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Procurement & Management of Construction for MSC CPM and QS

Paper Type: Free Essay Subject: Construction
Wordcount: 4979 words Published: 8th Feb 2020

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Contents

Introduction

Literature Review

Buildability/constructability

Productivity

Supply Chain

Lean construction

Sustainability

Innovation and technology

Value engineering

BIM

E-procurement

Partnering

Case Study

Conclusion

References

Introduction

Procurement is the act of obtaining goods and services from external sources (i.e. a building contractor) and includes deciding the strategy on how those goods are to be acquired by reviewing the client’s requirements and their attitude to risk.

One of the features of the construction industry over the last three decades or so, has been the use of various procurement methods for the projects such as management contracting, project management and design and build.

With the growth in the use of these methods, a number of researchers have investigated the criteria for their selection and their performance in terms of time, cost and quality

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Procurement can be described as a series of considered risks – each method has individual strengths and weaknesses, which must be carefully calculated by clients and industry alike.

Procurement routes generally differ as follows;

      Client’s exposure to financial insecurity

      Control Client has over design and construction processes

      Extent of design information at tender stage

      Information required at time construction commences

      Extent of involvement by contractor at design stage

      Organisational arrangements

      Distribution of risk/responsibility

Procurement method selection is difficult, because even the most experienced client or contractor does not know all the potential benefits or risks for each method. New innovative methods of procurement have focused on reducing this risk.

According to extensive research on the topic of procurement, some of the recurring problems in the course of procuring projects include:

Cost Overrun

Cost overrun essentially refers to the final cost of a construction project exceeding the original estimates (Avotos, 1983). Wanjari et al (2015) identified the top three factors affecting cost overruns in construction to be inflation in prices of raw material, delay in planned activity and lack of co-ordination between construction parties.

Late Delivery

Prakash (2016) denotes delay as the most common, costly, complex and risky problem encountered in construction projects.

Potential causes of delay by fault of the client include late submission of drawings and specifications, frequent change orders etc. Delays caused by contractors can generally be attributed to poor managerial skills. Late delivery of a project can be minimised when the causes of delay are identified at an early stage.

Furthermore, factors such as ground conditions, topography, logistics, weather, available technologies, labour availability and services can all greatly affect a project’s programme

Overstaffed Organisations

According to research (Intergraph, 2012), contractors are annually faced with high value construction claims as a result of inefficiency factors impacting labour.

Design changes frequently occur mid construction and there may be need for new or additional material, constraints, and equipment, which affect the sequence, duration, and schedule of work packages.

This, in turn, leads to an increase in idle time of workers waiting on material or in some cases, manpower increases causing work areas to be overcrowded with workers who now need to share and occupy the same work space, scaffolding, or equipment with other trades. Hence, a further drop in productivity.

Low Efficiency

Low efficiency can be put down to a number of factors such as untidiness on construction sites, slow turnaround of information provided by clients/consultants, lack of training/misuse of automated document control systems, poor planning etc. A number of previous studies (particularly Horner and Duff, 2001Chan, 2002) have identified the quality of project management and supervision as critical to productivity.

This paper aims to review research surrounding the topic of procurement, analysing the common issues raised with regard to the various procurement methods and offer potential solutions to the shortcomings of current procurement based on research undertaken.

Literature Review

Buildability/constructability

To put it simply, ‘buildability’ essentially refers to ‘the extent to which the design of a building facilitates ease of construction, subject to the overall requirements for the completed building’ (CIRIA, 1983, p. 6) Buildability has been linked to time, cost, quality and safety performance in construction. Buildability issues are partly due to confrontational attitudes between client, contractors and consultants under the traditional procurement arrangement. It has been postulated that construction time performance is strongly associated with buildability in the design of external wall elements, simplicity of assembly and installation considerations, while other design attributes affect cost, quality and safety performance to varying degrees.

