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    1 An Introduction To Building Procurement Systems

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    AN INTRODUCTION TO BUILDING PROCUREMENT SYSTEMS J.W.E. Masterman Gi] E & FN SPON London - New York « Tokyo Melbourne Madras bls by E BN Spon, an imprint of Chapman & Hal, 2-6 Boundary Row, London SE1 SHN (Cops & Hal, 2-6 Howndy Row, ladon SEL SHIN, UK ‘Yeo Nowa Reid fc, 113 5h Avenue, New Yor NY1O003, USA ‘Chapin & Hal jp, Thomson Publishing Japan, Hinkawac Nera Balding, 6, 1-7-11 ikaw cho, Chigoe eT 102, Jpae (Chapa Hall Aras, Thoret Neko Asai, 102 Dd Set, South ‘Malourae, Visors 3205, Auli ‘Chypoon Hol ods, . Seta, 32 Send Maa Rnd, CXF Eas, Mad (600035, lod Fra esi 1992 epeimed 1936 © 1992).0 Matermen ‘Typeset 10s on 1/2 Garnond by Exe Typeseters Company, HongKong Pred ia Great Bain by Athens Pes id, Gnteshead, Te Bear SBN 0 419 17720 5 CHB) 0 442 51506 4 CUBA) ‘Apa fo sy a eating lo the purpose of rszarch o rte say of ican revi, a pelted der the UE Coppieht Deg sedans Ace 15, ‘hs pubtcaion ay not be reproduc, ste, or trie lo any fom of by ‘ny tens thot rr parson i wing ofthe pubs the ise ‘trepearpie epodicion lyin accortance wn the ems of the hens ae by he Copy Lees Agency in be UK, or scence wth the tem of ‘ences ued by the sppopite Hepedacon Rigs Option cae the ‘Uk Pages concemingremaucioneuode the tes sn hee shold be St ‘0th pllses othe London aes ee on page ‘The publiber nes eo repreniion, eps or imped, wih rep 1 he sccirgy ofthe Infrmion conned in tha boot and cael ace ny est ‘poral or abit foray enon oars tht tay Se ade ‘A cxslue ear fr boo aaa fom th Beh Ley sary of Congres aalomingin Piao its arate ‘This work is dedicated to my wife Niki, who throughour thi and many others, has selflessly supported my endeavours CONTENTS Ackoowledgements Preface Incroduction 1 The concept of procurement systems 1.1 Terminology 1.2. Categorization of procurement systems References 2 The evolution of contemporary procurement systems 2.1 Introduction 2.2 1945-1972 23 1973-1979 24 1980 co the present time 2.5. The level of use of procurement systems Summary References 3 Separated and co-operative procurement syeteme 3.1 Introduction 3.2. The conventional method 3.3 Variants ofthe conventional method Sammary References 4. Integrated procurement systems 4.1 Introduction 14.2. Design and build /A3 Variants of design and build Summary References 5 Management-orientated procurement systems 5.1 Introduction 5.2. Management contracting 2 B 18 20 2B B 49 32 33 36 B B n 8 vil conTENTS “5.3. Construction management SA Design and manage Summary References 6 The British Property Federation system 6.1. Introduction 6.2 Genesis 6.3. Share of the market 6.4 The Process 6.5 The Product ‘Summary References 7 Glients and their needs 7.1 Categorization of clients 7.2 Clien’s needs Summary References ‘8 The selection of procurement systems 8.1 How clients actually selec che procurement systems they use Summary 8.2. ‘The methods clients should use co choose their procuremene systems 8.3 Guides and aids co che selection of procurement systems Summary References 9 The furure 9.1 General 9.2. Individual procurement systems Sammacy References 107 6 no 121 12 124 124 133 135 136 37 139 49 150 11 158 160 165 180 rat 183 185 187 138 ACKNOWLEDGEMENTS Grateful acknowledgement is made to following publishers and authors for their permission to quote or reproduce extracts from the works listed below: Walker, A. (1984) Projet Management in Constrasion, Blackwell Scientific Publications. British Property Federation (1983) Manual of the BPP System, prepared by a ‘Working Party chaired by Mr Stanley Honeyman. ‘Waters, B. (1983) The BPF System, in: Building, Building (Publications) Led. Centre for Construction Market Information (1985) Sursey of Management Contracting Skiemore, R.M., and Marsden, D.E. (1988) Which procurement system? ‘Towards universal procurement selection technique, in: Contraction Manage- sment and Economics, Chapman & Hall Led. Franks, J., and Harlow, P, (1990) Building Procerenant Sysens, Charcered Insvieute of Building, Building Economic Development Committee, NEDO (1983) Faster Building for Industry, Controller of Her Majesty's Stationery Office. Building Economic Development Committee, NEDO (1985) Thinking About Building ~ A Succrfal Customers Guide to Using the Contrcton Industry Jones, G.P. (1984) A New Approach to the JCT Design and Build Conrac, Longmen Group UK Led. Hillebrands, P.M._(1985) Eonomic Theory of the Construction Industry, The Macmillan Press (© Patricia M. Hillebrands) Praser, I. (1980) AMM Case Study, Architects Journal, MBC Architectural Press Led. Centre for Seraregic Scudies, University of Reading (1988) Building Britain 2001, National Coneractors Group (@ sector of the Building Employees Federation), x ACKNOWLEDGEMENTS University of Salford (1988) ELSIE Expert System ~ Users Maual (Commercial Application, Version 1,0), Royal Insticute of Chartered Surveyors. (The ELSIE software package is now being sold, maintained and further developed by IMAGINOR Systems ~ current version is 4.0) Brandon, P.S., Basden, A., Hamilton, W.I. and Stockley, J.E. (1988) Expert Systems ~ The Strategic Planning of Contraction Projects PREFACE Research hat revealed that the way in which many clients, and their advisors, select che method used co conteol the design and construction oftheir building projects, Le. che