Procurement Route For Complex And Highly Accommodation Construction Essay

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Procurement route for complex and highly accommodation of a hotel building is always linked with expensive and complex problems on inadequate coordination of building services and engineering services. These problems are crucial to the success of any hotel industry projects, and need to be resolved by proper project management planning from the initial design stage to construction stage. Design cannot be resolve by coordination, but more on relating to clients intent, engagement of designer and contractors. Therefore it is crucial that the building design and installation are properly managed in both design and construction stage. Elected procurement system can affect the project coordination progress, and non-traditional procurement method had better chance for the project success.

Introduction:

Cinnamon Grand is a privately owned large hotel chain in the UK. They offer accommodation across UK and are committed to preserve their rich heritage and are very passionate about the outlook and the quality of the hotel building. The hotel management board gain experience through renovation. With the committed passion and experience gained, they have higher expectation.

Three of Cinnamon Grand hotel located south east of UK is significantly destroyed in recent severe storms. The hotel management decide to reconstruct the destroyed buildings, to create a vibrant and attract environment to improve the quality of buildings and facilities provided. The design intent is developed along similar design intent that is adopted for previous existing hotel buildings.

The nature of damages varies from one building to another, all sites will require demolition on existing structures that are not structurally sound enough to retain and reconstruct.

The three hotel building will be undertaken in two phases;

Phase 1, the building require handover by 28th February 2015. The Planned start date on site is 1st March 2014. The priority should be given to the reconstruction of following key areas So that the hotel can reopen business within a short period of time. The planned reopening scheduled on 1st April 2015.

Roofs

Guest rooms

Restaurant

Swimming pools

Phase 2, to enhance opportunities for health and well-being of the visitors through following new facilities to be newly constructed.

Dance Studios

Health and fitness centre

Conference and meeting rooms

Other key issues to be considered:

Cinnamon Grand do not have in house executive who is experienced enough to advice on any reconstruction of their properties. Therefore, risk avoidance/ allocation are very important.

The client is highly concerned about possible project delays and overrun of costs beyond their budgeted allowances. The final price is requires to be known as early as possible, if possible at the outset. Value for money given the current economic climate is also a key consideration.

During the phase two of the reconstruction, they must provide good service to their hotel guests while the construction is going on.

Quality of the buildings is very important to the client, as their reputation was founded on quality of accommodation and service. Reconstruction works would have to match an existing hotel or even better.

Complexity is a significant issue in the second phase of the work. Conference and meeting rooms require high technology multimedia facilities with air conditioning.

Purpose of Procurement:

The natures of building services cannot be designed and installed independently, as the integration with other element require high level of coordination. It is difficult obtain client design intent and the right price due to inexperience or lack of appropriate advice. Procurement management is a series of decisions made at the start of the project. It could increase the efficiency by cutting cost and maximising existing resources. Procurement involves the use of specialised method in addressing risks and maintains its finances to overcome difficulties. Procurement addresses the difficulties arising from the following;

To understand the client intention on how he wants the project to be delivered. It includes the method or the process used in the projects; it doesn't include the design solution.

To organise and coordinate the necessary specialised organisations that must be collaborate to deliver the project solutions. It is subject to series of risk and uncertainties. It involves number of organisation to work as a team to determine the procurement path or strategy.

To reflect any overarching philosophy or principal that can support and guide project activities.

To agree and formally document the responsibilities of each specialised organisation involved in the project. Particularly with regards to distribute the risk among the other organisation.

To agree and formally document the processes that is used to manage and function of the project.

To define and identify at the beginning of the project, what will be done if things goes wrong or if the organisations come into a dispute with each other.

To organise and coordinate the day to day running or the administration of the project

Procurement is to understand how the client requires the project to be structured and managed. Making appropriate choices or suitable procurement path for the organisation is able to managed client's priorities for the delivery of the project.

Factors in selecting procurement route:

In any form of project, the key element is the selection of a suitable procurement method. That is going to implement, design, construct and complete the project. The selection of the suitable procurement route is very important contribute to a project success. There are some eight basic issues to be considered when selecting procurement route;

Factors that are not within the control of the project team. Such as change in finance cost or the availability of any required skills from the construction industry.

Client resources. Includes the necessary experience and knowledge of the people from the client organisation that will be involving in the project.

Project characteristics. Such as technical complexity and the possible cause on possible cost and time overruns.

The need to accommodate changes. Client willing to exchange cost certainty for the ability to continue to accommodate changes in the later stage of the project.

Risk management. To ensure risk is distributed to the organisation that is able to best managed to avoid additional cost incurred in the project.

Cost issues. The level of cost certainty required at each stage of the project as the project progress.

