Sample Paper on Procurement Methods of Construction

Executive Summary

Multiple methods of procuring building projects exist thus giving a client the room to select the most suitable for them depending on their objectives and priorities. Customers experience a rough time when choosing the ideal method especially because their goals have to rhyme with the selected approach in order to achieve project success. Decision-making regarding the strategy to use should take place early besides acknowledging the possible risks involved and how they can impact the business. The report will discuss three categories of procurement systems namely traditional, design and construct, and management. The paper shall also explore the advantages and disadvantages of each method besides the circumstances where each is best applicable.

Traditional Procurement

The traditional approach involves the employer treating construction and design work as two separate entities. The consultants are responsible for handling design and cost control on one hand whereas the contractor is responsible for performing the works. The contractor performs different functions such as controlling the workmanship and materials as well as managing the suppliers and subcontractors (Nam et al. 128). The employer appoints the contractor through the competitive tendering process on complete information. However, in some instances, clients prefer to select the contractor in advance through a negotiation procedure on either national or partial information basis.

The procurement approach, also known as Accelerated Traditional Method can use two options namely the two-stage or negotiated tendering. The term accelerated means that design work and construction can take place at once but up to a certain limit. The approach is time-saving since operations can start earlier on the site (Nam et al. 129). However, it is disadvantageous since it is hard to estimate the project’s cost. The traditional procurement method involves three types of contract namely; cost reimbursement, measurement, and lump sum.

Lump Sum Contracts

The contractor estimates the total cost of the project before the onset of construction and both parties agree on the same. The employer defines the work at hand, and the contractor gives a quotation for the same. The amount could be fixed meaning the employer cannot ask the contractor to recalculate the cost of the work performed. Moreover, the employer has no room to propose changes for the project and has to abide by the initial agreement. However, the sum can accommodate limited fluctuations such as tax charges unforeseeable during tendering (Nam et al. 131). If there are changes in labor or plant costs, the sum has to fluctuate as well where invoices guide in making corrections, or both parties can use a formula to readjust the initial amount.

Measurement Contracts

The contractor handles the project to completion and then calculates the total cost incurred in the construction but has to re-measure according to the agreement with the employer. Another term for this type of contract is re-measurement contracts. In this case, the contractor cannot estimate the total cost of the project before tendering. The approach is most appropriate when no time is available to prepare or approximate quantities or where it is difficult to quantify the work (Oladirin et al. 60). The employer is at risk for starting work without an idea of its eventual cost. It is thus advisable to use this approach when the job at hand is small.

Cost Reimbursement

Also known as Cost Plus, the project cost takes into account the actual expenses incurred such as labor and an additional amount to cover overheads and profit. Employers hoping to employ the traditional procurement method must bear in mind some considerations, for instance, matters of valuation and payment remain the responsibility of the project owner’s consultants. It is the right of the employer to decide the specialist firms the contractor will use. However, the contractor might demand to see the selected company’s performance safeguards (Nam et al. 133). The contractor cannot move at the agreed pace if the architect delays in giving instructions and information. Once the employer has delegated the matters of cost and design to the consultants, it becomes their sole responsibility to control both quality and desired design.

Advantages

The method gives room for the contractors and consultants to be familiar with each other. As a result, they understand each of their roles well which further contributes to successful projects due to teamwork. The competitive tendering process helps the client to obtain the best prices in the market. The customer has the assurance of the project meeting their interests since the consultants play the role of advisors as well as independent certifiers. However, the client has to develop the design thoroughly and eliminate all the uncertainties before inviting tenders (Nam et al. 134). In the case where the employer needs to introduce some variations in the project, the approach can accommodate changes. The client can control the quality of works thus achieving a desirable outcome.

Disadvantages

The approach is time-consuming, and it takes long before the project can kick off following the slow selection process of the consultant engineer and contractor. Carrying out the design also delays the project completion. It is a risky approach more so to the client if mistakes occur in the project’s design. It is tiresome for the customer who must coordinate with many consultants (Nam et al. 134). In most cases, the contractors are quick to give a lower quotation for the works since they are desperate to win the tender instead of asking for the right amount that reflects the task at hand. The approach leaves out the contractor in the design process meaning the professional does not need to “buy in” to the design. The method encourages the use of provisional sums and empowers the architect to give additional instructions which can lead to price escalations (Nam et al. 135).

When to Use the Traditional Approach

The traditional approach is appropriate when the project program is lengthy thus allowing for an extended designing process at the initial phase. It is also an ideal method when balancing the risk between the client and constructor (Nam et al. 129). It works best when the employer wants to be certain of the project’s total cost before construction starts. The traditional method is most suitable when the customer wishes to have both the designer and contractor as separate entities.

Design and Construct Procurement

The contractor becomes responsible for all or part of design work, and the contract must clearly outline this agreement including the extent of liability. The contractor has an obligation to develop and build the project while paying strict adherence to the specifications of the client (Ndekugri and Turner 247). Theoretically, the design and construct approach has a single point of responsibility since the employer deals with only one party who takes all the blame if things go wrong. However, when it comes to practice, the single point of responsibility does not apply since the contractor follows the detailed specifications of the client to the word leaving them with little room to make own contributions to the design. As a result, their liability to the design diminishes since the outcome is a representation of the employer’s interests.