procurement system, can be haphazard, il-timed and lacking in logic and discipline. [As ic has also been recognized that one of the principal reasons for the construction industey’s poor performance is the inappropriateness of the pro- ‘curement systems thar have been chosen in eis way, it is essencil for the future success of individual projects and che industry a5 a whole thac, ata time ‘when such systems are proliferating and where building projects are becoming more compler, the correct choice is made. While there is much available literature rlacing «0 individual methods of ‘procurement, litle has been done co provide an introduction to the subject and single source of reference which describes, examines and compares all of the ‘main procurement systems being used in mos of the United Kingdom, ‘This book attempts to satisfy this need by providing informacion on the history, procedures, use and characteristics associated with each of the major procurement systems and their variants, and offering guidance to the reader on the principles of selection of che most appropriate method of procurement. or the sake of clarity che term ‘building’ here relates to industrial, com retail, leisure, educational and other similar facilities bur noe civil engineering projects or petrochemical and process engineering installations. J.W.E, Masterman, INTRODUCTION ‘An examination ofthe historical background tothe use of procurement systems shows that in the post-war period up co the early 1970s, despite al relevant official reports and seudies recommending otherwise the majority of building ‘work was carried out by conventional methods of procurement with only 2 relatively small number of projects being implemented by means of, what were then, non-conventional methods such a negotiation, serial eendering and the use of package deals ‘Because of this, many clients saw the implementation ofa building project as an expensive and risky adventure with work taking a long time to get seared and delays, disputes and exes costs prolonging the agooy. This discontent came ro a head during the period of recession which ran fiom 1973 co the beginning of the 1980s when for the fst time client dissatisfaction with the constuction industry's iniley ro meee their needs ‘was publicly expressed and chis phenomenon, together with the financial and practical consequences of the dramatic increases in oil prices, resulted in the ‘much greater use of management concracing and the design and build pro- corement system, In the period from 1980 co the present day, which has mainly been atime of postcecesson recovery, chee has been a changed pattern of demand for the industry's resources, a lack of skilled labour and public fnance and new client aticudes tothe orgenization ofthe management of che design and construction of projeces and the financing of development schemes However, despite the incteased use of unconventional procurement systems, and with the exception of some mega project in the south-east of che county, the building indosty’s general performance, in terms ofthe usual crivera of time, cast, functionality and quality, has continued co be medioce and, although itis accepeed that che corect choice and use of ehe most appropiate procurement system is noc che only reason for inefcien project management, there is ele doube that ie as been a coateibutory factor in the industry's apparent inability co achieve a higher level of projec success and overall performance Ta order to enable thé choice and subsequent use ofthe correct procurement system to be made, it mast frst be understood that chere is 90 standard xiv IeTRODUCTION, solution, or ‘best buy’, amongst procurement systems. Client organizations are complex and different categories of clients require discrete solutions 0 their procurement needs, added to which construction projects vary so considerably, in every respect, from one to another that no single method of procurement can be suitable for every project fo al time. Secondly, it is essential that each project is analysed and its primary and secondary objectives identified and incorporaced into the technical bref for the work. The client's needs, expressed in the briefing document, must then be ‘compared with che characteristics of all available procurement systems and & logical and disciplined choice made of the most appropriate method. ‘The range of available procurement systems has peoiferted in recent years as a result of the increased complexity of building designs, escalating costs, the magnitude of projects and increasing demands of building owners, bue despite this the majority of clients coneinue eo select the procurement systems they use ‘from 2 very small number ofthe wide range of available methods, ‘The intention ofthis guide isto provide che reader with sufficient information about building procurement systems to ensure an awareness of al the methiads thae are currently available and eheit main advantages and disadvancages, 'No attempt has been made to describe in detail the way in which each system is processed through the various stages ofa project as this is not seen as the function of this guide bur rather char of che substantial amount of available literarure that deals with the various individual procurement systems on & specific basis. Specifically, Chapters 1 and 2 describe the concepe and categorization of procurement systems and the evolution of thase