Timing. Whether the project is to be able to deliver the project as a whole or in phased. The consequence of late or early deliverable on client's business.

Quality and performance. To ensure that the project focus on providing the functionality and not over or under specified.

Potential Procurement Route Path Selected:

Different procurement strategies provide different ways to allocate risk and responsibilities to the organisations contributing to the project.

The main types of procurement strategy selected for hotel projects are summarised as follows:

Traditional: The design is to be fully completed by the Client's consultants before the tender from the contractor, then carry out construction.

Construction Management: Design and developed by the client's consultant and construction commences before the design is complete. A fee-earning consulting construction manager work for the client to define and manage several work packages representing a specialised or functional aspect of the project. All contracts are between the client and the trade contractor. The final cost of the project may be known accurately when all packages have been assigned.

Design and Build: Detailed design and construction is undertaken by a single contractor in return for a lump sum. When the concept design is prepared by the client before the contractor is appointed to finish and construct the design, the procurement strategy is called Develop and Construct.

Appraisal for traditional route:

The traditional procurement system has been used for many years throughout. It was fully comprehend by all groups of building organisation team. Traditional procurement route is sequential, thus making it simple and easy to understand.

The client is inexperience; therefore require to appoint a team of consultant consisting of an architect, engineer, and surveyor to prepare design specification and drawing, and other tender documentation to allow the selection of contractor. The risk is being transferred to the appointed contractor to over see the project progress. Subsequently, risk is being distributed to the subcontractors.

There are competitive fairness and public accountability in the system. There will be reasonable price certainty during contract award, but price can still subject to changes or variation order. If there are any changes, it is easy to arrange or coordinate and easy to manage the costing value for the project. The client is highly concern on the possibly project that will be over their projected budgeted allowance.

However, the traditional method sequential and fragmented nature resulted in long design and construction periods. The duration of the design and construction is very crucial to the client, as the buildings require to 28th February 2015 and had a planned reopening schedule on 1st April 2015. The planned start date to be commence on 1st March 2014, therefore it is necessary that the schedule is properly planned and ensure that design changes are address in the initial stage to avoid any increased in cost or delay.

Appraisal on Construction Management:

Construction management procurement route works concurrently on the design process and construction progress. Thus construction management is more time saving than traditional procurement route.

Construction management procurement route appoints a construction manager to advise the client on a fee basis. The construction manager is expected to manage and coordinate the design planning and construction process. These are to ensure that the trade packages are interface were carefully selected. This arrangement place the client at a considerably risk. The ultimate responsibilities are however still retained by the client.

Employer

Architect/ Designers

Quantity Surveyor

Structural Engineer

Service Engineer

Management Contractor

However the system is more expensive and the client has to take on more risk on time and cost and responsibilities. The project has no cost certainty at outset, until the full packages are fully assigned which is a disadvantage for the client where cost certainty is a priority. Cinnamon Grand has gained some experience through dealing of hotel building construction. But they are not experienced enough or able to devote time for them to engage closer involvement in the construction process.

Appraisal on Design and Build:

Design and build procurement route allow the client to liaise with a single point of contractor. The contractor is fully responsible to the client delivery time, cost and stated quality. Therefore it simplified the process for the client. It allows the client to understand it total financial commitment at the initial stage of the project, where price certainty is the critical path for Cinnamon Grand.

Employer

Design & Build Contractor

Architect/ Designers

Quantity Surveyor

Employer's Advisors

Structural Engineer

Services Engineer

Sub-Contractors

Design and build provides multi-disciplinary approach, integrating and coordinating both designer and contractor at the initial stage of the process. It enables the organisation meet the tight delivery date to Cinnamon Grand by reducing project time and without any possible project delays and which could lead to over projected allowances.

The contractor is responsible for design and construction planning, organisation and control over project process. Work on the building can be commencing as soon as local authorities have been approved and relevant information on site operation is available. Design is not necessary to be finalised before work to be commence. Design and build nature is to integrate design and construction team together. Thus, the architect can be closely involved so that it is more buildable construction to meet Cinnamon Grand expectation.

Comparison on Procurement Route:

Traditional Method

Construction Management

Design and Build

Organisation

-Designer and construction team separated, thus harder to integrate and coordinate design and construction

-Contractor providing services not involve in design, would require coordination based on contractor selection of services equipment

-Coordination and allocation of design are always not clear

-Design and construction team is integrated, thus easier to integrate and coordinate design changes and construction process.

-Client need to be experienced

-Appoint construction manager to manage and advice on the project process

-Design and construction team is integrated, thus easier to integrate and coordinate design changes and construction process.

