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Traditional procurement is the most commonly used in construction firm. This type of contract is best confined to small jobs. Usually the client is through a competitive tendering process to appoint the contractor. This procurement is suitable for the time is predictability; cost is certainty, and complex projects.
Traditional organization structure
Design and Build
The design and build procurement is traditionally used for more straightforward building. This procurement gives the client a single point of contract. And, the eventual contractor takes on single-point responsibility to develop the entire design and deliver the works according to the client's requirement. Besides, it is suitable for the faster track project and cost is certainty.
In additional, turnkey procurement method is an advancement of the design and build. It has been used to large infrastructure projects financed by government. This method can be categorized to Build-own-operate-transfer (BOOT) and other similar arrangements such as design-build-finance-operate (DBFO), etc. The developer of the project is responsible for devising the scheme, raising the finance, operating the facility and finally transferring ownerships. (Frank Harris and Ronald McCaffer, 2001)
Design and Build Contractual
Contracts concentrate primarily on the management expertise of the contractor and are particularly suitable for fairly large projects with complex requirement. The client appoints the designers and a separate management contractor. The contractor is not expected to carry out any construction work and expected to manage both the construction process and the package contractors.
There are two common variations of the management system approach, which are management contracting and construction management. In management contracting, the works package contractors are to provide planning, management, and co-ordination of construction who then sub-contracts the work in the normal manner. Thus, construction management is similar concept to the management contracting. Contractors are contracted directly to client and the construction manager manages the process for the client on a simple consultancy basis.
However, the management contractor obtains a fee for performing similar duties to the construction manager, but they are carries more risk.
Management Contracting Contractual
-Not the faster project, it can be separate into two stages which are negotiated tendering and construction stage.
- At the tender stage is desirable to provide all the information and specification to contractor.
-Basically straightforward and clear in division of design and construction. However, complications can arise if client requires that certain sub-contractors are used.
-Certainty in cost and time before commitment to build. Clear accountability and cost monitoring at all stages.
-due to no time constraint and clearly information are given before tender stages, high quality of work will be achieved.
- Client has the right to controls design and variations.
-Contractor is fully responsible for achieving the stated quality.
-Competitive tenders are possible for all items. Negotiated tenders reduce competitive element.
- Low risk option to minimize the delay, overspend or design failure.
-Benefits in cost and quality but at the expense of time.
-Relatively fast method.
- Construction time can be reduced because design and building proceed in parallel.
-Pre-tender time largely depends on the amount of detail in the client's requirement.
-An efficient single contractual arrangement integrating design and construction expertise within one accountable organization.
-Can be a clear division, but confused where the client's requirements are detailed as this reduces reliance on the contractor for design or performance.
-Limited role for the client's representative during construction. There is a guaranteed cost and completion date.
-Client has no direct control over the contractor's performance and choice of specialist sub-contractor
-Contractor's design expertise may be limited.
- Virtually none for the client once the contract is signed, without heavy cost penalties. Flexibility in developing details or making substitutions is to the contractor's advantage.
-Difficult for the client to compare proposals which include for both price and design.
-Direct design and build very difficult to evaluate for competitiveness. No benefit passes to client if contractor seeks greater competitiveness for specialist work and materials.
-Contractor risk is high, due to single point of contract.
-Benefits in cost and time but at the expense of quality.
Early start on site is possible, long before tenders have even been invited for some of the works packages.
-Design and construction skills integrated at an early stage. Complex management operation requiring sophisticated techniques.
-Success depends on the management contractor's skills. An element of trust is essential. The professional team must be well coordinated through all the stages.
-Client requires certain standards to be shown or described. Managing contractor responsible for quality of work and materials on site.
-Client can modify or develop design requirement s during construction. Managing contractor can adjust programme and costs.
-Client is committed to start building on a cost plan, project drawings and Specification only.
Management contractor is appointed because of management expertise rather than because his fee is competitive. However competition can be retained for the Works packages.
-Lies mainly with the client- almost wholly in the case of construction management.
-Benefits in time and quality but at the expense of cost.
Comparison of Procurement method
(Hugh clamp, Stanley Cox and Sarah Lupton. 2007. Which Contract? Choosing the appropriate building contract. Fourth edition. London: Riba Publishing)
The most suitable procurement strategy for this project is traditional procurement.
This is a refurbishment project to convert the Old Post Office Building into a regional office. The ground floor area of this building approximately is 6616 meter squares and the existing building is designed in five levels and one basement. Therefore, this project is considered in medium size. Besides, the requirements of the client are the building can be ready for occupation by the 1st June 2010 and with a high quality office. And, thus, this is a government project so the cost of the project is restricted.
Design and build procurement is a contract that the contractor is responsible to handle the construction and full design. However, a refurbishment project is unnecessary to re-design and re-measure the building. Besides, converse the building into a high quality office is another reason that does not chose the procurement method for this project. It was because design and build is highlight in cost and time, but the quality in this procurement is slightly less important.
Management procurement is suitable for fairly or mega project. Medium size of project is not suitable to choose this procurement. Although the high quality of work can be achieved by the management procurement, however the cost of this procurement is high.
Based on the requirements of the client, quality and cost are emphasized in this project. As a result, the most suitable procurement strategy for this project is the traditional procurement method. Even this procurement is take longer time than other procurement; however time is not a constraint for this project. Due to the duration of the project approximately is up to 2 years from inception stages to completion stages. Other than that, quality in this procurement also can be achieved because of Contractor is wholly responsible to achieving the stated quality and a full set of documents or specifications of works are prepared before tenders are invited. Also, government cans though the competitive tender to obtain the best price for the stated specifications. Therefore, the project can be completed in time with good quality and low cost.