Purpose Of Procurement Procurement Systems Construction Essay

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Cinnamon Grand is the largest hotelchains in the United Kingdom .It is seeking the service of a project consultant for refurbishment of existing destroyed three hotels and re-construct with a better quality and appearance of the architectural building.

I'm Lakshmanan Ponnusamy from Jurong consultant and my client has appointed me as a consultant for the Cinnamon grand hotel chain in the United Kingdom.

Purpose of procurement:

Procurement represents a very hugepart of total cost-effective activity andtherefore competent procurement is a core necessity for firm's Profitability and survival. Procurement design and management is a complex issue and contractual problems directly interact with competitive screening the management problems, moreover the procurement is most often repeated activity. To manage the internal interface with the needs of business functions and the capabilities of the external market to secure the supply and minimize risk and maximize added value and improve business productivity. The use of procurement will guide more frequently to success of clients, in terms of ultimate quality, performance, cost and time features.Procurement is the process of obtaining a new products or services and it contains contract strategy, contractor selection and contract documentation.

The first important decision to make in designing the procurement system of a complex organization concerns its degree of centralization.Optimizing our expenditure in critical areas of installation, developing a good network, Identified value through project management and saving, ensuring critical business and compliance standards are reflect in the process.

The purpose of the agreement between client and consultant is responsible of the building involves testing and commissioning, expert service and creating a specific solution. Building procurement is often the subject of joint funding, with different parties having changinggrades of attention in the outcome of the building process.

Procurement systems:

The RICS surveys of standard forms of contract in use provide a comprehensive guide to the incidence of use the alternative procurement system. The survey use data provided by quantity surveying practices. The RICS has recognized that quantity surveyors, offices are not necessarily involved in all non-traditional forms of contract, from which is follows that the non-traditional may be more widely used.

Client Profile:

Primary business strategy of the client is hotel business and development

Secondary business stragery is project management

client is experienced at renovation of building

Absence of full time in-house executive for the project incharge

Client requirement:

Estimated Budget for the reconstruction is $ 120 million and the cost should not exceed the budget.

First phase target to reconstruct the hotels areas are Roofs, Guest rooms, Restaurant and Swimming pools.

Second phase target to reconstruct the hotels areas are Dance studios, health and fitness centre, conference and meeting rooms. During the phase two reconstruction, there should not be any inconveniences to the hotel customers.

Conference and meeting room required high technology multimedia facilities with air condition.

Lagging of project expertise, so experience executive person to look after the contractual of their project works and therefore to avoid risk/allocation.

Better quality easy maintenance of the building is very important.

Complexity must be considered, when deciding the procurement route.

Preserve the heritage of the building to maintain dignity.

Well organized construction planning, follow safety,environmental and health standards as per the local law requirements.

Selection of material and quality of workmanship should be value for money.

Timelines

This projectis to be carried out in two phases and the first phase is targeted to complete in 12 months' time .The project starts on 1st March 2014 and is to be complete by 28th February 2015.Hotel target operational date is 1st April 2015.

Procurement Routes:

There are different methods of procurement routes:

Traditional Procurement Routes

Non-traditional procurement routes are :

Design&Built

Construction management

Management contracting

Traditional Procurement Routes:

The traditional approach to procuring projects involves discrete design development, tender, contract award and delivery phases. Client appoints a group of consultant to prepare the contract document. In this method the contractor builds to define scope of works for a fixed price lump sum. The retains responsibility for the design and the project team. The contractor will be appointed normally following a tender process or negotiation and will sign up to a contract for the works. There are numbers of standard forms of building contract available for this purpose. The design is completed before the tender process commence and it offered the client a great deal of control over the quality, specification and cost.

Under the procurement arrangement the work is designed, then tendered, then constructed, thus the design team has an established relationship with the clients and dominates the design development phase.

The client has all the responsibility for the design or omission and the contractor has no responsibility. Eventhough some of the risk is shared by the contractor and majority of the risk bare by client.

