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Cinnamon Grand which is a privately owned large hotel chain in the UK has a strategy of adopting neglected landmark buildings and bring back to their former magnificent look.
A recent period of bad weather and storms resulted in the buildings of three Cinnamon Grand hotels which are located in prime locations in town settings being significantly destroyed. In August 2012, the hotel management board decided to reconstruct the destroyed buildings to create a vibrant and attractive environment which can improve the quality and facilities of the buildings
Cinnamon Grand has to invest a great deal of time, money and effort to ensure that the reconstruction is sensitive and does not compromise the dignity of the buildings and services provided which is satisfied with the client's policy on architectural significance and aesthetics of the buildings.
Purpose of procurement
"Cinnamon Grand" decides to undertake the three buildings under two phases:
In phase 1, the priority will be given to the rapid reconstruction of the following key areas of the hotels which makes them re-open to business within a short period of time due to the opportunity cost of closing down business following the storm damage.
In phase 2, is to enhance opportunities for health and well- being of the visitors through new facilities. 3 new facilities which will be constructed are:
Health and fitness centre
Conference and meeting rooms
Procurement Policies and Principles
The following principles should be adhered to in the procurement of materials and services:
Risk Avoidance/allocation would be the priority.
Reported to the client possible project delay or overrun of costs beyond their budget allowances.
Good service to the hotel guest and proper housekeeping to be done during the phase 2 construction.
Reconstruction work should evenly match with the existing design or even better.
High technology multimedia facilities should be installed for air conditioner meeting room.
Types of procurement route
Traditional procurement route
Traditional procurement route is most commonly use method in all kind of client whether they are experience or inexperience. This method is time predictability and cost certainly. However it is not suitable for fast track project.
How Traditional procurement route works:
Client will form a team of consultant which include of Architect, Engineer, and Surveyor and provide a brief and budget for his project. This team requires preparing contract document like design, specifications and drawing, and also tender document for selection of building contractor. The client will appoints the suitable building contractor by the completion date and the lowest price to complete the construction.
The client develops the business case for the project, provides a brief and budget and appoints a team of consultants to prepare a design, plus tender documents. The client appoints the building contractor to construct the works to the design, by the contract completion date and for the agreed price. Usually much of the work is sub-contracted to specialist firms but the contractor remains liable. The consultants administer the contract on behalf of the client and advise on aspects associated with design, progress and stage payments which must be paid by the client. The separation of the contractor from the design can mean missed opportunities for contractor or specialist contractor to input.
This strategy is a low-risk option for clients who wish to minimize their exposure to the risks of overspend delays or design failure. However, the exposure to risk will increase where the design phase is rushed, where unreasonable time targets are set or where the tender documents are not fully completed.
Keys Procurement Issues
Issues to be considered
Traditional procurement route
Factors outside the control of project team
Client have a team of consultant which include of Architect, Engineer, and Surveyor and provide a brief and budget for his project
Need to accommodate changes
Quality and performance
Design and Build
Design and Build procurement route is a single contractor who is fully appointed to be responsible for the design and construction work. This method in all kind of client whether they are experience or inexperience and also for those who requiring distance from the project. This method is cost certainly and suitable for fast track project. However it is not suitable for uncertain or developing client brief and complex buildings.
How Design and Build procurement route works:
Client will appoint a contractor and he has to take responsibility for both design and construction and will use either in-house designers or employ consultants to carry out the design. Most of the construction work will be carried out by specialist or sub-contractors.
The contractor tenders against a client brief and will often follow an initial concept design prepared by consultants appointed to advise the client.. The design will be developed by the contractor and the works will e completed, usually for a fixed price. Tendering is more expensive so it carries more risk for the contractor than the traditional approach. This is because the contractor has to develop an outline design and a detailed price. Tender lists will probably be shorter than for traditional contracts.
The Design-Build approach gives the client a single point of contact. However, the client commits to the cost of construction, as well as the cost of design, much earlier than with the traditional approach. Whilst risk is shifted to the contractor, it is important that design liability insurance is maintained to cover that risk. Changes made by the client during design can be expensive, because they affect the whole of the Design-Build contract, rather than just the design team costs.