methods currently in use. The ext four chapters deal with each of the various categories and the individual systems themselves. Chapter 7 looks at the needs of clients in che context of projece success while Chapter 8 investigates the way in which clients decide ‘which method to use, then identifies the principles that should govern the correct choice and the various aids chat ate available co assist clients ding this process. Finally, in Chapeer 9 an attempr is made to forecast the fueure in the context of procurement systems and cheie use Ic has been suggested that where chere is a clealy defined and communicated set of objectives, and an understanding and acceptance of their responsibilities by each member of an expere and competent project team, construction projects are much less likely co encounter sigoificant difficulties whatever the procurement methodology. Whilst this may be crue, i¢ is strongly advocated that this combination of criceria is rarely achieved in practice and success can, bese be guaranteed by the correct choice of the most appropriate procurement system within the discipline and framework of which the project team are more likely so achieve the necessary level of efficiency «0 enable them to bring che project t0 a successful conclusion it THE CONCEPT OF PROCUREMENT SYSTEMS 1.1 TERMINOLOGY ‘The fragmented nature of che building industry particularly the separation of design and construction, che uniqueness of construction projets and the resulting ephemeral nature of the project organization places great dependence fm the project team in setting up the building process and bringing the project 10 a successful conclusion [1] ‘One fundamental aspect of the building process that requices early and particular attention if success is to be achieved, is the selection of the most appropriate organization for the design and construction of the project. For che purposes of identification and communication it is necessary ¢o adopt 1 term to describe this organization. An examination of past research and literacure reveals that phrases such 25 ‘building procurement method’, ‘pro- fnirement form! and ‘pearntement path’ have heen sed by wa when referring to this concept Franks (2] describes ‘the amalgam of activities undertaken by a client to obtain a building’ as a ‘building procurement system’ and an examination of the definitions of che last ewo words of the phrase confirms that when con- joined hey relate to the method or organizational structure used to acquire a product, in this case a building project. ‘The term ‘building procurement’ system has cherefore been adopted and used throughout the succeeding chapters and it is suggested could, with benefit, be generally accepted within the industry to describe: thorities ‘The organizational structure adopted by the client for the management of the design and construction of a building. project. ‘The choice of building procurement systems available co clients is now so wide that the need to carry out the selection process in a disciplined and objective ‘manner should be self-evident, but the face that such a course of action is not 2. THE CONCEPT OF PROCUREMENT SYSTEMS adopted by many of the construction industry's customers suggests that he philosophy and advantages of a systems approach co both the detailed and ‘general management of construction projects is still not widely accepted 1.2. CATEGORIZATION OF PROCUREMENT SYSTEMS [As an aid to adopting @ mote logical approach to the selection of the most appropriate method fom the proliferation of systems currently available itis suggested that the different methods need co be categorized and chere are a number of ways in which this can be achieved, for example by the amount of risk taken by all of che participating parties; by ehe extent to which design and construction are integrated; fon the basis of the way in which the contractor is reimbursed; in the way suggested by The National Economic Development Office (NEDO), in their publication Thinking about Building (3); 5. by the approach suggested by Bennett (4] after Mintzber 6. in accordance with Pecry’s categorization [5], ‘The adoption ofthe fist and chitd methods would only result in categorizations which would be based upon single characteristics of procurement systems and thus provide an insufficiently wide basis for selection. The second method ‘touches upon a ctitial element within the design and construction process, ice. the relationship becween the wo processes but is again (00 narrow in ics approach. "The NEDO guide adopts « practical approach and identifies four different basic procurement systems, or paths, i.e. eradicional, design and build, manage ment, and design and manage, each of which have 2 number of variants, but makes no attempe to establish « grouping of systems based upon common characteristics. [Bennett [4] maintains that, fom a coastruction-project management view- point, there are three distinct idealized patterns of project organizations each ‘with consistent links with diferent eypes of projects: 1. programmed project organizations which relate ro standard construction; 2. professional project organizations which relate to traditional construction; and 43,_ problem-solving project organizations which relate coinnovative construction. “This approach is considered eo be too academic for the purpose of categoriza- tion, added to which ie does not relate to any of the