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This report is produced to analyse the various procurement methods that are available for Gamestown.
As stated in the scenario outline, a regeneration schemes has been identified to transform 60 acres of a former landfill site and also enhance the area by developing a local community park. The venture will also use sport, leisure, health, education and lifelong learning to increase the health and well-being of the local community. Besides, the client has specifically required the proposed building to be carbon neutral, highest aesthetic and qualitative standards. Value for money given the current economic climate is also a key consideration.
As stated in the scenario outline, 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. Besides, the completion date is critical, as the building requires handover by 1st July 2013 at the very latest.
Last but not least, 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:
Library and ICT
Community activity and meeting rooms
Health and fitness centre including squash courts
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
1.1 Introduction to Procurement Methods
According to Construction, Planning, Programming and Control (Cooke & Williams, 2009), Turner (1997) suggest that an appropriate procurement route will develop from an understanding of the objectives and priorities of the client and that a number of procurement assessment criteria will need to be considered.
There are eight procurement factors to be considered by the client at the procurement assessment stage. Of these, the three main considerations are time, cost and quality, however the issues of complexity, controllable variation, degree of competition, client responsibility and risk in the project will also influence the choice of procurement route. (Cooke & Williams, 2009)
By taking these points into consideration, the client should eventually be able to choose an appropriate procurement strategy for managing the projects. However, the choice of procurement method for every situations will be very different notwithstanding the additional complexity of other criteria that might be important to the client. (Cooke & Williams, 2009)
Proportions of procurement routes used in the UK today is shown in the figure as below:
[Extracted from "Construction Planning, Programming and Control" (2009) by Cooke. B and Williams. P]
From the figure, Design & Build is obviously to be the most popular route with a 43% share in the market, this is closely followed by Traditional Procurement with a 37% share. However, Target, Partnering, Management Contracting and Construction Management have a 20% share overall.
2.0 Procurement Routes
There are different types of procurement methods available in today's industry however, there are only four methods which are most likely to be adopted for the proposed development will be discussed. The following section of the report will analyse the various types of procurement methods available that might be viable to the proposed development and will finally appraise one method for recommendation.
2.1 Traditional Procurement
According to Cooke & Williams (2009), the client's lead consultant will be an architect or designer in many cases. Sometimes, the traditional procurement method is referred to as the "end-on" or "design-bid-build' method of procurement, it separates design from construction with an intervening 'tendering' period (Cooke & Williams, 2009). Masterman (2002) stated that "The client appoints independent consultants on a fee basis, who fully design the project and prepare tender documents upon which competitive bids, often on a lump sum basis, are obtained from main contractors. The successful tenderer enters into a direct contract with the client and carries out the work under the supervision of the original design consultants." Obviously the key characteristic of traditional procurement is the separation of the design and construction processes.
To achieve a large degree of price certainty, the project should be fully designed before the construction stage begins. Cooke and Williams (2009) stated that "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 remeasurement contract based on approximate/notional quantities
The contract price is determined at the end of the contract by measuring the actual work carried out"
The traditional procurement method takes longer project duration due to its sequential and fragmented nature. Traditional procurement is the slowest method of all the procurement methods available. Due to this, traditional procurement might be risky and not desirable if the Client wishes for an on-time handover date. As a subsequent, the project cost will increase as well following the increasing of project period as the client will be incurred financing charges.
However, the traditional method of procurement can be accelerated by using a two-stage tender approach. It means that the preferred contractor can be selected at an earlier stage and therefore the cost efficiency and practically of the design will be influenced (Cooke and Williams, 2009). Besides, the contract may also be negotiated with a single contractor favoured by the client or architect. According to Cooke and Williams (2009), two-stage tendering and negotiation are not limited to traditional procurement and can equally well be used with other methods including design and build.
The forms of contract under Traditional Procurement include, but are not limited to:
JCT Intermediate Building Contract
JCT Minor Works Contract
The Engineering & Construction Contract (ECC)
ICE Conditions (Usually used for Civil Engineering Works)
Figure below shows the relationships between the client, client's design team and main contractor under a Traditional Procurement Route using a JCT 2005 with Quantities Contract.
