Procurement And Management Of Construction Construction Essay

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1.1 Introduction

This report has been created in response to the request by the client, Hi-Rize Development 2008 (HRD 2008), to assess their intention to acquire a sight in a major Midlands city on which they intend to construct a prestigious office development. In response to the clients request this report will critically review the current position of the project, it will then propose suitable organisational and management techniques with which the project should be run, including a linked bar chart, demonstrating the tasks that must be executed to execute the proposals that have been made.

1.2 Client Requirements

When considering the main drivers for the construction of any building the clients brief is a vital piece of information. It is, according to Walker (2007), a detailed statement of what the client requires strategically, rather than a detailed technical document. The client will concern themselves with the three key objectives of cost, timescale and specification of the building.

Figure 1.0

Client Objective (100%)

Quality (45%)

Time (20%)

Price (35%)

Capital Costs (25%)

Life-Cycle Cost

(10%)

Technical Standards

(15%)

Aesthetic Standards

(5%)

Functional Standards

(25%)

Walker, 2007 (P.111)

High Rise Developments can be considered to be an informed and experienced client. There key goals of quality over price over time are summed up well in figure 1. The nature of the use of the building, a prestigious office development that will be the headquarters for a national company, means that its high specification will be paramount. Whilst programme and cost will be an issue with regards to quantity, what HRD do require is certainty on both of these issues so they are able to reap the commercial benefits of the completed building. The drivers for project procurement are discussed later in this report.

Figure 1.1 demonstrates this pull between these three key drivers well in a visual form. HRD's driver can be said to fall into the area marked as 'C', with a skew in that area toward the central space. Figure 1.1

Internet Source Misplaced (Accessed 17/5/08)

1.3 Appraisal of the project so far

The Architect

WNP Partners have been appointed by the client and have produced initial drawings for the project. Their brief at this stage from the client is only that they are to produce a design for a prestigious office development. These drawings have been submitted to the local planning authority, who are currently reviewing them and have not given any feedback as of yet.

Investigative Surveys

A site investigation has been carried out, revealing a limited amount of detail as to the quality of the site as a whole. It is clear form the architects drawings that boreholes have been dug and that a profile of the soil around these holes has been created. They show us that at high level a largely sandy soil is present, at mid level there is a clear clay presence and at low level there is a limestone bedrock presence.

Whilst giving us an idea as to the content of the soil, the site investigation is clearly limited. Further detailed site investigation is required to determine a number of issues. Firstly it can establish whether the existing profile of the soil is in fact demonstrative of the site as a whole. It will also reveal any possible obstructions that may be found in the ground, as this is likely in a city brownfield site (Graham - This is an assumption I have made from the information we have.)

2 - The Procurement Process

2.1 Project Procurement Drivers

When assessing the criteria that are required to stipulate which is the best procurement route for the project and client alike a number of key issues must be considered. In its research project, 'Faster building for industry', the National Economic Development Office (NEDO) outlined 9 factors that have an effect on the choice for a procurement route. The intention of this brief is to address these factors and relate them to the project and client:

Time - Whilst no specific time has been set for the completion of this project, once it has been procured and the construction phase has begun, the nature of the building itself means that the earlier the completion the better, as HRD will be able to begin to receive income from the rented office space. Similarily, earlier completion can be seen as a bonus in this respect, and it has been stated (In the client response email) that incentives for early completion will be offered.

Price - As a private development company price is an issue central to the project, with particular attention paid to cost certainty. In agreeing a price to build the project for, finance for the project can be assured, and a cash-flow can be planned. In agreeing a certain price, HRD 2008 will also be able to begin negotiating with potential tenants at an earlier stage, and ensure that on completion income revenues can flow immediately.

Variation - This applies to both price and design. Control of variations in price is crucial for the reasons stated above. Similarly this reflects on a consistency in design, as any variations there could have an effect on costs or the programme.

Competition - Whilst going out to competitive tender will undoubtedly help to lower costs and will give HRD the opportunity to view the different ways in which companies intend to build the project, it does not necessarily ensure the best value. Competitive tender lends itself to increased variations, as contractors attempt to recoup monies they may have removed from their initial tender price to win the job in the first place, making a competitive procurement route less suitable to HRD.

Risk - It is clear that HRD would like to allocate the risk involved in the construction of this development. Their desire to secure cost and programme will also influence this.

Management - As a development company, it is likely that HRD will be a well educated client. It is also likely that they will want to be involved in the processes. This brings with it strengths, a knowledgeable client who will be around to answer questions, and weaknesses, in the 'too many cooks' sense. Similarly, the appointment of a client project manager will also add another 'cook'.

Accountability - With the transfer of risk comes the transfer of accountability. But accountability can become confused with an over-involved client.

Quality - As a prestigious office development, quality of the building will be paramount.