accepted fundamencal characeetistics of procurement systems. “Perry's [5] approach categorizes all procurement methods as: (CATEGORIZATION OF PROCUREMENT SYSTENS 3 divided management of design and construction; co-operative management of design and construction; special emphasis on management; incegrated management of design and construction; and is considered to be, for the purpose of assisting in the simplification ofthe selection of procurement systems, the most appropriate categorization relating as it does co the critical interaction between the design and construction processes. “Therefore for the purposes of use in this guide che following categories have been adopted: 1. pee wc xpi Hc ot, ha ge lley Gr oe Sel tat cowcacion gee of Se PEt ae Oa somubiley of wpe eqpeieris, © dsign coun aad cone cree, be whee erin of ae he aan ay ie ir llc Gis eae oe pele acat apemt tee may patos sah nacre, eateries 12a basa and acl te Getty nl eam roe a se mop of co opstcon, atl x sea al te ee ar ae era Sl a igesanicoiesd pescaetaie recs, rire Ce copia sind spon cll guage af Mt dn ek darn vps Tin de car dees seullf beg ied oe by Wl ae ae ae responsibilities of a consultant. igor 1.1, sched fom Pee) xg ign, nr hi ct parle yaligedpes prado inet ae cMteniy swale The nomctegortaton of he Beioh Proper Fedeioa sya nal as ic a Ss elegy eile! crisper taenwech ne Ss oir prepcrcoes ac ne ed a tng ea plete ee st ‘pric cars which woul sabe to be paced with en craig oo “Fuoeroupings sade individual gotems ate ehemseles discs in smczrdiog eg bo heeled tes, dhe to te abaya eae Ts ero ear oe eal eat ee ee ae eng aie ieee ea ia papetindsortere? Gemeente iret van Os trie es meena dain rae pe ‘constuction of uiding projets ‘Systm for the management of the design and REFERENCES. 5 REFERENCES 1. Sidwell, A.C. (1982) Paper to seminar on Management Contracting, sponsored by § the Insicue of Quaneey Surveys, London, 1 December. = 2. Franks, J. (1984) Building Pracuremen Stans ~ a Guide to Building Projet Manage. smert, CIOB, Ascor. Building Economic Development Commicece (1985) Thinking abt Building ~ a ‘Secs Basins Customer's Guide Using the Coxstracin Industry, NEDO, London. Bennett, J. (1985) Contracin Projet Managemen, Butterworths, Loodon. erry, J.G. (1985) The development of cotta strategies for construction projects, unpublished PRD thesis, University of Manchester. Variants he categorization of building procurement sycems Conventional spon i 2 3 i f 2 THE EVOLUTION OF CONTEMPORARY PROCUREMENT SYSTEMS 2.1 INTRODUCTION Having established the concept of procurement systems the evolution and level of use of contemporary procurement methods over the past half century is now ‘examined in some decal using che numerous official and semi-offcial reports thac were produced during this perio, ‘The vast majority of construction projects prior to the Second World War (1939-1945), were implemented by conventional methods of procurement that had remained unchanged for over 150 years. Since that time, however, the ‘number of different available procurement systems has substantially increased, often as a resule of importation from the USA, and perhaps more significantly, the willingness of an increasing number of client organizations to sponsor and tse these new methods. ‘Three phases in the development of contemporary procurement systems can be identified. The first was a period of sustained economic growth when the ‘use of conventional mechods of procurement still prevailed; the second was & period of recession characterized by an increased use of non-conventional procurement systems; and the third and fin period, which has recently ended, was a time of postrecession recovery during which the mose experienced clients of the industry designed and implemented their own procurement systems and more generally, alchough conventional systems still predominated, vand-build and management-orientated procurement methods increased share of che available workload. Chronologically, chese periods broadly relate «o che years 1945 ro 1972, 1973 co 1980 and 1981 to che presene time — nearly half a century during {8 THE EVOLUTION OF CONTEMPORARY PROCUREMENT SYSTEMS which the changed atticudes and needs of client organizations have resulted in a substancial increase in the number and type of procurement systems available 22 1945-1972 Following the end of hostilities che demands placed upon che building industry rpidly increased in both complexity and workload. Despite this, the pattern of organization of projects cemained largely unalcered, particularly in che public sector, with che majority of work still being let on the basis of open compe- titive tendering even though the Simon Report (1) of 1944 had strongly recommended the use of selective bidding ‘The Phillips Report (2} published in 1950 reiteraced ehis recommendation and in addition highlighted che need for greater co-operation between all ofthe parties involved in the construction process although by now some innovations in procurement systems, such as negotiated cenders and design and build, had begun to be used co a very limited extent by the private sector and central ‘government. Criticism of the lack of liaison and relationships becween consultants, contractors and their mutual clients was contained within che 1962 Emmerson Repore (3] which commenced: In no other important industry is the responsibility for design so far removed from the responsibility