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This report has been prepared on behalf of Janus Leisure PLC to analyse the key procurement issues of the proposed two phases redevelopment of their flagship racecourse at Melchester.
1.1 Background of Janus Leisure PLC
Janus Leisure PLC (known as Janus onwards) is a leisure group with experience in horse racing. The company owns six racecourses within the UK where 20% of all racing fixtures held each year were held in their racecourses. Thus, this makes them one of the largest operators of horseracing in the UK. Their portfolio includes one of the oldest classic races in the world, the 5000 Guineas Stakes, as well as other high profile race meetings throughout the year.
All of Janus' racecourses provide conferencing and banqueting facilities and they ensured these facilities are functioning 365 days a year. They enhanced their leisure offering through the inclusion of 18-hole golf courses at two of their racecourses, one of which also provide a leisure club, and an integrated, branded hotel at a third racecourse.
Janus is experience in racecourses development as they own at least two stands which are approximately 100 years old. Besides, Janus is constantly investing in all its venues to ensure their assets are well-maintained and provides the best services to their customers.
In year 2010, Janus decided to make substantial improvements to their flagship racecourse at Melchester, which hosts the 5000 Guineas Stakes every year. Despite of that, Janus expects to expand the group and develop several of their other facilities substantially in near future.
1.2 Janus Leisure PLC's Proposal
Janus proposed a two-phased redevelopment of their Melchester flagship racecourse. The phases are described as below:
1.2.1 Phase I of Melchester Flagship Redevelopment
Demolition of the existing grandstand.
The construction of a new 5-storey grandstand to include and extensive conference and exhibition centre (10,000 m²) and associated external works with a budget of £25 million.
Refurbishment of two existing stands that are approximately 100 years old with a budget of £5 million.
To enable redevelopment, during Phase 1, the 2011 5000 Guineas Stakes meeting and others will be relocated to other courses. However, the 2012 5000 Guineas Stakes, scheduled for mid-September, must return to Melchester.
1.2.2 Phase II of Melchester Flagship Redevelopment
A new 120-bed hotel facility and casino with a budget of £12 million are to be constructed and be operational for the 2013 5000 Guineas Stakes meeting in mid-September.
The purpose of this report is to produce an appraisal on which procurement method that best suits the above mentioned development. To support the request for Janus' redevelopment plans, this submission includes an analysis of the group's aims and objectives, the key procurement issues and their project success criteria. These key procurement issues and success criteria outlines the anticipated key issues of choosing the best suited procurement strategy and the approach for choosing the appropriate organisations which would need to be commissioned in accordance with the proposed strategy.
Aims and Objectives of Janus Leisure PLC
The aim of Janus Leisure PLC is to constantly seeking to move its business forward. Janus has owned six racecourses so far yet they would still like to expand their businesses throughout the UK by constantly investing and exploring other business opportunities.
Besides holding horse racing in their racecourses, Janus provides conferencing and banqueting facilities, golf courses, leisure club and a hotel for their customers. Therefore, these facilities should be highly maintained, giving the best services and satisfaction to the customers.
It is important to define the objectives for Janus' project before reviewing the project success criteria leading to choose the best procurement method that suits the project. Objectives must be SMART - specific, measurable, achievable, realistic and time-bound. Objectives help building a framework for the project by nailing down the overall project scope, identify risks and provide estimation on duration and cost. The success of the project can be determined by whether or not the objectives are achieved. If objectives were not fully met, project is considered as partial success. (Mochal, 2005)
The objectives of Janus Leisure PLC are categorized into four categories:
Programme completion of the project as early as possible is highly important. As both Phase I and II's development is scheduled to be opened by mid-September 2012 and mid-September 2013, which is approximately 21 months and 33 months respectively from the date of this report is produced.
Project is expected to be completed at least a month before scheduled date, which is in mid-August of 2012 and 2013 for both phases for inspection and the issuing of certificate of practical completion.
18.104.22.168 Phase I
Janus' budget for Phase I is £25 million for the construction work of the new 5-storey grandstand including conference and exhibition centre and external works. Refurbishment of two existing stands circa that are 100 years old with a budget of £5 million.
