INTRODUCTION

Construction professionals are always keen to understand about procurement methods practiced in
industry. Therefore analyzing requirement and characteristics of procurement system is very vital. Core
objective of a procurement system is identifying responsibilities and task for of each and every participant
in a signed project.

TYPES OF PROCUREMENT METHODS

Commonly, five procurement systems are being exercised in industry. Each of them shall be
discussed in detail below. It is recommended that, to have deep understanding on types of
procurement methods, always functions of construction industry to be remembered.

1. TRADITIONAL METHOD
Responsibility of a contractor is limited only to build. All design works and management of
contract are carried out by consultant or engineer. Finance and operation on project shall be
controlled by client. This method of procurement recommended for complex and comparatively
huge project.

2. DESIGN & BUILD

As name suggests, design and build responsibility covered by contractor. Consultant’s scope
only limited to management of contract. Client is responsible for finance and operation.

3. MANAGEMENT CONTRACTING
This method of procurement system is completely different from traditional method and design
& builds method.  In addition to client, consultant and contractor, specialized contractors become
as participant. Contractor acts as a manager for project whereas specialized contractors undertake
real build aspect on their specialized field. Finance and operation carried out by client. This
method will be chosen if there are possibilities to identify projects in packages.

4. JOINT VENTURE/PARTNERING
Many of the problems that existed in construction are attributed to barriers that found between
parties of contract.  In other words, to overcome barriers, different parties establishing a working
environment based on mutual objectives, teamwork, trust and sharing risks and rewards. The
success of this setup solely depends on memorandum of understanding. Identifying
responsibilities of each party is bit difficult in joint venture procurement system.

5. PRIVATE FINANCING INITIATIVE (PFI)

Contractor is solely responsible for all functions of construction. After successful completion,
project shall be transferred to owner. This is very helpful for client who does not have a sound
financial background. This method generally used by government of developing countries.

The below chart compares and contrasts five main procurement methods in construction
industry.