects, particularly where there is a possibility of repeat work over a number of projects. This enables team building and measurement and improvement of team performance on a project to project basis. It also ensures that contractors and consultants fully buy in to the partnering process.
Construction Management is a fairly technical procurement process and suitable for large projects due to the technical nature of the process and the cost to implement. It involves the client organization appointing a management contractor whose role is purely a management function. The client organization employs the design team, with the client or contract manager employing sub-contractors.
Management Contract is a business format separating ownership from operation. The operator of a hotel is acting as an agent of and for the owner as well as assumes full responsibility for operations and management of the hotel. In the hotel industry it would give opportunities for much-needed capital to fund the demand for new construction in this market.
Time would be an issue as this route can be a timely process due to the strategy is sequential.
Design & Build
Single point responsibility, fast track and cost certainty,
communication, allocation of risks.
all clients, including inexperienced clients
Typically hotel owners don't build; instead they will go for license. They will get a developer to build and own the building and will pay a certain sum of money for the next 20 years for example. 2 methods: Build, Own and Operate / Rent and Operate.
The contractor is the consultant/coordinator, only manage the construction. Therefore the client must be a lot more involved, which they can't as they do not have executive.
More on Client
cost certainty before starting construction
clients wanting to pass risk to the contractor
In my report, I would recommend partnering contact as the procurement route. This based on the client's requirements where time is critical for the reopening of the hotels for business, cost certainty would not be a factor as it would be reduced. It is supported by Masterman (2001) which identified the benefits of partnering in the following:
The client's project costs are reduced, although these are difficult to quantify accurately as there is a very wide range of percentage savings reported worldwide.
Construction periods are reduced and design periods are sometimes shortened.
Quality of the final product is improved as a result of partnering and safety standards are heightened.
Conflicts among all of the members of the project team, and particularly between client and contractor and between contractor and subcontractor/supplier, is reduced, as are the number of disputes and claims.
Communication between all the members of the project team is improved, and the establishment of mutual objectives ensures that the client's needs and objectives are known and understood by all of those involved.
It is also supported by Bresnen & Marshall (2000) who suggested that application of partnering in construction could bring direct benefits to both clients and contractors that will lead to improvement of construction performance.