Operating as a main contractor in the UK construction market the overriding company aim is profit. Whilst this may seem a little abrupt one must remember that the one reason we undertake projects is so the business can deliver a profit to its shareholders and if the business doesn't achieve this it runs the risk of being disbanded. This primary business aim is the driver behind the procurement strategies we implement as a business.
The OGC (2007) defines a procurement strategy as the best way of achieving the objectives of the project, taking account of risks and constraints. A successful procurement strategy will deliver an optimum balance of risk and control. For a main contractor our procurement strategy ensures a consistent attitude to procurement across various projects. In our business the strategy is delivered through working to common best practice guidance which aligns attitudes across regions and sites and safeguards against unacceptable exposure to risks.
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The manner in which we deal with risk is through the selection of the most appropriate procurement method for our supply chain. This process is directly influenced by the main contract which we have entered into with the client as the preferred route is to directly 'step-down' the main contract terms and conditions to our supply chain, thus passing any associated risks to the specialist subcontractors who are best placed to manage them.
Examples of this includes where a main contract is entered into on a traditional basis where the costs are on the basis of a remeasureable bill of quantities. On such projects we will complete our procurement using this same method, using the same bill of quantities which form part of the main contract. This ensures that we are not exposed to any risks on the quantities included within the bills and all subcontract packages will also be subject to remeasurement. This ensures that the risk of the quantities remains with the client and we are not exposed to lump sum orders with our supply chain should the bills of quantities prove to be over or under measured.
The same principles also apply to any contractor designed portions within both traditional and design and build contracts. As we are a main contractor we don't undertake the works ourselves but employ subcontractors to complete the works under our supervision and control, this means that it would not be sensible for us to attempt to complete the design of specific elements ourselves and we will procure the works to include the design in the subcontract package. This process is typical for envelope and building services works due to the specialist design skills required.
Being part of PEP does not guarantee any contractor of securing work on our projects and it is not a formal partnering arrangement; PEP only guarantees category one subcontractors the opportunity to tender for our projects and if their quotation is of interest but comparable to a non-category one subcontractor we will usually opt to appoint the category one subcontractor. This arrangement ensures that we can continue to deliver competitive tenders to our clients but with the security of quality subcontractors.
The PEP system requires a significant amount of administration to ensure it remains accurate with current subcontractor performance. The system includes a performance scoring section where all projects are to score each subcontractor on their sites on a quarterly basis however the system is far too simplistic and does not allow for adequate comments to be made on performance. Also the process each site undertakes for scoring each subcontractor takes too long, it the process was quicker sites would be more inclined to score accurately and scores would be updated more often.
Becoming a category one subcontractor takes a long period of time and there is a lack of category one subcontractors for selected trades such as painting and flooring. This lack of preferred subcontractors for certain trades means that achieving the business target of 80% of all orders being placed with category one subcontractors will be continually difficult.
Traditional contracts with bills of quantities will usually be subject to remeasurement on completion, the accuracy of the bill of quantities remains a client owed risk. It is therefore important that we procure our subcontractors on this same basis, ensuring that our subcontracts are aligned with the main contract. Exceptions to this rule are when packages are a contractor designed portion in the main contract, these works are usually piling, curtain walling and mechanical and electrical works. For these packages we will procure the works as a lump-sum, non-remeasureable package based on the information available at tender stage. This ensures we are procuring the works as a direct step down from the main contract and limits our exposure to risk.
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For single stage design and build contracts the tender process we undertake with the client is similar to that for traditional contracts, the main difference being that rather than a client supplied bill of quantities we will prepare our own. As with traditional contracts we employ a slightly different tactic with specialist contractor designed portions. Whilst we would be responsible for the whole design under design and build contracts there are certain specialist designs which are completed outside of the main design team by specialist subcontractors or it may be that the design will only be completed to a specified level by the design team for completion and coordination by the subcontractor.
A typical example of this is the mechanical, electrical and plumbing design may be completed to RIBA stage E by the services designer; it will then be the subcontractor's responsibility to complete and coordinate the design beyond this. When we are procuring these types of packages we will seek to appoint a subcontractor on the same basis as our appointment, this to avoid any gaps in the design and limits our exposure to risk. If we were to appoint a mechanical and electrical contractor on a remeasureable contract on the basis that they would be issued with a fully coordinated deign we would be left with a gap in responsibilities between the designers who would only be working to stage E and our subcontractor who is expecting fully coordinated information, this would mean we would be responsible for the missing level of information and any costs due design development between the tender and construction information.
Once we have secured a design and build contract we alter our procurement strategy for the placement of orders with subcontractors. As with traditional projects the first action is to prepare a work package allocation and proposed subcontractor list for the preferred construction methodology. Subcontractors from a variety of sources are invited to tender but the tenders will be requested on a lump-sum, non-remeasureable basis on the most current information available.
One of the first items we will complete with the design team once appointed to a design and build contract is to agree an information release schedule for the construction issue designs. This is the opposite of traditional contracts where we will procure subcontractors on the same information we were issued at tender stage and where we seek to appoint subcontractors 'back-to-back' with the main contract. On design and build contracts we use the most current information, preferably RIBA stage F, to ensure that any design development issues are incorporated into the lump-sum quotations and to minimise any opportunity for variations to arise.