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Nowadays, Construction projects in both the private and public sector have become diversified, complicated and larger. In order to respond to these diverse and complex construction environments, many developed countries have adapted various procurement systems. It is widely acknowledged that selecting appropriate procurement method or system can make a substantial contribution to the success of the construction project.
Especially, according to the National Procurement Strategy for Local Government report (NPSLG, 2008) constructions spend is the largest single area of the public sector's external expenditure such as procurement of the construction, repair and maintenance of buildings and roads which is likely to bring huge benefits.
Thus it is essential that they have to make an effort for the proper use of this significant amount of expenditure. There is no doubt that that better procurement can significantly improve the quality of services the public sector deliver to the people. Smarter procurement is a fundamental driver for securing better outcomes and even greater efficiency. This is why the public sector have been put a continuous effort to secure efficient and effective procurement to give better service to client. The development of a major strategic approach to procurement and more sustainable procurement is another key role to make more values in construction.
In this essay, I will discuss more about procurement methods then explore what is the project managers' role and responsibilities in accordance with selecting a suitable procurement method in the public sector for a construction project.
The NPSLG(2003) explain that Procurement is 'the process of acquiring goods, works and services, covering both acquisitions from third parties and from in house providers. The process spans the whole cycle from identification of need through to the end of the useful life of an asset. It involves option appraisal and the critical "make or buy" decision which may result in the provision of services in house in appropriate circumstances.'
'Sustainable Procurement is a process whereby organisations meet their needs for goods, services, works and utilities in a way that achieves value for money on a whole life basis in terms of generating benefits not only to the organisation, but also to society and the economy, while minimising damage to the environment.' (Procuring the Future Sustainable Procurement Task Force, June 2006).
As defined above, procurement in the public sector is essential for the government to achieve value for money from taxation. Moreover, due to the fact that the largest public expenditure is generating in construction section, more conscious and effective ways to deal with procurement is strongly needed. It determines the overall framework and structure of duties and authorities for participants within the construction process.
Procurement is also a key factor contributing to overall client satisfaction and project success. The selection of the most appropriate procurement method consequently is important for both clients and project participants to make good services and outcome, and is becoming a significant and contemporary issue within the building industry.
I will now briefly look at the characteristics of several kinds of Procurement methods which are generally and widely used in the UK in construction field. Each method has different aspects of risk transfer and it is not easy to say that which method can be classed as the best overall
Procurement Methods(Lecture summaries)
In this method, the system is sequential, or end-on. It means the previous stage has to be completed before the next stage can start. Now traditional procurement has three different areas of responsibility, management and administration, design and construction in the hand of Project Manager, architect and Contractor respectively. The clients are still responsible for the design and the performance of the consultants. The major disadvantage for clients of this system is that the many parties separately involved in the contract are very adversarial. It could consequently result in project over-runs in time and budget.
SEQUENCE OF WORKING
Risk to the client
Design and Build Procurement
This is the most popular method of procurement in the UK. As the contractor is responsible for both design and construction, so this method provides the lowest overall risk to the client and it allows for the integration of the design and construction activities so buildability can be achieved. Design detail includes the choice of construction materials, methods and systems, thus this could reduce overall project time, As a result of a lump sum tender, it also guarantee the cost certainty which is a significant factor in reducing the client risk considerable overlaps in the detailed design and construction stages. In this method, as contractor bid a lump sum fixed price that it is not easy for the client to apply any changes once the contract has been entered into.
SEQUENCE OF WORKING
RISK TO THE CLIENT
This was the UKs' version of Construction Management (CM). The work/trade package contractors were in direct contract with the Management Contractor, because clients did not want to be in contract directly with the works trade package contractors as required by CM method.
The management contractor is appointed to manage overall construction process in return for a management fee. He or She has direct contractual links to the works/trade contractors and therefore has overall responsibility for management, the co-ordination of the works/trade contractors, the construction time and for the quality and quality control of the construction project. They are also responsible for obtaining competitive tenders from the contractors and programming and planning the works and for advising the client and design team on buildability aspects. As this method allows for an overlap in the design and construction activities, so the overall time for the project can be reduced by parallel working.
SEQUENCE OF WORKING
RISK TO THE CLIENT
In this method, the client retains the time and cost risk. As a result, construction management is widely considered to be the least adversarial of all the forms of procurement as it is not responsible for contract. Therefore construction management is really a procurement system for the experienced client. Obvious advantage of this method is the opportunity to overlap the design and construction activities which enables the client to make later design decisions, or to modify, or develop designs or requirements without the overall project effects. This considerable overlap allows for parallel working.
'Client should always device their procurement strategy on the basis of their project priorities, management capability and the extent of risk that they are prepared to accept.' (Davis Langdon, Simon Rawlinson: 2006)
Design and Manage Procurement
This combines the principles and attributes of the management procurement systems with the single point responsibility of Design and Build procurement.
It has two forms: Contractor Design and Manage, Consultant Design and Manage.