-Good teamwork and better control

-Single point of contact, main contractor manage all coordination work among the organisation

Cost

-Not able to know the project cost soon, and the likelihood of over client projected allowances

-No cost certainty at outset

-Able to know project cost at the initial stage of the project. Guaranteed Maximum price to the employer.

Time

-Longer design planning and construction process, which could lead to project overrun and project delay.

-Design planning and construction is conducted concurrently, which minimise the project overrun and project delay.

-Design planning and construction is conducted concurrently, which minimise the project overrun and project delay.

Risk

-Client undertakes the most risk as they are responsible including coordination of design.

-Client still undertakes the most risk although a construction manager is appointed.

-Contractor undertakes the risk on all coordination in design planning and construction process. And risk is distributed among sub contractors.

Conclusion:

Given the comparison above, Design and Build would be a better appropriate procurement route for Cinnamon Grand.

Since the Contractor undertake the design work, enable early start on site. Design and Build progress concurrently along with the design planning and construction process. It minimise the possibilities on project delay and overrun cost that is over their budgeted allowances. They are also able to provide quality building work that match their existing building design and can be even better quality.

Due to the complexity of the project at second phase, it is very crucial that information is being delivered to the individual sub contractors working on the building services. With Design and build in place, communication can be effectively transmitted and expected scope of work can be achieved. Thus Design and Build is highly recommended among the other procurement route.

There are similarities between Construction Management and Design & Build method. However Cinnamon Grand do not have in-house personnel that are experienced enough to give advice on their reconstruction properties. Construction Management require the employer to be experienced enough to undertake the project and to advise on the project. Design and build provided personnel who are experienced enough and able to commit to the project development. Cinnamon Grand therefore do not have to undertake the risk as the contractor appointed will undertake the risk and distributed among their sub-contractors.

Task 2

Option A:

Discuss the liability of Alexander Contractors to the Employer for the additional costs that the Employer had to incur as a consequence of being require to employ a more expensive tenderer to carry our the construction project.

The Employer called tenders for the new development of a major shopping complex. Alexander Contractors tender for the project and was the preferred tenderer. Before the Employer is able to write to the Alexander Contractors, the Tenderer wrote to the Employer that it is withdrawing its tender. The Employer had no choice but to award the project to another Tenderer with a higher cost.

At the point of withdrawal, no contract was officially signed or accepted. Identifying the offer and acceptance may prove to be more difficult. The Tenderer, Alexander Contractors has the right withdraw the tender anytime before the acceptance of the contract. Thus, it appears that the Tenderer, Alexander Contractors is not liable to the Employer.

However, if the conditions of tendering condition stated that the offer cannot be withdraw once the Employer has decided on the preferred Tenderer. They shall remain open for acceptance within the stipulated time frame, and then there probably be liability for breach of condition of tendering.

Illustrated by the New Zealand case of "J&JC Abraams Ltd v Ancliffe (1978) 2 NZLR 420". The defendant wished to develop a building plot behind his house, and was given an estimated quotation by the claimants and began work. The defendant has requested the claimant to provide a firm price as the contract had not been finalised. They realized that the work would cost more than the originally provided. Eventually, the claimants submitted a price that is double than the estimate quotation. When the claimants brought action for the price of work, the defendant made a counterclaim for his loss. The claimants were held guilty of negligence in not informing the defendant of changed circumstances and escalating the price until that it was too late for the defendant to withdraw from the project and reduce his losses. They were liable in the tort of negligence for all extra losses incurred.

Discuss the Clerk of Work's power to issue a Direction as detailed in the given scenario and its implications on the loss and expenses incurred by the Contractor.

The Contractor realised that the concrete quantity in the BOQ are wrong, due to the wrong pile cap size transferred from the design drawing to the BOQ of 160 cubic metre instead of 250 cubic metre. The Contractor informed the Contract Administrator in writing and copied the Clerk of Work. The Clerk of Work issued a direction to construct the work according to the drawing.

The instruction is given and confirmed by the Clerk of Work, the Contractor will need to comply with the confirmed instruction. It would allow the Contractor to proceed with the loss & expense to the employer. However if the instruction is not confirmed by the Clerk of Work, the Contractor can choose not to carry out the work provided that it was not frivolous or vexatious.

Under the Section 3 Clause 3.4, the Clerk of Work is an inspector appointed by the Employer to oversee the works on behalf of the Employer under the Architect/ Contract Administrator's directions. However, any direction given to the Contractor by the Clerk of Work has no effect. Unless such direction is expressly empowered by the Conditions to issue instruction, confirmed in writing by the Architect/ Contract Administrator within 2 working days of the direction given. Any direction given and confirmed shall deem as an instruction of the Architect/ Contract Administration as of the date of confirmation is issued.

