Procurement Systems in Construction Projects
Nearly for the last two decades and five years, there hasn’t been any clear change in the procurement methods of construction projects. Despite all these, time and cost do change more often in this business arena (smith et al, 2001). Many attempts to come up with more efficient procurement systems have been tried but still there are several sets of disadvantages and advantages that do accompany any of these procurement methods. This in turn affects all the players in this arena starting from the developer to the end user consumer. When selecting a procurement system, it is very vital that the goals and objectives of the client should be compared with the selected method to ensure they match.
This report gives detailed information about three procurement systems. The research furthermore tries to highlight the various recommendations for each specific procurement method. In this case therefore, not every type or form of procurement systems is right for a certain project (Qing Chen et al, 2016, p.142). It is important therefore to note that analyzing the needs and characteristics of procurement system is rudimentary. I the same line, it is also necessary to know the major functions that are involved in a construction project which are designing, building, the art of management , finances and mode of operation.
The existence of an organizational system which majors in the assignment of specified responsibilities to people and organization is what can be termed as procurement system or delivery system. It is thus responsible for defining certain constrains in the construction project (Holt et al. 2000 p.57). Procurement systems or methods can be grouped as;
- Design and construct (integrated)
- Management procurement (packaged)
- Collaborative, joint venture/ partnering (relational)
In this case, the choice of the procurement method to be used by the client should be underpinned earlier before the commencement of the project. Before the selection of the procurement system, it is also important to assess both the risks and benefits associated to them and how they can affect all the players i.e. the developer, contractors, consultants to the end user. The figure below shows the speculated risks associated with the procurement methods.
Characteristics
This type of procurement method involves the contractor taking the responsibility partly or of the whole design. In this case, the contract should contain the extent of design liability clearly stated not unless the contract states otherwise. It is also good to note that the design contains absolute or total liability through which the contractor is supposed to warrant for the intended course of action. This type of procurement method can sometimes limit the design liability of the contractor so that they can put into practice reasonable skills and skill. In this kind of procurement, the consultants who are involved by the contractor only have a normal liability. Thus, the acceptance of liability must be backed up by adequate indemnity insurance.
It is also necessary to state the requirements of the client in a simpler and brief manner. This necessitates the need of restricting the contractor’s input to taking the design scheme brought by the client so that he can develop the details and production information. They tend to offer certainty on the contract sum thus bringing cost benefits.
Design and Construct Procurement
The main advantage of design and contract procurement to the client is that it allows them to specifically deal with one firm and thus help in reducing the need to decentralize resources and time to contracting designers and contractors on a separate basis. This intern allows the client to manage his resources in an easier manner. It is also advantageous to all the parties involved since the price is certainly obtained before construction commences since the end user requirements are specified and changes re not introduced. The presence of guaranteed maximum price with a saving option has the abilities of stimulating innovation thus reducing time and cost of the project (Love et al, 2006 p 33).
The existence of overlap of design and construction activities has the ability to help reduce the project construction time thus being of benefit to both the contractor, consultant and the client. In addition to this, design and construct procurement necessitates the improvement of constructability due to the input of the contractor in the design (Yong et al, 2012, p19).
Negative aspects/Disadvantages of construct procurement
The client can have trouble in preparing an adequate/ fully detailed and sufficient brief. It can also be very costly when the client wants to change the scope of the project. It is disadvantageous on the side of the developers and contractors especially when forwarding bids since project programs will vary and they will also contain different prices. More so, it can be disadvantageous for the single organization taking the contract since it has to bare all the risks for the design and construction (Love et al. 2006, p. 8).
The following recommendations are necessary for design and construct procurement.
- When the building to be constructed is functional rather than for prestigious purposes.
- This method should only be used when a single organization is required to take the responsibility for the design and construction.
- When the brief of scope is expected to change or deviate at any moment.
- In the case where the building to be constructed is simple and does not require technical innovation or complexity.
Management procurement does exist in various forms such as management contracting, construct management and design and manage (Love et al, 2006).. These types of management procurement do have slight differences. For management contracting, the contractor is in possession and in control of all construction work, in construction management, the contractor has to be paid a certain amount of money in order to manage the project professionally thus developing a program that can coordinate and control the activities of design and construction. The methods in this process include;
- Management contracting- It is the task of the client to select independent professional teams whose responsibilities are advising in making decisions during the preconstruction stage. They are also held responsible for executing the work during the commencement of the project. In order for this to work out, there should be a mutual trust between the client, consultant and contractor.