Advantages

The client needs to deal with a single firm which saves resources and time since it is unnecessary to hire designers and contractors separately. It is possible to get the right price estimates for the entire project before it kicks off since the client specifies their recommendations early enough leaving them with no space to request for changes once the project is in progress. Using a guaranteed maximum price that includes a savings option spilt is an ideal way of fostering innovation besides saving both time and cost (Ndekugri and Turner 250). The project time can be shorter following the overlapping of design and construction work. The fact that the approach allows for the incorporation if the constructor’s input helps in improving constructability.

Disadvantages

It is a tiresome exercise for the employer who has to prepare an adequate comprehensive brief. The client might experience difficulties with the procedure which could mean missing out vital details they would like incorporated into the project. When the customer introduces some alterations to the project’s scope, it increases the overall cost. The approach demands the client to accept a concept design during the initial phase of the project when the detailed plans are yet to complete. As a result, the employer might feel dissatisfied with the outcome (Ndekugri and Turner 251). The client cannot hold the contractor liable for the design mistakes beyond the specifications of the available standard contracts. The process of comparing bids is tedious and challenging since every model differs with the rest. Moreover, every bidder suggests a different project program besides price quotations varying with each design.

When to Use Design and Construct Procurement

The design and construct procurement approach is appropriate when the project at hand is more functional-oriented than prestigious. It is the best method to use when the employer wishes to have a single person taking responsibility for the risks involved in design and construction. In this case, the contractor is solely responsible and is answerable to the client for any inconveniences (Ndekugri and Turner 249). The design and construct procurement model is also ideal when the customer has not finalized the brief for scope design and is likely to incorporate further changes. The method is also appropriate where the project at hand is a simple rather than a complex building. Structures that do not need technical innovation or high servicing can also benefit from using this method of procurement.

Management Procurement

The different types of variants under this method of purchasing include management contracting, design and manage, and construction management. The distinctions between these methods are not significant. For instance, in management contracting, the contractor associates directly with other contractors and oversees the construction work. Construction management, on the other hand, involves giving a fee to the contractor in exchange for professional services in managing and developing a program besides coordinating all design and construction work. The contractor also promotes collaboration vital in achieving project constructability (Oladirin et al. 57).

The construction management (CM) approach has several benefits such as improved collaboration among the design and supervisory teams which reduce confrontations. Further, the method allows the incorporation of construction management expertise during the initial phase of the project. It is time-saving since both design and construction activities run parallel to each other. The number of contract variations arising is limited. The design and manage technique has a close resemblance to management contracting since it involves paying a fee to the contractor to oversee both the work contractors and the design team. Management procurement is ideal when the project is large and complex, and the client would wish to take minimal time to complete (Oladirin et al. 54). The appointment of the management contractor should happen during the initial stages of the project. As a result, they can offer their expertise advice to the design team during the pre-construction period.

Advantages

The benefits associated with employing the management procurement method include the flexibility to incorporate changes to the project layout. Further, all the parties involved with the project are clear about their roles, risks, and responsibilities which further reduces confusion at the site. Since the constructor contributes to the project design, the structure achieves an improved constructability (Oladirin et al. 51). The client engages a single firm which translates to improved coordination between designers and builders. The project does not run for an extended duration since design and construction activities overlap which saves time.

Disadvantages

It is impossible to achieve price certainty before letting the last works package. The client does not exercise direct control of the design quality since the constructors come on board to develop and manage. The method demands a tight control over both time and information besides delivering unsatisfactory price certainty (Oladirin et al. 49). The client has to be informed and proactive, for instance, they have an obligation to present a quality brief to the design team since the design cannot complete before availing the necessary resources for the task.

Conclusion

Construction projects can embrace different procurement methods such as traditional, design and construct, and management. Each of them has its ups and downs, and it is upon the client to weigh both sides and determine if the approach is viable depending on their goals. Moreover, each of the methods suits different projects, for instance, the design and construct procurement approach is appropriate for functional-oriented projects than prestigious ones. On the other hand, the traditional approach is appropriate when the project program is lengthy thus allowing for an extended designing process at the initial phase. The management procurement method is ideal when the project is large, and complex and the client would wish to take minimal time to complete. It is thus the obligation of the customer to find a consultant who guides them to choose the best procurement strategy that rhymes with their objectives.

 

Works Cited

Ndekugri, Issaka, and Adrian Turner. “Building procurement by design and build approach.” Journal of Construction Engineering and Management 120.2 (1994): 243-256.

Oladirin, Olugbenga Timothy, Samuel Olusola Olatunji, and Basir Tomiwa Hamza. “Effect of selected procurement systems on building project performance in Nigeria.” International journal of sustainable construction engineering and technology 4.1 (2013): 48-62.

Nam, Hye-Won, et al. “A Study on the Selection Method of Project Procurement System based on Owner’s Requirement.” Korean Journal of Construction Engineering and Management 10.1 (2009): 126-135.