for production, Emmerson also came co the conclusion chat there was still a general failure co dope colightened methods of tendering in spite of the recommendations of catler reports, but also noted the growch of the package deal and “other forms’ of placing and managing contracts although no examples of such forms, other than setial tendering, and a passing reference to the ‘Clasp’ system of indus- tsialized building, were provided, ‘in 1964 the Banwell Report (4] was published, followed in 1967 by # review, Aaion on the Banuel! Report [5]. The former document expressed concern ar the failure of the industry and its professions to think and act together or to reform its approach co the organization of construction project. “The document also reiterated the recommendations of the Simon Report (1] snd other previous committees and working partes in chat the use of selective tendering should be more universally applied cogether with the use of ‘non-conventional methods such as negotiated and serial tendering where appropriate ‘The 1967 review [5] found thae some progress had been made since Banwell ‘on the pre-planning of projects, although the professionals had done litle 0 de-rstrice theit practices, An increase in the use of selective tendering was ws-1979 9 noted and the industry was again urged to increase the use of serial and negotiated condering, ‘A umber of guides intended co assis clients in the planning and organiea- tion of construction projects were published in the decade prior to 1965 although these had not, according to Actin on Banwell (5], been widely publicized or circulated, In that year Higgins and Jessop (6), ina pilot seudy ‘to examine communications in the industry sponsored by the National Joint Consultative Committee (NJCC), were probably the frst co suggest chat ‘overall co-ordination of design and construction should be exercised by a single person, oF organization. ‘The evidence therefore suggests that the early co mid-1960s were a ime of considerable activity within the industry with regard to its performance and organization, and that this was probably induced by a combination of economic expansion, rapidly developing techaology, changing social attitudes, the demand for more complex and sophisticated buildings end, noe least, the client's increased need for faster completion at minimum cost "The lst requirement stemmed from ehe revived activeies of property devel- copers, following the boom in urban redevelopment, aod industrial organiza- tions, Both of these client groups were unhampered by standing orders ot restrictive procedures and were thus mote open co suggestions for the use of unorthodox arrangements for the provision of their building projects. [Negotiated contracts and package deals were fiequencly entered ioto by the private sector and there was much discussion, but much less real progress, about the carly involvement of contractors in order to benefit from their practical expertise, ‘Within this period, a time of sustained and almost uninterrupted economic ‘growth from the end of the war to the extly 1970s, conventional methods of procusement prevailed with only 4 celatively small number of projects being carried out by non-conventional procedures despite a peolifertion of reports recommending their use and the adoption of more co-operative approach by all members of the building. proces 23. 1973-1979 ‘The second phase was a period of recession, if not depression and instability, and commenced in 1973 a5 a result of the fist price increase imposed by the oil-producing countries coupled wich a high rae of inflation arising from che previous boom and, eventually, from the effect on the ol price rise ieself; this ‘stage is seen co have lasted until 1980. During this time government-sponsored studies of the industry were less ‘general and fundamental than chey had been in the 1950s and 1960s and related to specific sectors of construction activity 10. THE EVOLUTION OF CONTEMPORARY PROCUREMENT SYSTEMS. (OF the numberof seudies emanating from NEDO the report {7} produced in 1975 by che Joint Working Party chaired by Sir Kenneth Wood was the only ‘one specifically to examine purchasing polices and procurement practices although even then the examination was restricted to the public sector. The report found that che procurement systems used by public authorities were inappropriate to the circumstances and types of project surveyed, although the tse oF non-conventional methods of organizing construction work amounted t0 neatly 40% of the projects examined. ‘Various offical and unofficial reports thar were produced during this period deew unflattering comparisons between the performance of the Bricish and foreign construction industries and the «wo case studies carried out by Slough Estates PLC in 1976 (8) and 1979 (9] were particularly damning. “The 1976 study found thar che overall rime taken co implement an industrial project in the UK was considerably longer than in other countries and the eventual cost of developments in this councry was considerably higher than all but one of the seven countries surveyed. The reasons for this poor performance ‘were considered to stem from the unnecessarily lengthy and complex design and pricing process and che time taken for che application and grancing of the necessary statutory permits which, when related co the high level of interest rates, ination and prolonged programmes, led