Risk:Cost risk is low because it is based on lump sumcontract, time risk is medium because contract date is fixed. quality and design risk is low because most the work is insured.

Advantage:Competitive justice, procedures familiar, comparatively low tender preparation cost and satisfactory public accountability.

Disadvantage:Start work on site will be delayed, contractor will not involved in the planning and design, possible for adversarial interaction and design risk bare by client.

This system is that removes the contractor from the design development phase and thus much management and contractibility information is lost.

Reason for Rejection:

This procurement route is not suitable for selection because no time certainty and possibility of design risk.

Design & Built:

Procurement approach provides for an organization to be contracted by a clientto manage a design and construction process with a single point of contact. There may have been preliminary sketch plans developed to indicate a generalized design solution or the design brief may be left fairly open for the design and built contractor to offer proposals. The client appoint a building contractor, the contractor is responsible for type of design and construction. The contactor can be chosen through a tender process or negotiation. The client can appoint a consultant to oversee the project works. So the maximum risk will be transferred to the contractor in the project earlier stage. Cost certainty is achieved at an early stage, so therefore offers a client of high level of certainty.The design team is novated to the contractor and no longer with the control of the client. Most clients choose to retain the services of the QS, So that some control can be maintained over costs.

The contractor provides a fixed price based on the clients specification.If the client requires any changes during the works and the client should be responsible for the cost.

If the design is novated, the client has the advantage that he is able, from the drawing and specification prepared by the consultant to satisfy himself that his needs and intentions are adequately for the tendering purposes. The client's agent may supervise the works and ensure that the contractors are complied with and that the work is not skimped.

Risk:Cost risk is low because it is lump sum basis, time risk is low because the design and built contractor will fix the time and commit themselves, quality and design risk is high.

Advantage:Shorter duration,cost effective, contract sum as determine in early stage, specific purpose clearly stated and less duration compare to traditional routes.

Disadvantage:Client have to engage contractor, before the design completion and difficult for clients to prepare brief adequate.

Management Contracting:

Management type contracts include management contracting and construction management.Managing contracting is an effective method for client retaining control of the design whilst drawing on the experience of a construction specialist as a part of the professional team. The management contractor is likely to be appointed at same time as the designer. The clients separately appoint the designer and contractor and pay the contractor to manage the construction works. This is suitable for fast track project and complex building, however it is less suitable for inexperience clients, cost certainty for before starting construction, clients waiting to pass the risk to the contractor. The use of the procurement methodology provides our clients with the most expedient start on the site and the most efficient design for the works.

Risk:Cost and time of the risk is medium, quality and design risk is low.

Advantage:, possibilities of reduce project duration, last minute changes can be easily accommodate without problems, work packages better than the other procurement route.

Disadvantage:Many changes along the way,anything can be happen in cost evaluation and good quality must be depend on project team.

Reason for Rejection:

This procurement route is not suitable for selection because no cost and time certainty.

Construction Management:

Construction management expertise to be made rapidly available in the design team.Reduced confrontation between the design teams and the team responsible for the supervising construction, early involvement of construction management expertise, overlap of design and construction, increased competition work on large projects due to work packaging and splitting the construction activated into more digestible chunks, More even development of documentation, fewer contract variations, no need for nominated trade contractors and public accountability.

Risk:Cost and time of the risk is medium, quality and design risk is low.

Advantage:Early involvement of construction management expertise, possibilities of reduce project duration,work packages and last minute changes are similar to the management contracting, overlap of design and construction, Clarity of roles, risks and relationship for all participants.

Disadvantage:No cost evaluation can be happen, good quality must be depend on project brief team needs efficient manage of time and in order.

Reason for Rejection:

This procurement route is not suitable for selection because no cost and time certainty

Recommendation:

After assessing four different types of procurement route and I would like to propose for this project is Design and Built procurement route.