Complexity - As an office development complexity will be minimised. The more pragmatic the design, the more functional the building will be, and so the project will be more successful.

To summarise the above statements, it is clear that the key drivers for this project are cost, programme and quality certainty. Risk is also an issue, and HRD would look to transfer this to other parties. The less crucial factors can be said to be the need to competitively tender to ensure the lowest cost, as well as the complexity of the build. Although it should be noted that the latter remains a consideration as the project is a prestigious development.

2.2 Selecting an Appropriate Procurement Route

Clearly at this stage of a project the method chosen by which to procure a building can ensure its success or doom it to failure. A great design can be totally negated by a procurement method which it is not suited to. It is therefore crucial to choose the right procurement route. As a result, Bennett and Grice have developed a system which is able to suggest a preferred procurement route for a client dependant on their drivers. By scoring on a 1 to 5 scale in categories based around those mentioned in the previous section the client is able to get an idea of the type of procurement route they should use. This method of procurement route can be found in the appendix of this report, referenced as Figure 1. Using the Bennett and Grice method it would seem appropriate that High Rise Developments should use 1 of 2 options; either a direct design and build route, or a contractor led design and manage route.

Figure 2.1

Strengths and Weaknesses of Procurement (Bennett and Grice 1998)

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Other guidelines exist to help choose a procurement route. The Office of Government Commerce has released a document called 'Achieving Excellence in Construction Procurement'. In this certain guidelines are suggested to optimise the success of the procurement process. Whilst it is aimed at government financed projects, important lessons can be learnt from it, and some of the advice it gives remains relevant in all sectors.

2.3 Outlining the Procurement Routes Available to High Rise Developments

2.3.1 Design and Build

This approach is characterised by the control of an 'integrated project team, responsible for both design and construction of the project. Through the use of specifications the client is able to gain the most from the project, as it increases the functionality of the building, and so the usefulness of the building to the client. What it also means is that the client, its agent and the contractor do not get caught up in wrangling over detail as the contractor is able to bring it's experience in these matters to the forefront, and also utilise the supply chain to maximise their detailed knowledge at the same time. Some issues may arise if the specification is not sufficiently detailed, but in the case of HRD, the client has enough experience to ensure the detail is there.

2.3.2 Design and Manage

Whilst similar to design and build, design and manage does have some subtle variations. Ultimately a design and manage contractor will use separate organisations for architectural, structural engineering, and other consultancy services. By appointing a contractor to design and manage the project they would be taking on project, construction and commissioning management responsibilities. They would complete the procurement process themselves, and have ownership of the design process. Another key feature is that of the use of the supply chain. Little direct labour is used by the contractor, instead they go out to special sub-contractors for each package, bringing both cost, programme and design betterment.

2.3.3 Traditional Procurement

Traditional procurement methods continue to account for around 40% of all business being carried out in the United Kingdom today. Its clearest benefits come with the financial security that is brought about by the Bill of Quantities system, it also transfers risk away from the client and onto the contractor. Where the traditional method can become unstuck is with the issue of time, the procurement period can be very long with a traditional procurement route. Similarly, during the construction process this method does not lend itself to cost and time saving efforts from the contractor. Finally, the nature of the traditional method does lend itself to creating variations through the construction phase, this can cause fluctuations in cost, particularly if the client and contractors relationship is not great.

2.3.4 Prime Contracting

Whilst largely used on public initiatives, it should still be considered. This method requires a single organisation (the prime contractor) to act as a link between the supply chain and the client. This organisation needs to be experienced and prepared to bring the lower echelons together in order to meet the needs of the client. Cost is usually a key driver when using a prime contractor, and certain bonuses are offered to the contractor in which project completion with improvements to programme and cost are met with a reward that is shared amongst the client and contractor.

2.3.5 Construction Management

This route is probably one of the least appropriate for this project. HRD require a more rounded delivery of the project, with equal attention paid to quality, cost and programme. As a general rule, construction management delivers with regards to programme, but is less reliable with regard to cost.

2.4 Chosen Procurement Route

This report concludes that High Rise Developments 2008 should opt for a Contractor-led Design and Manage procurement route, combined with a contract which underlines a team ethos. The reasons for this are as follows:

The overall project length on a design and build project are shorter, this enables HRD to move tenants into this commercial property earlier, and so create incoming revenue at an earlier stage.

Average cost of D&M projects tends to be lower than other procurement types. Having been given a target figure of £25M, it will be possible for the contractor to design the optimum building for this amount, and sign up to a lump sum before construction actually starts.

'Single Point Responsibility' lies with the Contractor, transferring risk away from the Client.

Through use of the Contractor's own experience, and also that of his supply chain, the possibilities for betterment to programme, cost and quality through early involvement in the design process are clear.

Quality can be ensured through the provision of detailed and high specifications to the contractor in the employers requirements.