22.214.171.124 Phase II
Janus' budget for Phase II's construction work for hotel and casino is £12 million.
126.96.36.199 Phase I
The construction of the new 5-storey grandstand including a conference and exhibition centre should accommodate 20,000 spectators and 550 peoples in the conference and exhibition centre. Refurbishment of two approximately 100 years old existing stands should includes essential improvements on areas that are not fit for purpose and involving specialists in acoustic, ventilation and structural engineering. The grandstand may be use for certain occasion such as concerts or other celebrations.
188.8.131.52 Phase II
As the flagship racecourse of Janus, the new 120-bed hotel facility and casino will together provide classy facilities and satisfaction to the customers. Janus preferred to have the proposed design similar to their previous hotel for easy identification. The objective of these facilities is to become the perfect destination for a racy weekend away or a refreshing venue for corporate events and hospitality. (Harmer, 2010)
Management, accountability and risk allocation are important for the Phase I of this project. Janus would like direct supervision or an organisation which is in charge of the programme of work. As for Phase II, Janus expects to be involved in the new facility of the hotel and casino especially during the construction period where their business is still running as usual and would like constant updates from the site. This is to prevent any obstruction towards their business and allow time to react if they foresee any extraordinary circumstances. (Turner, 1997, p.161)
The importance of aims and objectives are to lead the parties involving in this project towards the right goal. For the following chapter, each analyzed project success criteria has to reflect to the objectives and to be compared to define whether or not the project is a success. Therefore, an appropriate procurement method can be obtained from the results of this analysis.
Analysis of the Key Procurement Issues
The analysis is focus on four main points, Time, Cost, Quality and Risk. The basic principle involving in a project is finding a balance in three factors - Time, Cost and Quality. (Hackett, Robinson and Statham, 2007, pp 21-23)
Figure The Procurement Triangle (Hackett, Robinson and Statham, 2007, p 21)
The key to choose the right procurement method is to identify the priorities in the client's objectives and to plan a procurement path that is most appropriate. However, it is important to put the order of these three factors by differentiating their priorities within each other, because by definition, there can be only one priority. (Turner, 1997, p 25)
When one of the three factors is prioritize, the other two will 'suffer', or carry less weight or emphasis. In this project, it is identified that time is the most important issue for Phase I, and quality is of utmost important in Phase II. (Hackett, Robinson and Statham, 2007, p 22)
Thereby, for Phase I, where time is of paramount importance, the design and construction stages may need to be speeded up, hence, the cost and quality of Phase I may have to suffer. Whereas in Phase II, quality is the priority, time must be allowed for design and specifications to be perfected and cost may rise. (Ibid)
Despite of this, risk allocation within this project is relatively important. Janus would like to identify the risks involving in the project as early as possible and decide where to allocate them.
According to Janus Phase I's proposal, the concern is on the time as it must be finished by mid-September 2012. Therefore, this report highlights the points within the three stages that Janus has to emphasize for the project.
3.1.1 Early Start
Janus concerns about building delays and extended programmes on Phase I of the project. It is therefore important for the designer to produce design at a faster pace while an overlap of design and construction period is possible. An incomplete design may lead to price and programme uncertainty. (Turner, 1997, p 156) Work programmes should be prepared and perfected as early as possible for easier management and preventing delays. However, Turner (1997, p 140) claimed that "an earlier construction start should then mean an earlier construction completionâ€¦provided foundation design and early items of the critical path are available on time." Janus may consider Accelerated Traditional Method, where design has to be completed before the commencing of work on site or Construction Management where design overlaps with construction period.
Phase I involves demolition, construction of a new building and refurbishment. The work programme is complicated and it is advice to recruit an experienced party, such as Project Manager or Construction Manager to manage and plan the work programmes.
Besides, Janus has to obtain planning permission from the local authority before the commencing of construction work on site. Early start for Phase I of this project is essential.
3.1.2 During Construction Period
Significant variation in design or alteration of works is to be minimised after the commencing of construction works. As overlapping of design and construction seem to be necessary, alteration of design and works is not desirable but possible. The more the conflict in designs, the longer the project may take to finish and hence, lead to delays or project not completed in scheduled time.