The following reason for selection: Client to manage the Design and built processes with a single point of contact, contractor is responsible for both design and built, The client has more influence and control to shape the desired outcome in design and built, the client pays for the project and gets the key to gain access to the building, Low cost and time risk, contractors experience in the design and built is a great advantage to the inexperienced client,

Task2 Contracts

Identify the key issues

Alexander contractors Preferred tender withdrawal (Award to the next contractor)

Pile cap concrete volume(Actual bill of quantity concrete) nit reasonable

Clerk of work directionis to proceed as per the drawing design (Assume that the contractor written to contract administrator) change of construction method (Pile cap) time and cost increase.

Existing building floor collapse while curing of the concrete. Contract administrator issue new instruction for new slab and wall works(variation cost new unit rate (Extension of time). Solution: May use old unit rates and claim use loss and expenses also.

Approximate quantity not accurate.

Late payment by employer several occasions.

Definition of Contract: The condition and appendix, drawings, specifications, schedule of rates, bills of quantities, the tender, letter of acceptance, agreement and such documents as the parties may expressly identify in writing and agree as forming part of the contract.

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 required to employ a more expensive tender to carry out the construction project.

General rules of contract:

Assume that the Alexander contractor has no liability for the employer additional cost incurreduntil the offer isaccepted. If the tender documentstate that, may withdraw tender anytime before acceptance by the contractor. It would appear in contract document,Alexander contractor is not liable to the employer.

Liability is depends on the terms and conditions of tendering contract.

Practical solution:

The basic contractual position is that since a contractor's tender is merely an offer it may be validity revoked at any time before it has accepted.If the employer likes to have a binding contractual obligation he can request the contractors to supply a 'bid bond' that is promise by deed not to withdraw the bid, backed by a financial guarantee.

b)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 informed the Contract administrator and Clerk of work about the increase in quantity of concrete refers to the pile caps. Clerk of work a direction to go-ahead with construction works according to the design drawing and ignore BOQ for the concrete.

This direction has two implications on the contractor loss and expense.

Increase in volume of concrete will require more materials and man power resources and change in method of curing.

The same also refers to increases curing time ends. This could not be accomplished as planned by the contractor in the original program, this implication result in additional expense for the contractor and loss of time.

As per JCT standard building contract clause 3.4: The clerk of work is an inspector appointed by the employer to oversee the construction project works behalf of the employer. Clerk of work is authorized to give only direction and he cannot give instruction to the contractor.

Contract administrator is empowered to issue instructions and such direction shall need to be confirmed in writing within two working days of the direction being given, any work so given and confirmed shall, as from the date of issue of the confirmation, shall be deemed the date instruction is issued by the contract administrator.

Liability: Once the contract administrator is given instruction and proceed confirmed in writing, the variation cost is claimable for the contractor.

Variations, except when loss and expense relates to a confirmed acceptance of a schedule 2 quotation.

Instructions of the contract administrator, issued in accordance with clause 3.15, postponement of any work to be carried out under this contract. The generally accepted view is that this provision does not empower the contract administrator to postpone all the work, so as to enable the employer not to give possession of the site at the agreed time. It is concerned rather with instruction which alter the order in which the works are to be carried out. Such a procedure may of course the contractor loss through the need to re-programme.

c)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 revision 2 2009'.

The possible claims with the respect to the given scenario: Ben Contractor can submit claim under the disruption claim, Disruption is the material change of the performance conditions that were expected resulting in an increased difficulty in performance, The impact of disruption on performance is often a loss of productivity and increased costs, Root causes for disruption include the changes in plans and specifications, and defective drawing etc

Progress Payment should be paid within time allowed by the contract. Failure to do so:

• May attract penalty interest and

• Is a breach of the contract by the employer

Before any payment is made, ensure that the builder completes the stage and that they are entitled to the payment.

The Ben Contractor will have to contribution their part to the Progress Claim:

They have to provide information required for a progress claim:

There is much basic information required before cost information is required.

