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Respective to the Cinnamon Grand hotel new three buildings reconstruction project, though analysis the key issues as time, cost, quality and risk allocation arising in project process. Introduce 4 standard procurement routes: Traditional Procurement Route, Design and Build Procurement Route, the Management Contracting Procurement Route and the Construction Management Procurement Route, according to client profie to choose an appropriate procurement.
Purpose Of Procurement
Procurement issues of Client
Cinnamon Grand Hotel is the owner and operator of the new three hotel buildings. Their core business is hotel operation and making profit from it. So they must obtain building first to unpin their core business. Their business is over the UK and they are always giving abstractive outlook of building closely to landmark, good quality in aesthetics and good services. Giving customers from the entire world highly level life in hotel and being best choice as well as making profits are their objectives.
Project construction period is strictly due to hotel project intending to make profit earlier. As required by Hotel Management Board (HMB) of client, project start date on site is 1st March 2012. And 12 months later project will hand over by 28th February 2015. Project delay is not allowed.
Project is complexity. It is sub-divided into 2 phases. Phase 1 target for reopening to achieve profit objective. Then Phase 2 carries on building other facilities for providing extra value of hotel. Connection between these 2 phases and non-interruption and necessary services for re-opening business are very important.
HMB also concern about the risk allocation. To build new building is their secondary strategy, so they don't have in-house experienced person to work in closely collaboration with consultants or contractors. So how to advise the construction process pertaining to time and cost certainty, quality control needs carefully attention. Overrunning of budget is not allowed.
Different Procurement Routes Characteristic
The Traditional Procurement Route.
Generally speaking, the sequence of this type approach is firstly client appoint an consultant group including architect, quantity surveyor, structure engineer, MEP consultant, and other listed-subcontractors etc., usually architect is the principal agent and this procurement route almost characterized by him. Secondly client gives briefs for design stage. Normally the design is closely to finish and agreed by client, then QS start to prepare the tender documents for tenders. Once the preferred tender has been chosen, the process will turn into construction stage until project handover.
This procurement route is relative fair for competitors. Therefore client has more options in choosing tenders respective to integrated capability. 'Low bid wins' culture need prudent consideration. Cost of tender preparation is relatively low, because tender is also playing the role of checking mistakes, accountability is satisfactory, procedures well know and arrangement and valuation of reasonably changes is easily, are the advantages of this procurement route too.
The disadvantages are: the process is not a concurrence because of project start date on site is slow, from design to choose preferred tenderer may last many years, easily confusion due to uncertainty when design is uncompleted, poor buildable due to contractor not involved in design or planning, contractor has very practical experience, potential adversarial relationship pertaining to build ability, design solution and design risk rest on client, such as possibility of design mistake, the revision cost is high.
This procurement is applicable for all clients, including experienced or inexperienced clients.
Low cost risk because fixation of contract sum. Medium time risk due to the completion date is fixed in contract. Low quality and design risk as the most of works is designed by insured consultants working directly for the client.
More over there also have variations of the traditional procurement route such as traditional sequential, traditional accelerated and traditional with remeasurement. Payment method option has lump sum contracts, measurement contracts and remeausrement contracts.
The Design and Build (D&B) Procurement Route.
It is performed by various tender documents in which employer's requirement are involved, and usually it is an initial and not fully design solution and lump sum contract. The sequence normally is that client gives a project brief priory to either an appointed or a competitive design and build contractor. Then the design phase and construction activities can concurrently proceed.
This type procurement route keeps single link between employer and contractor respect to responsibility and contract relationship. Much of the design solutions coming from D&B contractor enhance buildability. Quick responses will achieve as above condition. Concurrent working is allowable, therefore the total project period is reduced comparing to tradition route. Cost is relatively certainty due to contract sum is made prior to construction.
Client needs to appoint a D&B contractor before in initial design is complete. Design overview available until consultant has been appointed. Client prepare sufficient brief is difficult. Bids are not comparable. All design liability is limited by standard contract. Variation made by client is expensive.
Low cost risk because of lump sum contract makes cost firmly. Low time risk as the completion time is usually fixed in contract and the D&B contractor will be committed it. High design/quality risk only when D&B contractor control the design, the risk is related to designs suitability and ability of contractor to perform design tasks.
This procurement route is of application for all clients even inexperienced and those who require cost certainty, fast track project and simple buildings.
The Management Contracting Procurement Route.
It is performed by the management contractor appointed by employer in the early stage to advise for the design programming and buildability. The appointed consultants was given project brief from employer to start design, and concurrently the management contractor start to program , package and obtains tenders for works. Woks packages are based on competitive bid and lump sum contract with management contractor respectively. Works can start to commence as soon as possible once the employer approved the design proposal. So concurrent working is allowable.
Simple connection between management contractor and client enhances quick response. Work commence concurrently saves overall project duration. Design is Buildable inherent as management contractor appointed earlier. It became a member of design team by contributing construction knowledge and management capability. Works packages are comparable.
Good practices such as a good quality brief and project team are required. Price certainty is unsure.
The project actual cost is known after last work package is let that will produce a medium cost risk. Although design and construction can proceed concurrently, but there is potential time risk as the construction duration is an outcome of package selection. Simple and close link between clients, consultant team and works contractor resulting low quality/design risk.
This procurement route is applicable for all clients even inexperienced.
The Construction Management Procurement Route.
It is performed by a construction manager appointed to advise the employer on cost basis. The works contractors directly contracts with employer respectively. The short link leads to a faster response to decision than other procurement system. Appointed designer starts to design once receiving project brief. Construction can proceed in the same time. Design and construction can concurrent proceed make time saving potential in total project duration. Works packages can let by competitive bid. Design is buildable potential as the participation of work specialist. Traditional communication barrier is gone as works contractor direction link to employer. Clear define in related to role, risks and relationships for all participants. Good quality brief and project team, and effectively time controlling and information are desired. Accommodation is allowable for late changes.
Project actual final cost is uncertainty before last work package is release. There is medium cost risk rest on employer. No certain organization has been committed to control and responsible for time delay. Shorter and closer link of client, design and work contractors result low design/quality risk
This applicable for experienced clients, fast track projects, complex buildings, developing brief and where cost of certainty is not a priority.
Conclusion and Recommendation
Since the more simple and short link between clients, designers and contractors the more good quality in design/quality as well as risk is low in this aspect. But Client 'Hotel Management Board' doesn't have in-house person to contribute either experience or enough time to advise on the reconstruction project. So the 'Construction Management procurement route' is not suitable.
Objectively speaking, the reconstruction project is a slightly fast track project and requires time certainty strictly. Therefore 'Traditional Procurement Route' is not suitable as the preparation duration of tendering until actual date commencing on site potential last many years. Client can't take the risk of time delay for their core business.
Cost certainty is also desired in client hotel project. The management contracting procurement route has medium cost and time risk as Actual cost is known only after the last package is let, and that the time for package contractor selection is the total construction duration.
Finally, it is recommended that the design and build procurement route is an appropriate route for client's (HMB) new three reconstruction project.