co the high levels of cost. ‘The 1979 repore [9] endorsed the findings of the earlier study but conceded that there had been a general improvement in the intervening 3 years which ‘was attributable to che effects of the recession and the resulting low level of building activey.. “The recommendations made by che two studies stessed the need for reform of the planning and building regulation processes and, in the context of procurement systems, urged the simplification of design and construction ‘proceduses, the improvement of construction management, che estahlichment by clients of cheir real needs and more effective briefing of their design teams ‘These two reports {8, 9] were probably the first formalized examples of & trend, which emerged during the late 1970s and has continued since, of some client organizations forcibly voicing their dissatisfaction with the performance of che construction industry. In 1978 che Building and Civil Engineesing Development Committees combined to produce Construction for Indwirial Recmery {10} a study which sought, among other objectives, 10 obcain the views of industrialists on che adequacy of the products and services offered by the building industry ‘The report, based upon a survey of 500 firms and 32 case studies, concluded thae industrial firms carried out their construction projects using. various procurement methods wich many choosing the conventional route. It was also tstablished thae the average industeial user is not aware of che complexities of wi-i99 1 the construction process, of more particularly che alternative methods of acquiring buildings, and that traditional contrace procedures frequently do not meet the needs of the manufacturing industry ‘The Royal Inscicution of Chartered Surveyors, published a repore (11) in 1979 which was based upon a study of the contribution made by different design and contract procedures to cost and time performance, especially in the UK and US construction industries. The document contains a number of conclusions which are relevant to the procurement proces 1. A very wide range of procurement systems is used in the private sector in the US as against a very narrow range in che UK, where central and local ‘government is the dominant influence and public accountability, racher ‘han economy, is essential 2. Major cost and time penalties ace likely co be incurred if deealed design is divorced from construction. 3. The use of construction management in the US has grown as a result of this system being capable of giving che design team concrol over the construction cost and time, 4. The range of variety of procurement systems has proliferated on both sides of the Atlantic because of escalating costs, increasingly complex designs, the increased size of projects and the more onerous demands of owners, 5. Clients in both councries were found to be dissatisfied with conventional ‘procedures, In the US this dissatisfaction results ftom an increase in claims, and subsequent litigation, as well a lack of cose control during the design stage, while in the UK escalating costs, the slow rate of construction and technical defects have disappointed clients 6. Clients in the UK are more conservative than their US counterparts, who are prepared to experiment with the whole range of procurement methods, particularly construction management. ‘The themes of most of che reports published in the 1970s reflected the diminishing numbers of sponsors prepared co commit themselves ro building projects in an uncertain economic climate and che increasing concern, of those clients who continued to cerry out construction works, at rapidly increasing ‘material and labour costs, high inflation and falling demand for their products, all of which were made worse by che delays, overruns and other difficulties associated with the UK construction industry. ‘Within chis second phase the use of the conventional procurement system still accounted for much of the construction work although the use of man- agement contracting, and to somewhat lesser extent the design and build ‘method, continued co increase. 12. THE EVOLUTION OF CONTEMPORARY PROCUREMENT SYSTEMS. 24 1980 TO THE PRESENT TIME ‘The third of the chronological phases started in 1980 and has now finished. This stage has been described as a post-recession period of adjustment and recovery during which changes have taken place as a result of long-term shifts jn che structure of che industry, such as the emergence of labour-only sub~ contracting and the client's changing perceptions ‘This latter characteristic is best releced in the publication, at the end of 1983, of the British Property Federation's (BPE) System for Building Dasgn and Constracton (12). This body, which represents the majority of UK property evelopment organizations and a number of che larger retailers and commercial ‘companies, had concluded chat many existing procurement systems caused elays, were ineficient, could increase costs and cause and sustain confron- tational arctudes between consultants and contractors which are contrary o the bese interest of the client. 