Extracted from "Construction Planning, Programming and Control" (2009) by Cooke. B and Williams. P
2.1.1 Advantages of Traditional Procurement
Firstly, the design is complete before the tender stage. Due to this, a large degree of price certainty can be achieved and this would benefit the client as the client will know the potential cost in acquiring the building and therefore decided whether or not to proceed with the project. Besides, the designer understand how the building 'fits together', ensuring buildability. Last but not least, changes and variations are kept to a minimum once construction is carried out. (Cooke and Williams, 2009)
2.1.2 Disadvatages of Traditional Procurement
The disadvantages are that client have to bear all the risks and responsibility in terms of design and financial. Besides, commitment to a lump sum price is often undermined by a lack of information or client changes. Tenders can only be finalised when the design is complete, which may lead to an extended programme. Last but not least, high pre-contract fees 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. (Cooke and Williams, 2009)
2.2 Design and Build Procurement Route
According to Cooke and Williams (2009), even though there are several varieties of design and build, the basic idea is that there is a single point of responsibility for both the design and construction of the project. The client benefits from the contractor's expertise early in the project and there is also a common law fitness for purpose liability for contractor's design. However, this benefit is often lost under some standard contract conditions which limit the contractor's design liability to that of an architect (Cooke and Williams, 2009). Design and Build can be separated into two main categories as below.
2.2.1 Client Led Design and Build
According to Cooke and Williams (2009), this procurement involves the client being fully involved in the design stage early on in the project. Prior to tender action, the design may be virtually complete possibly with full bills of quantities or notional bills (Cooke and Williams, 2009). At this stage a small number of contractors will be invited to tender for the project. For this procurement, client will fully bear the design risk as tenderers have very little to add to the fundamental design (Cooke and Williams, 2009).
Cooke and Williams stated that "the client will be responsible for all design fees from commencement to completion of the project." In this procurement, the architect will normally been selected as a lead consultant or alternatively the client may decicded to appoint a project manager as a lead consultant (Cooke and Williams, 2009). This is referred as develop and construct because the contractor inherits the design and develops the detail required for the production stage of the project (Cooke and Williams, 2009). Cooke and Williams (2009) suggested that it is preferable to invite tenders at RIBA Plan of Work Stage D because this way the client retains some of his control over the design but also benefits from imaginative design submissions from contractors.
Beside that, novation design and build is an alternative way of develop and construct, due to this, architect or design will be novated to the contractor once the contract has been awarded. The architect or design team are legally passed over to the contractor in order to produce the detailed aspects of the design (Cooke and Williams, 2009).
According to Cooke and Williams (2009), in this way, the client will maintain an interest in the design but the contractor will pay the continuing design fees through to contract completion and become responsible for the entire design (Cooke and Williams, 2009).
2.2.2 Contractor Led Design and Build
Cooke and Williams (2009) stated that of "In Extreme Z, the Client may wish to provide the contractor with minimal information in the form of an outline brief (RIBA Stage B - Strategic Briefing). This will leave the design and build contractor fully responsible for the conceptual and detailed design in order to meet the employer's requirements". Due to this, the design and build contractor will fully bear for all the responsibility and risk of all design aspects to produce a building in respect of client's time, quality and cost requirements. from the inception stage of a project. (Cooke and Williams, 2009)
Subsequently, the client is benefit by this as he can ensure that he gets a large degree of 'value for money' by using competitive tendering methods.
According to Cooke and Williams (2009), the contractor will then submit a bid on the basis of the client's requirements and will produce drawings and costs to coincide with this. This particular method is known as 'traditional design and build'. (Cooke and Williams, 2009)
The main contractor may provide an in house design team or independent design teams may be used to ensure the flow of information between design team and project team in order that key design and construction dates are adhered to. (Cooke and Williams, 2009)
Contracts to be used under all options of design and build are similar to those of traditional procurement methods for example JCT & ICE.