Benchmarking of buildability should not constrain designs but rather be used as a guide, supported by a databank. Buildability benchmarking may be more applicable to projects such as public housing, small office buildings, three-star hotels, factories, schools and social service centres, etc.

Fully integrated procurement methods such as Design and Build and project management are most appropriate for clients placing a high priority on the buildability of their project.

Chan et al. (2010) asserted that if a proactive contractor is involved at the pre‐construction stage with advanced works, programme planning and materials procurement, as well as the buildability of project design will be remarkably enhanced.

A comparative study of buildability perspectives between clients, consultants and contractors conducted by Patrick T.I. Lam and Franky W.H. Wong, (2011) revealed that clients/consultants look at buildability from a longer term and schematic design perspective in the overall interest of their companies, whilst contractors look for more flexibility during the construction process. The study concluded that it is beneficial to integrate the contractors’ expertise into building designs early enough so that buildability issues can be worked out to the satisfaction of all concerned.

Productivity

Productivity is the output produced by a unit of study as a proportion of the inputs required to produce it (OECD, 2001). In construction, the output is usually expressed in weight, length, or volume, and the input resource is usually in cost of labour or man-hours (Intergraph, 2012).

Horner and Duff’s (2001) analysis of 25 years of construction productivity research up to 2001 concluded that there had been few changes to the way construction projects had been managed over the last 50 years and that there was huge room for improvement.

A recent 2014 study conducted by Martin Loosemore (Faculty of the Built Environment, University of New South Wales, Sydney, Australia) found that poor tendering practices can lead to productivity issues, with participants claiming that tender periods can be too short and don’t give subcontractors ample opportunity to innovate.

He concluded that everyone in the supply and demand chain has a role in improving productivity. A “culture” of productivity improvement will need to be “nurtured” across the business and supply chain if productivity is to be improved. The results of the study also indicated that contractors should revisit their tender processes.

Chan (2002) stated that site welfare, job prospects, skills training and qualifications are critical to sustaining long-term productivity improvements.

Supply Chain

‘Supply chain’ is the term used to describe the linkage of companies that turns a series of basic materials, products or services into a finished product for the client.

SCM (supply chain management) is a process to coordinate and distribute all commodities among the stakeholders in a strategic manner. Wang et al. (2018) points out that a proper, efficient planning approach with regard to materials and logistics will improve the project performance and as a consequence can reduce the whole construction cost.

Al-Bizri and Gray (2010) are of the opinion that the construction supply chain is not integrated into one group with a common purpose, and as a potential solution suggest the use of technology clusters. This involves the grouping of supply chains (i.e. the client, designers, engineers, construction team etc.) to enable focused procedures.

The benefits of a more integrated supply chain for end-users and project clients include a more responsive industry delivering facilities that better meet user needs, delivered to time and cost with minimum defects. This in turn creates higher customer satisfaction levels and an improved reputation

Khalfan et al (2014) note that some of the key barriers to greater integration within the construction supply chain include the fragmentation of project delivery system, lack of trust, and adversarial contractual relationship. Dainty et al. (2001) suggest that some of the barriers of integration could also be broken down through improvement of communication abilities among project-based staff. Barratt (2004) reports some of the SCM implementation problems including: collaboration is difficult to implement; over-reliance on technology for implementation; failure to differentiate between whom to collaborate with; and lack of trust between trading partners.

Lean construction

Recently, the concept of lean thinking has been adopted by the construction industry as a means of supply chain improvement (Ballard and Howell, 2003; Green and May, 2005; Jorgensen and Emmitt, 2009). Hence, the term lean construction.

Eriksson and Koskela (2009) identify six main components of lean construction;

  • Waste reduction
  • Process focus in production planning and control
  • End customer focus
  • Continuous improvements
  • Co-operative relationships
  • Systems perspective

Relying on competitive bidding is not efficient when applying lean construction to procurement (Elfving et al., 2005; Green and May, 2005). Rather than optimising client satisfaction, prioritising lowest tender prices will foster self‐protecting attitudes among contractors (Eriksson and Laan, 2007; Khalfan et al., 2007).