Notes for caution:

For this route to work as efficiently as possible it is vital that the client works alongside the other members of the project team in order to pass the most detailed specifications and employer's requirements from the start. This is one area where design and manage contracting can come unstuck, in particular with regard to a building which is intended to be technically and functionally advanced.

Sufficient audit processes must be put in place by the Client's QS to ensure quality and progress of the Contractor through both the design and construction phase.

Why use a partnering contract such as PPC2000?

A partnering contract such as this integrate design, supply and construction.

Communication between all team members is vastly improved, as the contract links all parties directly, rather than being linked through the client.

PPC2000 encourages the team members that have been included at an early stage to contribute in the pre-construction phase early enough to add 'value' to the project.

Timetabling of the project from concept through to construction occurs clearly and can used to measure programme KPI's.

PPC2000 can be used to incentivise the various members of the project team, encouraging them to improve the speed, cost and quality of their works and their achievement of KPI's.

Finally, this type of contract is seen to promote the chances of the client being happy with their project, helping them to achieve a more predictable, sustainable, better quality and safer project for a better value. (www.ppc2000.co.uk Accessed:17/05/08)

2.5 Future Actions

The Project Team

For construction activities to begin on this project, a full project team must be appointed that will cover all the necessary detail of the construction and enable HRD to proceed with the project in the most efficient manner.

Quantity Surveyor

Despite the fact that HRD are a relatively experienced client, the appointment of a client's quantity surveyor is an essential element in the audit process when using a procurement route such as design and manage. Experienced QS firms are also able to provide Project Management services, which in the context of design and manage contracting is equally valuable. The professional expertise, and general experience of a client QS will be used to make the contractor accountable for its decisions and process, and also to assess the value and quality of the works, and whilst no variations should occur in a theoretical design and manage contract, they are able to advise on these if the do occur.

Architect

The appointment of an WNP Partners has already occurred and so this is not an issue to worry about. What is essential is that the Contracting team is able and willing to work with the existing design team, and the architect should be able to communicate its vision to them.

Highways Consultant

The given scenario mentions that access to the sight is limited and the sole access route is from Ascot Road. In a project of this size just one access point to a site can cause problems, particularly with regard to time and delays to programme. A highways consultant would be able to advise on these problems, and if he believes large problems could be created it could lead to the site being deemed unsuitable for a development such as this.

M&E Consultant

The high quality specification that this building will undoubtedly have means that the Mechanical and Electrical Installations will be both highly sophisticated and numerous. Most D&M contractors will have in house design teams for this, but it is an inherent risk of the procurement route that the contractor has a tendancy to use simpler designs in order to cut cost and complexity. Consultation with an experienced M&E consultant prior to issuing specifications to the contractor will ensure that they are not able to highjack HRD's vision and make it more mundane.

Structural Engineer

The fact that no decisions have yet been made by the client as to the structural design or the external envelope would suggest that it is of paramount importance to get assistance from a structural engineer in order to draw up specifications for the two areas. On appointment of the contractor, SE can liaise with the design team.

Planning Consultant

The fact that the project has not yet passed planning could become a cause for concern. In the best case scenario the existing plans may prove to be sufficient and pass through the planning process. In the event of this not happening, which in a city brown field site is a very real possibility, a planning consultant is invaluable in coaxing the project through the planning process. There knowledge of the process, combined with an understanding of local planning authorities, in particular their aims and drivers for urban regeneration can save both time and money.

Chartered Surveyors/Lettings Agents

On completion of the project HRD will be looking to move tenants into the let office space as early as possible to start to get a return on their investment. A general surveying practice would be able to fulfil a number of roles in helping HRD to optimise their return. Firstly, a surveying firm with specialised local knowledge will be able to work out the most accurate Tenancy terms, as well as rental values. They will also, through their agency department, have a knowledge of the tenant market and be able to find the most appropriate tenants. By engaging a firm such as this at an early stage they may also be able to influence the design process to an extent, suggesting certain features and/or services that would make the development more desirable to the market. Large surveying firms may also be able to provide advice regarding land acquisition, helping with that process also.

Solicitor

The appointment of a solicitor will be required in the event of HRD choosing to proceed with acquiring the land. Having a solicitor au fait with the project itself will be useful further along in the project, such as legal work relating to the planning applications, tenancy agreements, and such like.

Design and Manage Contractor

The central member of the project team will be the contractor. In order to appoint the correct contractor HRD as the client must consider their wider objectives. Aligning themselves with a contractor which has similar views on corporate responsibility, sustainability. When entering into a partnering style contract such as PPC2000 it is important that HRD have a good working relationship with the main contractor, consideration should be given to Contractors with whom they have worked with previously and successfully.

Appendix A

Construction Drawings

Appendix B

Client Response Email

Appendix C

Procurement and Construction Programme

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