'A Working Party, assisted by 2 small group of consultants, was set up t0 Arafc‘an improved managemenc system forthe building process appropriate for ‘members of the BPF' and, for the frst time on any major scale, eventually produced its own system of organizing the management, design and construc- tion of @ building project which reflected US practice and the experience ‘gtined in using all of the various existing procurement methods that have become established over many years. It is interesting co note, however, thae there is no evidence to suggest that this new approach has caprured the imagination of many clients or a significant percentage of the available workload, "Two important NEDO reports [13, 14], were published in 1983 and 1988, both dealing with the widely held belief that che process of procuring new industrial or commercial buildings was unnecessarily long and dificult, a view ‘which had been established in the reports of the 1970s, which compared UK performance unfavourably with chat of ehe building industry in overseas ‘The 1983 seudy [13] found, in relation co procurement methods used on industrial projects, that while conventional methods can give good results, ‘non-conventional techniques tend +o be quicker, although the use of bills of approximate quantities and negotiated tendering also leads co faster progres. It also established thar over half of the projects surveyed were carried ouc by ‘conventional methods, about a third by the design and build procurement system and the remainder by some form of management or other approach. ‘The 1988 report [14], which deale specifically with commercial projets, ‘identified a wide variability in time performance, even on comparable projects, with project outcomes being determined not only by the form of organization bur also by the early development of a comprehensive project strategy and ‘THE LEVEL OF USE OF PROCUREMENT SYSTEMS. 13. timetable. Two-thitds of the projects surveyed were carried out by the use of conventional methods with the remainder being more or less evenly divided beeween design and build and management techniques. Both scudies found chac abour one-third of both industrial and commercial projects finished on time but che rest overran theit planned times by « month ‘or mote thereby confirming the concern expressed by many clients during this period at the industry's inability co satisfy their needs ‘While the British Property Federacion produced its own syscem asa result of its frustration at the construction industry's poor performance on its members projects, another group of clienes, mainly those sponsoring mega-projects in London and che south-east of England, began in the mid-1980s individually ¢o ppt together their own forms of project organization in a way chat best suited their own interests. The emergence of this type of expert private-sector client, who has the necessary in-house resources to enable him to manage large projects and an on-going construction programme, is one ofthe phenomena of the period with clients of the industry despairing of it ever putting its own hhouse in order and identifying the need to develop bespoke project organiza- tions which, in che case of the major schemes, mainly consisted of some form of construction management In this chitd and final phase, although che conventional method remained the most widely used system, there was a substantial increase in the use of design and build and a continued use of various forms of management approaches, albeit with an apparent reduction in the use of management contracting, during the latter years of the period, as a result of clients dissatisfaction with this method of procurement. 2.5. THE LEVEL OF USE OF PROCUREMENT SYSTEMS [None of the many reports on che construction industry thac have been pro- duced since the mid-1960s by government-sponsored committees and others, have accurately or adequately defined the level of use by clients of the various amailable procurement systems, Some of these studies have, however, given indicative figures. The Working Party when preparing the 1967 study Action on the Banuell Report {3} es tablished that, in the housing and educational sections of che public sector, che methods of procuring building projects was as shown in Table 2.1. ‘The information contained within this scudy regarding the level of use in the other sections of construction activity was far less definitive ~ hospical boards used selective tendering, universities used selective tendering and ‘negotiation and most contracts for central government and the nationalized industries were being procured by selective tendering and various forms of ‘negotiation. 14 THE EVOLUTION OF CONTEMPORARY PROCUREMENT SYSTENS “Table 2.1 Method of appoincing the contractor Sauer ‘Matbnd of appointment % By numberof ibe 19641965 Housing Open compertion 49.2 43.2 Selective competition 20.0 20.4 ‘Negotiated 233 218 Package deal 1 mee Education Open competition 22.4 26.2 Invite list 22 2d Select lise aa 3 Negotiated wo 32 ‘Souce: Ato ot Bal Reo (3) “The 1974 NEDO guide Before you Build — What a Client Needs te Know about the Construction Industry (15}, contained information on the use of procurement methods in the private sector, which confirmed that over 70% of projects were sill procured on @ conventional basis, 18% were implemented using the design and build system and the remainder carried out by ‘management’ and other mechods. ‘The Wood Report (71, which examined the purchasing policies and prac- tices of the public client, established that 60% of concracts were let on 2 conventional basis, nearly 25% used the design and build method and che remainder were implemented using other non-conventional procurement systems. “illebeande [16] mainrained thar there was no comprehensive dats available fon the level of use of the various construction industry procurement methods fand produced an assessment of the systems usage, in both the public and private sectors, which is partly reproduced in Table 2.2. Subsequent reports indicate that the amount of work catried out in the private sector by selective tendering was underestimated by Hillebrande [16] and the use of management- orientated methods substantially overestimated. 