In terms of applying lean construction to procurement, it can be argued that strong emphasis should be put upon the importance of forging co-operative relationships from the outset as well as acknowledging continuous improvement (i.e. partnering). A fundamental change should be made in the behaviours and attitudes of the parties involved (Eriksson and Laan, 2007).

Sustainability

Sustainable procurement is defined as: a process whereby organisations meet their needs for goods, services, works and utilities in a way that achieves value for money on a whole life basis in terms of generating benefits not only to the organisation, but also to society and the economy, whilst minimising damage to the environment (CIPS).

Sustainable procurement can improve procurement practices and enhance the sustainability performance of the construction industry as a whole.

Ofori et al. (2002) considered the main obstacles to sustainable procurement to be designing a proper supply chain, and overcoming the traditional attitudes in the construction industry, as the main obstacles for implementing sustainable supply chains.

Ruparathna et al (2015) identified budget restrictions, lack of awareness, understanding, information, commitment, and demand as well as insufficient policies, regulations, incentives, and lack of leadership as some of the main challenges for implementing sustainable procurement.

In order to achieve improved sustainability, significant change will need to be made within the construction industry with a particular focus on the organisation, structure and communication channels of the industry. Hamza and Greenwood (2007) note the challenges in achieving sustainability under the traditional and design and build procurement arrangements due to conflicts with the contractor’s incentive to avoid delays and extra cost.

Innovation and technology

There is increasing pressure from clients to improve quality, reduce costs and speed up construction processes. (Naoum et al., 2015). Egbu (2004) argued that the ability to innovate depends largely on the way in which an organisation uses and exploits the resources available to it.

There is pressure within the construction industry to become more innovative and deliver better value for money for clients, however there are certain characteristics of the industry that appear to slow progress and make innovation difficult (Valence, 2010).

The level of innovation within the construction industry is directly influenced by the procurement method chosen. The traditional design-bid-build method does not allow for capture of intellectual property and knowledge externalities by contractors in their tenders. With the increased use of non-traditional procurement methods such as design and construct, D&B, build, own, operate, and build and maintain, this disincentive is removed and firms can more easily appropriate the benefits of innovation and R&D over the extended life of these contracts.

The use of technology can expose inefficiencies, enable visualisation of problem areas, and  improve construction planning accuracy, as well as provide documentation to support or defend change order requests and construction claims (Intergraph, 2012).

Value engineering

Construction projects are implemented with heavy costs and some of the projects have even faced irreversible losses after construction.

Value engineering is a method experienced in management that aims to achieve desirable function with the least costs

Value management can encourage collaboration, innovation, improved constructability, enhanced communication throughout the supply chain and the integration of sustainable practices with a view of reducing waste, improving buildability and promoting clearer understanding of the brief through team working such as Management contracting and partnering. By breaking the fragmented approach of the traditional route and encouraging cooperation through an integrated method of procurement, communication and ideas are able to be shared that can improve value to a project. The earlier that this can take place in the design process the more benefit there will be for a client. 

BIM

BIM (Building Information Modelling) is a process for creating and managing information on a construction project across the project lifecycle. One of the key outputs of this process is the Building Information Model, the digital description of every aspect of the built asset. This model draws on information that is updated at key stages of a project.

The use of BIM in construction projects demands clearly laid out rules and frameworks for the various stakeholders involved. It is important that the client lists what information the model should contain, and defines the level of the desired information at each phase of the project.

Contract procurement methods can impact the success of BIM-use and how it can be applied on construction projects. BIM can facilitate the flow of information if end goals are well defined and parties can exchange building data with clear deliverables in mind.

E-procurement

Efficiency is closely linked to the use of information technologies (Hanák, 2018). Electronic procurement involves procuring goods and services online in order to automate the process and streamline the flow of procurement process in an organisation (Morris 2000; Thomson and Singh 2001; DPWS 2002). It has been postulated that construction companies are quite slow in adopting IT and innovative approaches (Hanák, 2018).