2.2.3 Advantages of Design and Build
Firstly, the advantage of price certainty is secured early in the project. Besides, contractual completion dates are fixed early in the design process. Not only that, less risk to client on price changes during the design development as the contractor will bear the brunt of the costs if designs change after tender stage. In addition to this, the main contractor provides a single point of contact for both the design and construction aspects of the construction process, thus all major risk lies with the contractor. (Cooke and Williams, 2009)
2.2.4 Disadvantages of Design and Build
The disadvantages including that due to the fact that the contractor bears all risks, therefore the contractor assumes greater financial risk and this is often reflected in the price. Besides, difficulties arise for the employer in matching like-for like prices at tender stage. The tender period of design and build procurement also tends to be much longer than in other procurement methods and the fact that the project may become price driven leading to a decrease in quality. (Cooke and Williams, 2009)
2.3 Management Contracting
According to Cooke and Williams (2009), Management Contracting is an alternative to the traditional approach. The procurement method involves the client employing a management contractor to engage and manage a number of different work package subcontractors on site. Cooke and Williams (2009) stated that "Management contracting enables the client to create a competitive situation between management contractors at the appointment stage of the project." The client can request quotation and proposals from a number of different contractors for managing the contract.
Bids will be based on the contractor's view of management and preliminaries costs associated with managing the work packages (Cooke and Williams, 2009). By referring to Cooke and Williams (2009), the work package approach allows maximum overlap between design and construction activities. As each section of work is designed, the work packages subcontractor may commence the works on site. It tends to result in a reduced overall contract period. Due to this, this procurement method is greatly fit with the requirement of the proposed development.
Figure 1.3 shows the relationships between Client, Design Team, Management Contractor and Sub-Contractors in a typical management contracting arrangement.
In construction management, the construction management consultant or construction manager joints the design team early in the project (Cooke and Williams, 2009). Referring to Cooke and Williams (2009), the construction manager's services are based on a negotiated fee with the client simply to supervise and plan the work to be undertaken by the work package contractors.
According to Masterman (2002), in the construction management system, the Client contracts directly with the trade contractors and the construction manager (CM) has no contractual relationship with these contractors. As similar to Management contracting, all the direct works are sub-contracted by specialist work sub-contractors. However, they are now contracted to client directly instead of contracted by the management contractor in Management Contracting. Each work package contractor has a separate contract with the client and is paid directly by the client each month. (Cooke and Williams, 2009)
2.3.1 Advantages of Management Contracting and Construction Management
A number of advantages are apparent when discussing management contracting. Firstly as previously stated the maximum overlap of the design and construction phase is achieved. This can lead to reduced project timescales. A high level of quality can be obtained from management contracting due to the fact that a large degree of supervision is available at site level. The buildability aspect of the project may also be improved because the expertise of the management contractor can be utilised at early stages.
2.3.2 Disadvantages of Management Contracting and Construction Management
One of the first apparent disadvantages of management contracting is that the client has no commitment from the contractor in terms of price certainty. The job is priced as it moves along depending on how much time the contractor has allocated to the job. Another major disadvantage is that the client takes all the risk with management contracting, especially in terms of the arrangement between himself and the contractor.
3.0 Conclusion & Recommendation
To conclude, each of the above procurement routes has advantages and disadvantages toward suitability for Macclesfield Cricket Club. Traditional Procurement offers a large degree of value for money especially when a competitive tendering method is adopted. Also the fact that designs are almost complete before work begins on site means that variations and extras are kept to a minimum, and high financial control can be achieved. The main disadvantage of traditional procurement however, is that the client takes all the risk in terms of design and financially. For these reasons I believe that this procurement route would not be suited to the Macclesfield Cricket Club project.
Management Contracting has a major advantage over traditional procurement due to the shortened overall construction period. This means that the 9 months specified by MCC could easily be met delivering a working club house, which would be available for use over the summer months, hopefully leading to an increase in profits / turnover. However, as with traditional procurement the client takes all the risk and again for this reason I do not believe it would be suitable for the proposed project.
I believe that the most suitable procurement route for Macclesfield Cricket Club to follow would be contractor led design and build. Drawings produced by the group (33) could be given to the client as an outline design brief and then sent out to a number of design and build contractors to be further developed & priced. By doing this, the client allocates all risk to the contractor and any changes later in the works will be down to the contractor. He will bear the brunt of the costs. The fact that the contractor is responsible for all design aspects means that the client can be confident in knowing that their budget will not overrun. The only disadvantage, which in my opinion could be applicable to the proposed project, is that due to the contractor bearing the risk, the initial cost of the project may be quite high. However I believe this point is outweighed by the advantages and therefore I am recommending this procurement route to Macclesfield Cricket Club as a formally appraised route.