PROJECT PROCUREMENT STRATEGY

by Upali Fernando MRICS,MCIOB,MAcostE,ACIArb,MASI,AIQS(SL) (Chartered Quantity Surveyor, Cost Consultant, Independent Adjudicator and Charted Builder) Managing Consultant WANFERND CONSULTING

Construction Consultant Specialized in Quantity Surveying, Project Management and Claims and Contract Administration
http://www.wanferndconsulting.com

info@wanferndconsulting.com

Construction procurement Construction procurement is the process that is used to deliver construction projects. The dictionary definition states that procurement is acquiring or obtaining by care or effort.

Clients who have made the major decision to build are faced with the task of procuring the construction works that they require

Client Procurement Need

Cost Quality Accountability Certainty of project objectives Market conditions

Partnering
Many of the problems that exist in construction are attributed to the barriers that exist between employers and contractors . In essence ,partnering is about breaking down these barriers by establishing a working environment that is based on mutual objectives ,teamwork ,trust and sharing in risks and rewards.

Partnering is a management process used by two or more organizations to achieve specific business objectives by maximizing the effectiveness of each participants resources. The approach is based on mutual objectives ,an agreed method of problem resolution and an active search for continuous measurable improvements.

The Role of a Quantity Surveyor in construction procurement Quantity surveyors are in an excellent position as procurement managers with their specialist knowledge of construction costs and contractual procedures. They are able to appraise the characteristics of the competing methods that might be appropriate and to match these with the particular needs and aspirations of the employer. Procurement management may be broadly defined to include the following:

Determining the employers requirements in terms of time, cost and quality Assessing the viability of the project and providing advice in respect of funding and taxation advantages Recommending an organizational structure for the development of a project as a whole Advising on the appointment of the various consultants and contractors in the knowledge of the information provided by the employer

 Managing the information and coordinating the work of the different parties Selecting the methods for the appointment of consultants and contractors.

RIBA Plan of work

Preparation Appraisal Design Brief Design Concept Design Development Technical Design Pre-construction Production Information Tender Documentation Tender Action Construction Mobilization Construction to practical Completion Use Post practical completion

Traditional Procurement Method

The Employer takes his scheme to an advance stage with his the Engineer before appointing a Contractor. The Engineers roll is in as an independent one. The Engineer is employed advise the Employer, design and ensure that the work is kept within the cost limit and that it complies with the standards requirements. The Quantity Surveyor can be engaged to give guidance on design cost and budget, prepare bills of quantities, check tenders, prepare interim valuations and advise on the value of variations and to prepare final accounts.

contract EMPLOYER

Warranties with specialists

contract THE ENGINEET/ PROFFESIONAL TEAM control CONTRACTOR

SUPPLIERS

contract

contract

DOMESTIC/ NOMINATED SUB-CONTRACTOR

Alternative Procurement Methods

The bringing of the contractor in an early stage in the design of a project was the other factor in consideration. Under the traditional procedures, the contractor rarely played any part until the tender stage was reached, after virtual completion of the design.

It was realized that the vast amount of knowledge and practical experience of contractors will make a valuable contribution in the increasing complexity of projects, early in the design process, which will be in the interests of clients and architects, to a successful out come.

The following are some of the principal alternative methods construction procurements now in use.

A). DESIGN AND BUILD. (Sometimes called Design and Construct or Package Deals) Here the contractor is responsible for the design, for the planning, organization and control of the construction and for generally satisfying the clients requirements, and offers his service for an inclusive sum. The procedure is initiated by the client (or an architect on his behalf) preparing his requirements in as much or as little detail as he thinks fit. These are then sent to a selection of suitable contractors, each of whom prepares his proposals on design, time and cost, which he submits together with an analysis of his tender sum.

The client then accepts the proposals he is satisfied best meet his requirements and enters into a contract with the successful tenderer . The latter then proceeds to develop his design proposals and to carry out and complete the works. The client may use the services of an independent architect and quantity surveyor to advise his on the contractors proposals as to the design and construction methods and as to the financial aspects respectively. He may also appoint an agent to supervise the works and generally to act on his behalf to ensure that the contractors proposals are compiled with.

Advantages:
1 Single point responsibility is provided, i.e. the contractor is solely responsible for failure in the design and/construction. 2 The client has only one person to deal with, namely, the contractor, whose design team includes architects, quantity surveyors, structural engineers etc. 3 The client is aware of his total financial commitment from the outset. 4 Close intercommunication between the contractors design and construction teams promotes co-operation in achieving smoother running of the contract and prompt resolution of site problems.

Disadvantages:
1. Variations from the original design are discouraged by the contractor and, if allowed, are expensive. 2. The client has no means of knowing whether he getting value for money unless he employs his own independent advisors, which adds to his cost. 3. If the contractors organization is relatively small, he is unlikely to be as expert on design as he is on construction, and the resulting building may be aesthetically less acceptable.

contract EMPLOYER

Warranties with specialists

contract AGENT/ ADVISER control CONTRACTOR

DESIGN TEAM

contract

contract

DOMESTIC SUB-CONTRACTORS

B. MANAGEMENT CONTRACTNG
The main characteristics of management contracting is that the management contractor does none of the construction work himself but it is divided up into work packages which sub-let to sub-contractors, each of whom enters into a contract with the management contractor. The management contractor is nominated by the client on the basis of the contractors previous experience or is selected by competition based upon tenders obtained from a number of suitable contractors for (a) the management fees and (b) prices for any additional services to be provided before or during the construction period. The successful contractor will then enter into a contract with the client.