At the European level, auctions are used infrequently (less than 1% in terms of number and volume of contracts awarded).

Some of the reasoning behind this is due to the mobility of production resources, material, employees and machinery, high time and resource demands, a high level of uncertainty, an actual price exceeding award price and a high number of stakeholders in the construction project that need to be managed adequately.

The benefits of e-procurement include increasing transparency, lowering administrative costs and improving the economic outcome in a competitive environment (Lu et al., 2013)

Partnering

In order to achieve collaboration and integration of the design and construction process Egan (1998) advocated partnering.

Partnering can be applied in a project situation (project partnering) or long term (strategic partnering)

It is operated in two ways;

  • Traditional contract with a partnering charter
  • Two-party contract aligned to partnering (contractually bound to partner unlike the other option)

Risks are made transparent at commencement of the project and those risks are shared and it relies on negotiation rather than competition.

Some advantages to partnering include a reduction in disputes, early supply chain involvement, open book and win/win culture and an integration of design into construction. The downside to partnering is that it requires more client resource.

Case Study

Choose and justify a suitable procurement method for the following brief:

 

The client is the Department of Education and they require a New School for children with disabilities.

There is a strict moving in day and good quality finishes are required.

The client would like to have a clear idea of the costs with some flexibility.

Choosing the appropriate project delivery method and corresponding procurement strategy is vital to successful construction project delivery. Generally, three factors are considered; time, quality and risk;

•          Time 

•          How flexible is the end date?

•          How quickly does the project need to be completed?

•          Is there time to design the project prior to construction?

•          Quality

•          What performance levels need to be achieved?

•          Functionality of the project

•          Final level of finish required

•          Risk Apportionment/Accountability

•          Public or private sector project

•          Who manages the majority of risk?

The most suitable method of procurement for the client in this case is the design and build (D&B) method. With the D&B method of procurement, a single contractor assumes risk and responsibility for designing and building for a lump sum price. In the brief, it is stated that the client would like to have a clear idea of the costs. With the traditional (lump sum) method of procurement, there is little contractor input and a greater risk of cost and time over-runs. Going back to the brief, it is mentioned that there is a strict move in date. Any risk of delay should ideally be avoided.

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With the D&B method, the contractor is normally left to interpret preliminary design but rarely will be asked to obtain planning and project funding. The normal procedure is that the client will produce a set of Employers Requirements outlining objectives, design and specification and the contractor will produce a set of Contractors Proposals which the client must assess along with the price.

In the majority of cases the contractor will novate the employers design team, the contractor may have a requirement to provide a building that is fit for purpose which is a higher duty of care under an architect has in a traditional contract (due skill and care).

The advantages of the design and build method include; i) the client deals with one company; ii) there is a single point of responsibility; iii) client risk is minimal; iv) enables contractor expertise to be implemented on design; v) cost certainty

The disadvantages include; i) time is reduced due to overlapping design and construction activities; ii) a comprehensive brief is required; iii) the client must know what they want; iv) the client has to commit very early to a contractor; v) the quality is relinquished to contractor and price and space will dictate aesthetics of project

Conclusion

This study has provided an overview of trends in procurement methods. The output of this research essentially identifies the need for the development of a framework for facilitating better integration of design and construction processes.  It is very clear from the research conducted, that increased collaboration within the industry is essential to deliver improvements on the prevailing issues with cost, time and quality.

Furthermore, the construction industry needs to be more forthcoming on embracing change and allow innovative methods to grow.

Presumably in an attempt by the industry to increase the level of integration, over the recent years the UK construction industry has seen an increasing level of interest in the use of design and build (D&B) as a construction procurement method.

However, the construction industry is still experiencing problems associated with D&B procurement despite the increase in the level of interest across the UK. Perhaps how procurement methods are implemented in practice needs to be examined.