- Construction management- After a careful selection of the management contractor, they are paid a fee to manage the project. The difference between construct management and management contracting is that there is contraction of work. Even though they are managed by the management contractor, there is a direct link between the works contract and the client.
- Design and manage- This is very similar to management contracting the only difference is that the contractor is paid and thus assumes all the responsibilities for the design team and also for the work contractors.
Advantages/ positive aspects
It has the advantage of reduced confrontation between the design team and the team that undertakes the responsibility of supervising the construction since the client only deals with one firm thus leading to improved coordination and collaboration between designers and collaborator. It is an added advantage to both the contractors, subcontractors and the client given the fact that work packages can be let competitively at prices that are current. It is also advantageous since it the risks and responsibilities for all the concerned parties are clearly stated. The presence of public accountability and absence of nomination of trade contractor is also an added benefit to all the players.
Disadvantages/ negative aspects
It is not possible to determine the exact price of the project until the accomplishment of the project thus coursing lots of uncertainties to the parties involved. There is often poor price certainty thus coursing inconveniences. It requires close time and control of information which is quite hectic to both players. The client my end up losing direct control over the design quality since it is greatly influence by those undertaking the construction. It also requires a good quality brief that may be hectic for the client to develop.
- The client should only select this type of procurement if there is a high degree of trust and confidence since there is no initial capital before commencement of the project.
- It should be given priority if the nature of the project to be undertaken is complex, fast moving and completion is desirable.
- If the competitive tendering element needs to be retained for all work contracts.
Advantages/ positive aspects
Characteristics
Joint venture/ partnering procurement can also be called collaborative forms like alliancing. This type of procurement is majorly used in high and complex projects. Here, a new business project is thus created to which every party contributes resources. They are commonly used for enabling small scale organizations to deliver large projects by combining their skills, and also in gaining local knowledge in oversee markets (Love 2002, p. 4).
Positive aspects
The client can get quick access to the intended project objective since the contractors combine resources to achieve the stated objective.it is advantageous to the contractor since there is sharing of risks thus minimizing the losses that my occur. There is access to greater resources such as specialized staff, technology and finance. It furthermore facilitates growth and development of the firm without borrowing of funds.
Negative aspects
It can be very complex to partner with another business for instance forming relationships with a business that does not meet the abilities of your own business. It can be very cumbersome to build the right business relation thus can be disadvantageous to the client and the developer since it may lead to wastage of resources and time. The objectives of the venture may fail to match those of the client thus may be problematic to the project accomplishment.
This type of procurement method should be used if the nature of the project is complex and requires technical observations. It should also be considered when dealing with large and costly projects.
References
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Love, PED 2002, ‘Influence of Project Type and Procurement Method on Rework Costs in Building Construction Projects’, Journal of Construction Engineering & Management, vol. 128, no. 1, p. 18, viewed 4 October 2018, <https://search.ebscohost.com/login.aspx?direct=true&db=buh&AN=6673873&site=ehost-live>.
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Qing Chen et al. (2016) ‘Time and Cost Performance of Design-Build Projects’, Journal of Construction Engineering & Management, 142(2), pp. 4015074-1-4015074–7. doi: 10.1061/(ASCE)CO.1943-7862.0001056.
Ruparathna, R & Hewage, K 2015, ‘Review of Contemporary Construction Procurement Practices’, Journal of Management in Engineering, vol. 31, no. 3, pp. 1–11, viewed 4 October 2018, <https://search.ebscohost.com/login.aspx?direct=true&db=buh&AN=102143358&site=ehost-live>.
Wendell, L. K. and Glinn, M. J. (2008) ‘Florida Law Concerning Local Government Construction Contracts: Overview of Procurement Methods and Project Delivery Systems’, Real Estate Finance Journal, 24(2), pp. 64–68. Available at: https://search.ebscohost.com/login.aspx?direct=true&db=buh&AN=34165397&site=ehost-live (Accessed: 4 October 2018).
Wislocki, P. (no date). Available at: https://search.ebscohost.com/login.aspx?direct=true&db=aft&AN=504994227&site=ehost-live (Accessed: 4 October 2018).
Wood, G. D. and Ellis, R. C. T. (2005) ‘Main contractor experiences of partnering relationships on UK construction projects’, Construction Management & Economics, 23(3), pp. 317–325. doi: 10.1080/0144619042000287714.
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