Building company's name

Project name and address

Date: the date of preparation and submission should be shown to prove compliance with the contract conditions. Should there be any delay in payment, the date of submission can be seen for the possible calculation of interest on late payments.

Progress claim number

Ben Contractor to adopt Methods of assessing the value of work completed

To determine a percentage of large areas of the works since the works commences is very quick

and should only be carried out by those with long experience of the trades involved. It is best used as a check of claims carried out by others (Example a clerk of works checking through a builder's progress claim.

Measure the work completed since the last progress claim

Measure the total work completed since the commencement of the works

Determine a percentage of each work item completed since the commencement of the works

Determine a percentage of large areas of the works since the works commenced

The Ben Contractor should ensure that the progress claim should contain three components:

A covering letter, The progress claim summary and a complete breakdown showing detail of how the figures on the summary were achieved.

The employer will want as much information as possible before a payment is approved. By providing all relevant information you will be answering all the employer's questions , Any questions related to the progress claim details are likely to delay the payment to the builder.

The contractor must justify and present evidence that justifies that the cost is related to discrepancy between drawings and BOQ , changes in structural spec and progress of work adversely affected

The contractor possible claim:

The contractor can only claim loss and expense based on site conditions if there is a particular provision of the contract that provides this.

The Project was awarded to the contractor estimated at 50million, Out of which 15 million is to carry extra loads upon completion of the project.

There are certain procedural aspects in relation to claims, The procedure for making the claim is set out in JCT SBC5. The application must be made to the contract Administrator who decides if the claim is founded and ascertains the amount incurred. The nature of loss or expense can cover out of pocket expenses for loss or loss of profit. There may be immediate cost and head office overheads and profits.

The JCT SBC 5 requires the contractor to prove that direct loss and expense has been incurred. The loss may be arising from one of the following:

• Variations

• Discrepancy or diversions between contract drawings

• Diversions where the quantity is different to an approximate quantity.

• Suspension of works due to default in payment.

The detail possible claim from the contractor:

Direct Costs: Labour, materials supplies, equipment and professional consultants being contracted by contractor

Head office Overhead costs (or Indirect Cost ) : Business related expenses that are necessary to perform the instruction issued by the clerk of work, Overhead costs are usually a percentage of labour costs and can include office rent, insurances, office supply, communication expenses, mileage and drawing printing or reproduction.

Fee ( or Profit) The profit is usually a fix directly associated with the work.

Preliminaries and site overheads: Cost of an overhead nature actually incurred on the site but in either case only in so far they would not otherwise have been incurred and which should not have been provided for the contractor.

d) 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 shall consist of two parts:

The verification of the existence and extent of the relevant matter

The impact and effect of the relevant matters on the progress of work

The cost effect of such impact on progress

Valuation

Examination of costs and expenses claimed

Evaluate and recommend sums payable

Validation of the points of claim

Validation extend of relevant matters

Impact and effect of relevant matters on work progress

Cost effect of Impact on work progress

 Direct cost of materials, labour and equipment and things of whatsoever nature required for the execution and work completion.

The contractor has incurred direct expense, which is not otherwise reimbursed under the contract.

Labour and equipment are indirect and may not be claim.

Due to increase of pile cap size, the work could not be accomplished as planned by the contractor in the original programme.

Increased cost for the employer, failure to spend the additional cost will stop work plan further progress. If proceed further as per BOQ, require could not be met.

 Replace of damage floor area, repair works of walls including additional work for the structural work stability.

 Direct work scope change in the contract, issued order claim acceptable. However the new rate for the variation is not acceptable.

Additional work may not be completed according to the construction plan. Failure to provide structural stability may result in further damage, which can badly badly affect the progress.

This claims result increase construction cost also lengthen the completion period of the project.

Claim for the loss and expense for work suspension by the contractor, due to failure of pay by the employer.

Claim in accordance with class 4.14 the claim is acceptable.

Suspension of work result in lengthened the project period.

Additional cost and project progress delay.

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