The exploration adopted in this research involves identification and evaluation of challenges encountered by key participants (clients, contractors and designers).

There is no ‘one size fit all’ procurement method and clients should match project circumstances and requirements (which are different from one project to the other) before selecting the procurement method. Key parties to the process must be involved early in the process to ensure that client requirements are clearly articulated and communicated.

Training and development of people is key to the implementation of the integration processes associated with the particular procurement method. It is important that continual learning and development of personnel integrated procurement methods are going to generate the desired results.

As noted by Ruparathna and Hewage (2013) this need for change and acceptance of new and innovative procurement methods has to be a client-driven process supported by the rest of the building team.

References

  • Berry, C. and McCarthy, S.,2011. Guide to Sustainable Procurement in Construction, CIRIA
  • de Valence, G (2010) ‘Innovation, procurement, construction industry development’, Australasian Journal of Construction Economics and Building, 10 (4) 50-59
  • Procurement innovation for public construction projects: a study of agent-construction system and public-private partnership in China Author(s) Lu, W; Liu, AMM; Wang, H.D.; Wu, Z.B. Citation Engineering, Construction and Architectural Management, 2013, v. 20 n. 6, p. 543-562
  • Electronic Reverse Auctions in Public Sector Construction Procurement: Case Study of Czech Buyers and Suppliers Tomáš Hanák 1 1 Brno University of Technology, Faculty of Civil Engineering, Veveří 95, 602 00 Brno, Czech Republic
  • Jain, M, Abidi, N. and Bandyopadhayay, A. (2018), ‘E-procurement espousal and assessment framework: A case-based study of Indian automobile companies’, International Journal of Technology Management & Sustainable Development, 17:1, pp. 87–109, doi: 10.1386/tmsd.17.1.87_1
  • Morris A. (2000), E-Procurement: streamlining processes to maximize effectiveness, Houston, TX: Luminant Worldwide Corporation.
  • Thomson, D. and Singh, M. (2001), ‘“December”: An e-procurement model for B2B exchanges and the role of e-markets’, Proceedings of 6th Annual CollECTeR Conference on Electronic Conference, pp. 3–4.
  • DPWS (2002), Electronic Procurement Implementation Strategy – Guidelines, Sydney: NSW Department of Puortblic Works and Services.
  • upply Chain Cost Prediction for Prefabricated Building Construction under Uncertainty Shaoli Wang , 1 Yasir Mursalin,2 Gang Lin,3 and Conghua Lin 1 1 School of Architecture and Planning, Fujian University of Technology, Fuzhou 350118, China 2 School of Electrical Engineering, Computing, and Mathematical Sciences, Curtin U
  • Khalfan, M, McDermott, P and Cooper, R., 2004. Integrating the supply chain within construction industry. 20th Annual ARCOM Conference, 1-3 September 2004, Heriot Watt University. Association of Researchers in Construction Management, Vol. 2, 897-904
  • Martin Loosemore, (2014) “Improving construction productivity: a subcontractor’s perspective”, Engineering, Construction and Architectural Management, Vol. 21 Issue: 3, pp.245-260, https://0-doi-org.lispac.lsbu.ac.uk/10.1108/ECAM-05-2013-0043
  • European Commission (2011). Evaluation Report – Impact and Effectiveness of EU Public Procurement Legislation Part 1
  • Sa¯dhana¯ Vol. 41, No. 6, June 2016, pp. 679–693 Identifying factors causing cost overrun of the construction projects in India SWAPNIL P WANJARI* and GAURAV DOBARIYA
  • ] Avotos I 1983 Cost-relevance analysis for overrun control. Int. J. Project Manag. 1(3): 142–148. Available at: http:// www.sciencedirect.com/science/article/pii/ 0263786383900182 [Accessed January 14, 2016]
  • Journal of IT and Economic Development 7(1), 15-24, April 2016 15 Delay Analysis of Construction Projects B. Prakash Rao

 

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