As illustrated in "Sika Contracts Ltd v Gill (1978) 9 BLR 15" where a letter accepting a supplier's tender was signed: 'BL Gill, Chartered Civil Engineer', the engineer was held personally liable to the supplier for the price even though the engineer knew that he was only acting as an agent.

The instruction related to discrepancies fall under the relevant matters under Clause 2.15, Clause 4.24.2.3 & Clause 4.24.4.

Clause 2.15 states that if the Contractor aware of any discrepancy in the design drawing or BOQ, he shall immediately give notice to the Architect/ Contract Administrator shall issue instruction in that regard.

Clause 4.24.2.3 states that in relation to any discrepancy or divergence shall referred to in Clause 2.15.

Clause 4.24.4 states that suspension by the Contractor under clause 4.14 of the performance of his obligations under this contract provided the suspension was not frivolous or vexatious.

Detail the possible claims with respect to the given scenario, the main facts that can be included in the claims and the contractual provisions available to substantiate the claims according to the 'JCT Standard Building Contract With Quantities 2005 Edition (JCT SBC05) Revision 2 2009'.

The main facts include the discrepancy between designs drawing to the BOQ from 160m3 instead of 250 m3. Since the volume of concrete had increased due to the increase of pile cap sizes, the work could not be carry out as scheduled. The additional pile cap was affected by the limited availability of the resources on site. It resulted in change or construction method which was put into writing and was approved by the Contract Administrator. The changes in structural specification require additional cost on resources. Thus the schedule and the progress of work are greatly affected and require longer time to complete the additional work. An estimated quantity of BOQ for additional quantity of wall finishes was not reasonably accurate estimated. As illustrated in "Wharf Propertied Ltd v J Devonal Williams & Eric Cumine Associates (No2) (1991) 52 BLR 1" , in which action against architect for negligence was struck out because the pleading did not seek how various act of negligence can led to various losses.

The Contractor will have to require Architect/ Contract Administrator's instruction to put into writing. The Contractor will have to provide the direct cost such as labour, materials & plant for variation to the Employer under Clause 5.2, Clause 5.6.5. Also, the Contractor should provide preliminaries site overheads and head office overhead.

Disruption to the progress of work resulted the contractor to incur administrative cost at head office. Ensure that the cost is justifiable and must be specified and properly supported with supporting documents. As illustrated in "Peak Construction (Liverpool) Ltd v McKinney Foundation Ltd (1970) 1 BLR 111" that the contractor must be able to show that the organisation worked elsewhere during the period of delay.

Clause 5.6.5 states that any unreasonably estimation of quality of work shall include a fair allowance for the difference in quantity. Provided that Clause 5.6.1.4 & 5.6.1.5 apply to the extent of work has not been altered or modified other than in quantity.

If you were the Contract Administrator prepare a report outlining your assessment of the contractor's claim including the process you have followed, the pertinent issues of the dispute and the contractual provisions relevant.

The report of assessment of the contractor's claim includes:

To and quantified & substantiate whether claim from the Contractor to the Employer is valid. It will be important to determine whether it is justifiable to verify the existence & the extent of the relevant issues pertaining to the claim. Determine whether the relevant issue has any impact or effect to affect the schedule and progress of work.

To examine all documents on the cost and expenses that was put up for claim for the project. And the appropriate amount claimed on loss & expense based on Clause 4.23.1, Clause 4.23.2, Clause 4.23.3 & Clause 4.25. As illustrated in "Croudace construction Ltd v Cawoods Concrete Product Ltd (1978) 8 BLR 20", a contract to supply masonry block to the main contractors on a school project states that the suppliers should not be liable for any consequential loss or damage caused by late delivery or defect. The blocks were found defective, the contractors claimed the damages for loss of productivity and inflation cost result from delay and cost of meeting claim brought by the sub-contractor.

Disruption to the progress of work resulted the contractor to incur administrative cost at head office. Ensure that the cost is justifiable and must be specified and properly supported with supporting documents. As illustrated in "Peak Construction (Liverpool) Ltd v McKinney Foundation Ltd (1970) 1 BLR 111" that the contractor must be able to show that the organisation worked elsewhere during the period of delay.

Under Clause 4.23.1, Clause 4.23.2 & Clause 4.23.3 indicated that the application submitted to the Architect/ Contract Administrator or to the Quantity Surveyor detail on the loss and/ or expenses should be reasonably.

Under Clause 4.25 indicated that any amount from time to time ascertained under Clause 4.23 shall be included to the Contract Sum.

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