The objective of Janus is to complete the work at least one month before mid-September 2012 and 2013. Early project completion is critical. The 2012 5000 Guineas Stakes is an important event and failure of Janus to hold this race in Melchester will lead to lower income and reputation ruined. In addition, project completion within scheduled time is a must to achieve.
However, programme completion is important particularly in Phase I but less so in Phase II. Hence, a single procurement route may be inappropriate for all phases. (Turner, 1997, p 165)
Janus' budget on Phase I is a total of £30 million and £12 million for Phase II. As discussed in 3.0, when time is the priority of a project, both cost and quality may 'suffer' in order to reach a balance in the procurement triangle.
The price certainty is uncertain in advance as overlapping of design and construction is required for this project. Usually, price will be based upon the estimated cost of known major works elements and the details will be negotiated later. (Morledge, Smith and Kashiwagi, 2006, pp 109 - 110) Adjustments are often to be made to the design of works later in the programme to keep the project within budget. However, the overall process of the project tends to be speeded up. (William, 2004) Some contingency are allowed for the unknowns of construction costs, within certain limits. (Turner, 1997, p 166)
A high level of cost management may be required as the programme of work needs strict supervision by an experienced person or by Janus itself.
Price competition is important for Phase II where possible. Phase I may be appropriate for negotiated price as programme is critical.
3.3.1 Phase I
The objective of Phase I of this project is to construct a new 5-storey grandstand including conference and exhibition centre. The quality level of this is to be high but not extravagant. As 20,000 spectators are expected to be accommodated in the grandstand, numerous specialists are to be involved in the design of the grandstand. The specialists includes, acoustic specialist and structural engineer where both need to find a balance for the design of the grandstand to decrease the vibration and structural error that subsequently lower the case where grandstand may possibly collapse. (Turner, 2010; TheAge, 2010) In addition, ventilation specialist has to be included as spectators might faint or undergo asphyxia when the grandstand is too crowded. A good ventilation system design is required.
In addition, the refurbishment of the two 100-year old existing stands requires experienced contractors. Its external façade has to match the proposed 5-storey grandstand and not too exaggerate. This will ease future maintenance for Janus if refurbishment is carry out in a simpler manner.
3.3.2 Phase II
Janus is concern about the quality of the 120-bed hotel and casino. As Janus owned an integrated, branded hotel at one of their racecourse, they would like the proposed hotel to share certain similarity in design and facilities for easier identification and recognition. Reflecting to Janus' objective, that is to provide a venue for corporate events and hospitality, the hotel facilities and casino shall provide convenience and ultimate relaxation by fully utilising the latest technologies. For example, customer management software, Siebel Systems Inc. (SEBL) which is used to respond more quickly to customer's needs. (Borrus, 2000; Beal, 2003)
In addition, the construction works shall keep the disturbance towards their normal business activities to a minimum.
Risks should be allocated on a basis of responsibility and control to those who are capable of managing it, and in a manner to optimise project performance. An important consideration when allocating risks is the willingness of the parties, the most cost-effective way for the allocation of risk comes from a mutual consent between the parties. (Morledge, Smith and Kashiwagi, 2006, p 168 - 169)
Janus realises that having the contractor to be fully responsible over the risk is inappropriate as overlapping of design and construction work is possible and therefore the contractor's responsibility can only be general and not specific in essential detail. (Turner, 1997, p 72) Janus also known that any changes occur within the construction period may allow variations but more expensive.
Janus prefers an earlier appointment of manager or contractor to allow the contribution of his managing and construction skills. An earlier involvement allows the parties to contribute from the beginning of the project and to reduce any unnecessary conflicts in information or design. An experienced manager is preferred as Time is still the priority of this project and Janus would like the work programme to be planned by an experienced manager.
However, the risk regarding the quality of the project still heavily relies on the contractor.
Inappropriate risk allocations is likely to result in budget overruns or delays, as contractor expects to make allowances in their tenders for the risks that they are responsible, resulting the likelihood of disputes and litigation at a later time. (Wellington, 2008)