The management contractors role consists of providing a construction management service on a fee basis as part of the clients management team organizing, co-ordinating, supervising and managing the construction works in co-operation with the clients other professional consultants.
Further, he provides and maintains all the necessary site facilities, such as offices, storage and mess huts, and power supplies and other site services, common construction plant, welfare, essential attendances on the works contractors and dealing with labour relation matters.

Advantages: 1.Work can begin on site as soon as the first one or two works packages have been designed. 2.Over lapping of design and construction can significantly reduce the time requirement, resulting in an earlier return on the clients investments. 3.The contractors principal knowledge and management expertise are available on to assist the design team.

4.Where the nature and extent of the work may be uncertain, as in refurbishment contracts, the design of latter work packages may be delayed until more information becomes available as the work progresses, without extending the construction period. 5.The contractor, being part of the clients team, is able to identify with the clients needs and interests. 6.Because works contracts are entered into close to the time of their commencement on site, they can be based on firm price tenders.

Disadvantages:
1. Uncertainty as to the final cost of the project until the last works contract has been signed. 2.The number of variations and the amount of remeasurement required may be greater than on traditional contracts because of the greater opportunity to make changes in design during the construction period, because of problems connected with the interface between packages are sometimes let on less than complete design information.

contract EMPLOYER

Warranty contracts contract PROFFESIONAL TEAM MANAGEMENT CONTRACTOR

contracts

WORKS CONTRACTOR

(C). CONSTRUCTION MANAGEMENT (Sometimes called the Separate Contract System). Construction Management is not a procurement system in itself but is only part of the total progress. It is a professional consultant service to the client, provided on fee basis, with the design and construction services being provided by other organizations. The construction manager is responsible for the organization and planning of the construction work on site and for arranging for it to be carried out in the most efficient manner. The construction work itself is normally carried out by a number of contractors, each of whom is responsible for a defined work package. All the work packages together constitute the total project. Each works contractor enters into a direct contract with the client.

Advantages: 1. The construction work is more closely integrated into the management of the project. 2. Close liaison between the construction manager and design manager leads to prompt identification of and decisions relating to practical problems. 3. Detailed design can continue in parallel with construction, work packages being let in succession as the design of each is completed, thus shortening the project time. 4. Privity of contract between the client and each of the works contractors provides the client with a readily means of redress in the event of difficulties, such as delays,

Disadvantages: 1. The client has one more consultant and a number of contractors with whom to deal instead of only one main contractor. 2. The clients financial commitment is uncertain until the last of the works contract has been signed.

contracts EMPLOYER

contracts

control

CONSTRUCTION MANAGER

control

DESIGN TEAM

TRADE CONTRACTORS

(D). PROJECT MANAGEMNT.

Project management is not a procurement system; it does not include the site construction process but only the general supervision of the works. It has been defined by the RICS, as: The overall planning, control and co-ordination of a project from inception to completion aimed at meeting the Employers requirements and ensuring completion on time, within cost and to required quality standards. Quantity Surveyors, by their training and experience in financial and contractual matters and with a detailed knowledge of construction processes, are qualified to offer a project management service.

The project manager is the clients representative, with authority to supervise and control the entire planning and building operation from acquisition of the site to completion of the project and settlement of the accounts. The services provided by a project manager is planning, organizing and co-ordinating the services provided by surveyors and lawyers in relation to site acquisition; the architect, engineers and quantity surveyor in relation to project planning and design; and the contractor and subcontractors in carrying out the site construction work; but does not include the carrying out of any of their duties himself.

(E). JOINT VENTURE.

This is an arrangement for building procurement, which has developed out of the increasing complexity of construction projects, often with unorthodox methods or sequences of construction. It is applicable to large-scale projects, where there is a higher than normal proportion of engineering and other specialist services. A partnership between two or more companies covering building, mechanical and electrical engineering, or other specialist services for the purpose of tendering for, and executing a building or civil engineering contract, each of the participating companies having joint and several liability for their contractual obligations to the employer.

The basis of such projects is a single contract to which all the partner companies to the joint venture are signatories. Any of the standard forms of contract in current use may form the contract documents.
Modifications will need to be made to cover joint and several liabilities of the participating companies and to provide for any performance warranty, which the Employer may require. Joint venture has the effect of making specialist contractors, who under more orthodox arrangements would be sub-contractors, partners with the building contractor. This does not preclude the use of sub-contractors, a role, which is filled by secondary specialist contractors who are not partners in the joint venture.

Advantages:

1.The combined resources of participating companies result in greater economy in the use of specialist manpower, design and equipment.
2.There is greater degree of unified action between the contracting parties. 3.Lines of communication between the Employers professional advisors and the building contractor and specialist contractors are shorter and better defined. 4.Improved integration of work sequences results in a shorter

1.If one JV partner withdraws, the remaining partner or partners must accept total liability to complete the project. 2.A separate, unified JV bank account must be arranged and maintained by all the parties. 3.Separate insurance policies must be taken out on behalf of all the JV partners, specifically for the proposed project. 4.A board of management with a single managing director needs to be appointed jointly by the JV partners to ensure

Several variants of the Joint Venture are as follows: BOO -Build, Own and Operate BOOT -Build, Own, Operate and Transfer BOT - Build, Operate and Transfer BOOTT -Build, Own, Operate, Train and Transfer BTO -Build, Transfer and Operate BRT -Build, Rent and Transfer

MOT-Modernise, Operate and Transfer

Any Questions ?