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Understand that due to the terrible weather and severe storm, a significant damage was happened to Cinnamon Grand hotels. As a result, the hotel management board requested for advice on selecting an appropriate procurement route after deciding to reconstruct the destroyed buildings.
There are a few procurement routes could be selected amongst traditional procurement route and non-traditional procurement routes which includes Design and Build, Management Contracting and Construction Management. In general, Traditional method is more favored by public project because it satisfies public accountability, Design and Build method is more for inexperienced client who desire cost certainty and fast track projects, Management Contracting method is usually adopted by experienced client who does not take cost certainty as their priority, similar to Construction Management. Selecting an appropriate procurement route will directly benefit the client in many perspectives, such as time saving, cost saving, risk avoidance, quality control, price competition and so on.
Provided information states that you do not have an in-house executive to advise the reconstruction; you will obtain a financial assistance of estimated 120 million; you intend to re-open the business latest by 28th February 2015. Thurs, the most important issues which you are highly concerned are risk allocation, price certainty and project duration. Two points each will be allocated to the most suitable procurement route. Besides, you are also concerned about site control, quality control, complexity and heritage. One point will be allocated to the most suitable procurement route. Table 1 shows the matrix for making decision on how to select a suitable procurement route.
Table 1: Matrix of selecting the most suitable procurement route
Design and Build
Risk Allocation áµƒ
Price Certainty áµ‡
Project Duration á¶œ
Site Control áµˆ
Quality Control áµ‰
2. Factors Affecting the Selection of Procurement Route
2.1 Risk Allocation
Risks can be classified as design risks and construction risks. It is crucial for you to know much risk it can bear and how to pass the risks to the contractor; especially in this case, you do not have a team of specialists who are capable of advising on the design nor the reconstruction. Amongst all the procurement routes, Design and Build method will allow you to pass almost all the design and construction risks to the contractor, at a price. Traditional procurement method distributes risks to both insured consultant and contractor equally, while Management Contracting and Construction Management have a disadvantage of retaining most of the risks to employer.
Therefore, Design and Build and Traditional methods are most suitable for Cinnamon Grand to minimise risks áµƒ.
2.2 Price Certainty
Price certainty is always a prior concern in private projects, because preventing overrunning budget plays a big part for private client. It has been highlighted in the key issues by Cinnamon Grand saying price certainty is most important. Traditional method provides a high level of price certainty because it relied on competitive tender, usually the Contactor with the lowest tender price will be accepted, although sometimes negotiation happens. Other advantages of Traditional method are competitive fairness, which means all tenderers' prices will be based on same design drawings issued by Consultant, and a relatively low tender preparation cost comparing to the rest methods. Design and Build method also ensures a firm cost as most contracts will be let on a lump sum basis, it is also unlikely to have design changes, because contractor's responsibilities of both design and construction will increase the buildability and minimise the variation. Management Contracting and Construction Management are at disadvantage as the actual project cost will only be know when all the work packages have been let.
In order to make the price competitive, the best way of obtaining price certainty is through Traditional method or Design and Build method áµ‡.
2.3 Project Duration
Time is essence for those who want quick return on the investment, especially for private client. There are two ways to avoid project delays, one is to start project as early as possible, the other is to end project as early as possible. As I know that the date of commencement is on 1st March 2014 and the date of completion is on 28th February 2015, which means the time for construction is really crucial. Fortunately, the decision has been made in August 2012, giving us one and a half year head start on doing whatever necessary preparation works, for example, to carry out brief, design and competition.
The late worksite handover date seems to be suitable to use Traditional method, however, under certain circumstances of any variation order incurred, Contractor reserve the right to claim extension of time, this will affect the crucial construction period and cause project delays. Therefore, even though Traditional method allows design works can be start early, it still has a medium risk of project delays because the design responsibility does not lie with Contractor.
Same applies to Management Contracting and Construction Management as well. Although Management Contracting and Construction Management allow design and construction works to be carried out concurrently, Management Contracting takes more time on selecting a management input and then subcontractors, and Construction Management makes you have to deal with many subcontractors and no single subcontractor is solely responsible for the date of completion.
So since there is a long preparation period from August 2012 to March 2014, I suggest that Competitive Design and Build (two-stage tendering) method will be best suitable to meet the time requirement á¶œ, not only because it avoids delay to the commencement date, but also ensures the completion date with buildability and single point of contract and responsibility.
2.4 Site Control
In order to provide a good service while the construction is going on, work site must be well managed in every perspective including safety, planning, noise and etc. The advantage of Management Contracting and Construction Management methods is having a shorter communication line between you and subcontractors, so that to ensure a faster response to decisions. On the other hand, Traditional and Design and Build method do not have control of subcontractors, because there is no contractual relationship between you and subcontractors. Thus, Management Contracting and Construction Management methods will be best suitable to control work site áµˆ. However, it is still possible for other procurement methods to keep the work site well managed by improving the contract requirements and specifications.
2.5 Quality Control
Traditional method has a low quality risk because most of the design works are done by insured Consultants who working directly for you. Management Contracting and Construction Management methods also have a low quality risk because a close link will be established between you, Consultants and Contractors, to allow buildibility. Even though when under certain circumstances, design quality may be compromised duo to pressure from employer. Design and Build method has a relatively high quality risk because the whole design and build process is solely undertaken by Contractor, which may slightly affects the quality level.
All above mentioned procumbent methods except Design and Build method are suitable to enhance quality control and heritage áµ‰. Even so, the possible affected quality using Design and Build method also depends on how experienced the employer is and how accurate is the requirements stated in the contracts document. So I think it will not be a difficult task for such an experienced client in renovation of buildings like Cinnamon Grand.
Project's complexity can be identified by the types of physical services involved, the number of sub-contractors, resources in term of labour, plant and materials, the level of technology and the uniqueness of project activities (Songer and Molenaar, 1997). Traditional method and Design and Build method are more suitable for simple or medium-scaled buildings like this particular project, while Management Contracting and Construction Management methods cater for larger and more complex buildings.
Considering all types of complexities mentioned, the core concept still revolves around time and cost as the primary purpose is to re-open the hotel business to make money. And the construction period for phase two is only one month time. So I suggest that in order to encourage time saving, Design and Build method should be selected á¶ rather than Traditional methods, because all construction works will be conducted by Contractor alone while Traditional method has different specialists doing high technology multimedia facilities and air conditioning system.
There is no single procumbent method suitable for all kinds of projects, advantages and disadvantages can only be determined according to clients' concerns and priorities. Therefore, by referring to the result formulated in Table 1, I suggest that the most suitable procurement route should be Competitive Design and Build.