The client is in direct contract with the Consultant Construction Design Manager, or with Contractor Design and manager who takes the responsibility for the design and the management of the construction. It means that they (Consultant or Contractors) take all the contractual risks.
The Chartered Institute of Building(CIOB)(2010) defined partnering as, 'a management approach used by two or more organisations to achieve specific business objectives by maximising the effectiveness of each participant's resources.' , It is a method of establish successful contractual relationship rather than having the adversarial relationships of many construction projects. Therefore, the tendering in this procurement method cost more than other competitive tendering and negotiation is also more needed which could cause the late commence time of the project comparing to other procurement routes.
On the other hand, the Bennett and Jayes report(1995) noted that adapting a partnering contractual relationship could bring profits of saving costs, times, improved quality, better design and configuration, safer construction methods.
Framework Agreement can be explained as services which can be achieved on the basis of previously agreed contract terms and conditions with agreed prices and quality. However, sufficiency, quality and reliability of framework agreement workload programmes are responsible for the client to make certain. Framework Agreements can be reached with single suppliers or with a restricted number of suppliers while partnering is necessarily a single project relationship.
Partner co-operation with trust from communication, risk taking, equity preservation and inter-partner adaption is crucial for a successful framework. The most advantage of this route is that access to knowledge, skills and resources partners already have without further investment of time and cost is possible from working together.
PFI (Private Finance Initiative)
Government adapt private funding for public sector projects in order to make up for the insufficient public capital investment. Including huge project such as roads, canal, waterways and railways, a wide range of public works and infrastructure projects have been being undertaken in the UK with the PFI.
The role and responsibility of the Project Manager in accordance with selecting procurement method
I have just known that Design and Build procurement system is the most prevalent and popular in the UK, which was primarily used in the housebuilding private sector. This method is also widely used in the public works of my country (South Korea) which is generally known as ' turn-key' procurement with PFI methods. As a lump sum tender can reduce overall project time, cost and the risk, Korean government also have a preference of choosing Design and Build procurement Method in the public construction sector.
As we have discussed above, the most procurement of the public sector construction projects has been based on the lowest price tender, therefore, the most important thing has to be considered is that which procurement method in certain case of construction is more effective and efficiency in terms of time, cost and quality/performance. This sometime make the final cost of the project outstandingly exceed the contract price.
Basically, the principal of the relations between the client and contractor based on construction project is simple but obvious. The client wants the lowest price with good quality, while the contractor wants to have more profits. In this reasons, the Project management in construction area have to focus on communication the project objectives throughout the life of the project.
In this stage, I want to discuss about Project Management of construction project.
The purpose of project management is to predict as many of the dangers and problems as possible and to plan, organize and control activities to that the project is completed successfully in spite of all the difficulties and risks. This process starts before any resources are committed, and have to continue until all work is finished.
The end result of the project must be suitable for the objective for which it was intended. The specification must be satisfied. The project also must be completed without exceeding the budget. It is obvious that failure to complete work within limited costs must reduce profits and any expected return on the capital invested, with risk of causing an actual financial loss.
In order to manage construction project well, there is an important role and responsibility as a project manager to contemplate which procurement system is the most appropriate.
As also discussed above, the most construction projects, good selection of the procurement system is one of the most crucial factors to be considered which could cause either success or fail of the project.
Generally speaking, the Project Manager is in direct contracts with the package contractors, one of the important roles as a Project Manager is that manage all project development process to be finished on time and to budget. Because, according to The Construction Round Table(1995) 'time, cost, quality and performance' are the vital factors to meet client requirements.
In construction fields, the Project Manager is required have a variety range of knowledge and skill for successful delivery which is involved in procurement methods. In order to choose suitable procurement methods for the project development, Understanding the characteristic of the project is the need above all. That is also the responsibility of the project manager that identifies the exact business needs.
Throughout the completion of Promoting project investment analyses, risk assessments, the standard criteria of procurement method selection will be able to be made. And the factors of those criteria which should be considered in order to meet the needs of client's objectives are 'timing, price certainty, quality/performance level, complexity, competition, controllable variation, risk avoidance' which was mentioned in the Construction Round Table (1995).
With these key factors which could directly affect the way of procurement, the Project manager gives a clearly defined advice to clients to choose the most appropriate procurement system which can maximise profit and minimise risk. It is true that effective procurement techniques need to be applied in particular areas of high value and risk.
It is widely recognised that Procurement methods affect the success of construction projects significantly, and selecting proper procurement path is critical factor as a key decision making in order to undertake construction business successfully and get the best result.
Project manager who is appointed by the client have to suggest more well- suited criteria to the client based on project types to choose appropriate procurement method for their specific construction circumstance. That criterion has to be considered outstandingly in terms of time, money and quality with less risk. Despite the fact that the client always ask the better quality and performance with the least budget, but the procurement options provide a different emphasis on the obvious criteria as well as different levels of risk for the client.