'A survey of 21 public and private sector organizations carried out in 1985 bby Hewitt [17] established that the use of conventional procurement systems, mainly in che form of selective competition and negotiation, was predominant with design and build being the next most popular method ~ the detailed results of thi survey are shown in Table 2.3, "The Faster Building for Industry report (13) established, from a survey of 5000 industrial projects undertaken in 1980-81, chat just over half of these were ‘artied oat using conventional procurement methods, a third wete implemented "THE LEVEL OF USE OF PROCUREMENT SYSTEMS 15. ‘Table 2.2 Asesament of level of use of procurement system in ealy 1980s [16] Pracromot matbod of mane Prise Pablic lint cient® (Open endering eer Selective rendering 3070 Negoriaion wo 5 Design and build ‘Table 2.3 Mort commonly used procurement systems Precarmnetrag ed % ‘Convensional or variants ‘elective compection 35.60 negotiation 23.74 twovstage tendering 347 prime cost and fee 847 Design snd build 15.25 ‘Turnkey 339 Managemen contacting 5.08 Source: Hewie (173 using the design and build methods and the remainder by some form of ‘management system. 'NEDO’s subsequent report on the commercial sector {14} was based upon representative sample of 60 projects, built between 1984 and 1986, supple- ‘mented by additional data gleaned from 260 schemes and the statistical analysis of non-detaled information on some 8000 commercial projects. The report concluded that over two-chieds of the contracts were let on a conven~ tional basis, about one-sixth used the design and build approach and the remainder were castied out using some type of management procurement method. ‘Surveys (18) have been cartied our in 1984, 1985, 1987 and 1989, by the Junior Organization of the Quantity Surveyors Division of the RICs, of some 16 THE EVOLUTION OF CONTEMPORARY PROCUREMENT SYSTEMS ‘Table 2.4 Summary of surveys and estimates of level of use of procurement systems 1960-87 [191 Year of CCommional —Disignand build — Management Referee actual trey and signs —_—_—ad variants and wher 1960, 85 10 5 * 1964 92 8 = b 100 = = 1965 ol 2 = 100 Es = 1972 0 74 16 « 1973 R 18 10 4 1981 32 Ea ire © caly 1980s 0 30 30 r 1985, 16 19 5 e 1984-6 a 16 7 b 1984 53 5 2 i 1985 8 8 4 i 1987 0 ira 9 k 1989 a ul 2 ' SEE eee Source: Rowlinson (15) {© Rowlinsos eximate (19) (© Actin or Beal Rr (31 (0) Tee Word Repor (7) (@) The Wakon Rept (15) (6) Faster Bag for tary (13) {B Hilebrnes mae (10) G@) Hewiete suey (171 (0) ater Bung for Comme (14) (i) RIGS JO Sere of Conrac m Use in 1984 18) {) RICS JO Suey of Corn Ue in 1985 (18) {hy RCS JO Sery of Cour n Uni 1987 (18) (0) RUCS JO Suey of Cons Us in 1989 (18) 700 quantity surveyors in private practice in local and central government and the housing association sector in order to determine the levels of use of forms of contract and building procurement systems during the years in question, “The results of these surveys show a decrease over the 4 years in the use of conventional methods from 83% to 67%, while design and build has increased ‘over the same period from 5% t0 11% or 12% (alehough the authors of the survey are of the opinion chat the use of the latter arrangement is understated as 4 result of the single discipline of the respondents). The use of management land other methods decreased between 1984 and 1987 and then rose drama- tically to 22% in 1989, although these results may again be suspect “Table 2.4 based upon Rowlinson’s work (19) summarizes all of the pre- viously described surveys, reports and literature with « view co bringing ‘THE LEVEL OF USE OF PROCUREMENT SYSTEMS 17 Table 2.5 tacidence of use, by percencage of annual value of wok commisioned, of the main procugement systems aaa See Avdiets Quantity sereoert e by vale So by wale by oat Jatst 590 dana Sym tat S98 eer pri yor pri year ror Conventional 3636 60.85 7232 8142 65.70 76.52 Design and build B64 1736 1255 784 1B 8.26 eckage deals 134 Ls 290 190 291 2.61 Turnkey 295 44 010 016 087 131 Management contracting 2.05. 3.83433 3.48 3.1778 Conserucion management, 1.79 «197 426 «2.23178 (0.65 BPR sysern 231 06 0960.65 Design and menage 936 9.69 332-265 2.83 0.70 ‘Other — oe 0s 139 ‘together all of the diverse information and providing an indication of the way jn which the use of the various systems has changed over the years. Unfor- ‘nately, the lack of comparable figures for the level of use of the various procurement methods over a set period of time from a sufficiencly wide range of respondents means that it is not possible accurately to quantify the actual past use of each individual system, or identify che long-term trends, even oo the basis of the preceding data, In an effore co establish a more accurate picture, the author undertook a survey in 1988 (20), of clients, architects and quantity surveyors; respondents were asked

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