The Key Procurement Issues For The Client Construction Essay

The purpose of this report is to analyse the key procurement issues for the Client Cinnamon Grand and to further evaluate the Clients objectives. Analysis of Client’s objectives will be evaluated to provide a better understanding on the project issues and main concerns, which includes an analysis of the various procurement routes such as the Traditional Route, the Design & Build Route and the Management Route to weigh the most suitable route to suit the Client’s objectives.

The report will allow the Client to make a better choice in selecting the best procurement route based on the recommendations discussed. This includes the advantages, disadvantages and risks involved for the 3 main procurement routes based on Client’s objectives. It will identify issues on the project requirements on quality, time and costs ensuring the Client’s objectives are met.

INTRODUCTION

The Client owns a large chain of hotels called “Cinnamon Grand”. The hotels provide guests with comfortable accommodation throughout the UK. Their main business includes adopting neglected historical landmarks and refurbishes the building to their former magnificent look. Although the Client is experienced at renovation of historical buildings, the Client does not have much experience in re-constructing damaged buildings or alteration works to the structures of the building.

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The project objective is to re-construct 3 Hotels, damaged by a period of bad weather and severe storms to an existing hotel quality or better. These Hotels are located in prime locations in town settings which means time is of the essence. For phase 1, time is the main priority due to the prime locations of the hotels. The opportunity cost will be incurred if there are any delays in phase 1. For phase 2, issues raised are the quality of the facilities and to ensure there is none or minimal disruption to the business.

As the Consultant to the Client, we will discuss the 3 main procurement routes which are the Traditional Route, the Design & Build Route and the Management Route and analyse the best route based on the Client’s objective.

CLIENT’S OBJECTIVES

Client is concern about the duration of the project and its quality. Internal facilities must be upgraded and reconstruction of building must preserve the historical outlook of the existing building. Although the Client has experience in renovation works, the current project development includes the demolition of structures and re-construction of hotels both external and internally. Projects done by Client previously is different in nature, one being renovation works, minor construction works and current is a complex re-construction and refurbishment of the damaged hotels.

The project consists of 2 (two) phases:-

Phase 1 is to re-construct the hotels outlook and structures and completing key areas for operation which are the Roofs, Guest Rooms, Restaurant and Swimming Pools. Expected date of possession of site by contractor is 1st Mar 2014 and expected construction completion date is 28th February 2015, a 1 year construction. Planned re-opening on 1st April 2015.

Phase 2 is to enhance the hotels with new facilities such as Dance Studios, Health & Fitness Centre, Conference and Meeting Rooms without any disruption to hotel operations.

The Client is very concern about the duration of the project due to the location, a prime town setting which means, if the hotels completes early, the losses incur from ‘no business days’ or opportunity cost will be lesser.

The second concern is the quality of the building. Outlook must be the same as before being damaged, structurally must be improved to increase building total life cycle.

While time and quality is of the main concern, the cost of the project must not exceed the budget of $120 million pounds for total of 3 hotels. The cost certainty must be known earliest possible.

PROCUREMENT ISSUES

The procurement issues are listed below:-

No in-house executive by the client, means the Client have to engage consultants to oversee the project.

Highly concerned about possible project delays and overrun of costs. Financial loan of $120 million pounds acquired for project. This means there is a tight budget, so cost certainty is required before the construction begins.

Works in phase 2 must be done quickly to minimise the discomfort to guests.

Quality of building should be high and sensitive to ensure the dignity of the building and services provided are not compromise.

Every procurement route have its main priorities, no procurement can accommodate to the three main factors which are Time, Cost and Quality.

PROCUREMENT ROUTES

Traditional route: – in this route the Client appoints a team of consultants to design and prepare tender documents. The process is in sequence as shown in Fig 1. The selection of a main contractor is done later through tendering.

Fig 1

Advantages are the competitive tendering, low preparation cost for tendering, procedures are known widely and variations are easily arranged.

Disadvantages are mainly the long timeline, no concurrent work at site, incomplete design results in less certainty, poor build-ability due to contractor not involved during design stage, risk by Client for the design.

Risks on cost are low due to lump sum contract and there is a fixed contract date with exception that contractor claims extensions. Since the design is designed by the consultants, there is low design and quality risk.

Although the Traditional route is sequential, there are 2 other variations. They are the traditional accelerated and traditional with re-measurement. For the Traditional accelerated, the contractor is appointed earlier based on partial design and brief through negotiation or competitive tendering.

Traditional routes focus on the cost and the quality of the project. In this case, for the current project, time is of the essence. Traditional route is not suitable for the project.

Design and Build route: – in this route a main contractor is appointed to design and construct the project. This route integrates design and construction which means, the construction works are concurrent even before final design is completed as shown in Fig 2. This quickens the timeline of the project.

Fig 2

Advantages of this route are the client liaises with a single point of communication and responsibility. The price certainty is known before the construction starts. The total project duration is shorter than in the traditional route as works are done concurrently with design.

Disadvantages are there is no design overview because it is designed by the contractor. The design brief by client must be adequate and the bid through tender is difficult to compare. Changes made by client can be expensive.

Risk on cost and time are low as it will be on a lump sum basis and works are done to a fix time. There is a high risk in design and quality as the contractor controls the design and some contractors do not have the capacity to carry out the proper design.

Although the design is mostly done by contractor, variants such as Develop & construct can be considered to improve design. In develop & construct route the employer appoints a consultant at the initial stage to develop a detailed design to have more control on the design. Assuming the Client have the detailed design drawing for the existing building, this option is the most suitable for the project.

Management route: – this route consists of 2 variant, The Management Contracting and The Construction Management route. In this route, the Client appoints the Management Contractor at an early stage where they help to design and contribute management expertise. The appointments of sub-contractors/specialist contractor are decided by both the Client and Management Contractor before work commencement in packages, as shown in Fig 3.

Fig 3

Advantages are the work packages of specialist contractors are competitive, due to the concurrent works, timeline will be quickened. Late changes can easily be accommodated and the relationship between the Client and the Management Contractor is much closer than in traditional.

Disadvantages are the cost prediction, the need for a good project team and a quality brief. The design must be managed properly to ensure work packages is kept on programme.

Risks are low for design and quality due to close link between client and contractor but medium risk for cost and time as the amount is known after the last package is let. This route is longer compared to design and build and require a good history between client and contractor.

RECOMMENDATIONS

Based on the Client’s objectives, the Design & Build variant (Develop & Construct) is the most suitable for the project. This procurement route does not need an in-house executive as a consultant will be in-charge of developing the design of the project. Assuming Client has the design of the existing 3 hotels, the design for the structure is acquired and project can commence as early as a contractor is appointed, shorter timeline. The cost of the project will be known before the work commences and the quality of building will not be compromise due to existing design by Client and additional inputs by the design team for the phase 2 of the project. The quality of phase 2 will be based on design worked by the Client specifications and the design team, ensuring good quality facilities.