Procurement Strategy for a Construction Project

Introduction

To select a suitable procurement strategy for a construction project, there are some issues which need to consider. From all of those issues, there are 3 big issues that mainly affect the selection decision which are time, cost and quality. There is several type of procurement strategy available in market that commonly used for construction project and each of the common method will be analyze and compare to find the most appropriate method for this project.

The choice of procurement strategy is very important to the success of a construction project. Therefore, the characteristic of each strategy have to analyze and also its relative advantages and disadvantages. A recommendation of most appropriate procurement strategy will be made after analyzed the all factor that affect the procurement selection.

Report

Background of project Project type : Office and Store Client: Robert Gordon University Source of fund: Public Funding Time length: 12 months Time for construction : 8 months Time for full design, BQ and tendering: 7 months For this office and store project, there are numbers of procurement strategy which is commonly used and suitable for it. The types of procurement strategies are as below :

1.Traditional Lump Sum Contracts

For this type of contract, contractor and design team are two separated body which respond directly to the client. Client hires the design team and select the most suitable a main contractor to carry out the whole project. Normally, for this type of contract, all the drawing and document had completed before the selection of contractor.

Advantages :

  • Price certainty
  • Good quality of work
  • Changes can be evaluated

Disadvantages :

  • Take longer time because have to wait the design team to complete full design before go to tender stage
  • Claim of delay may happen due to design not fully detailed.
  • Poor communication between the design team and contractor.

2. Management Contracting

This type of procurement strategy is a ‘fast track’ strategy. Client pays a sum of money to hire a management contractor to manage the whole construction project. Therefore, some early work can be carried out before the design is complete. The contract for the construction projects are between the management contractor and sub contractor. The final cost for the project can not be identified until the final work has been awarded.

Advantages :

  • Shorter construction time
  • Management contractor can advise client during the design stage
  • Some risk can be transfer to management contractor

Disadvantages :

  • Pre construction price uncertainty
  • Delay of works may occur due to ineffective management.

3.Contract Management

Another ‘fast track’ strategy where work can be carry out before the design is complete. Construction manager is appointed in early state may benefit to the client. For this strategy, client have direct contract with the trade contractor. Same as management contracting, the final cost for the project can not be identified until the final work has been awarded.

Advantages :

  • Suitable for project with high level of complexity
  • Client control the design
  • Change of design has little impact on the project time table
  • Direct contract with sub contractor can get a lower price

Disadvantages :

  • Pre construction price uncertainty
  • Most of the construction risk falls on client
  • Construction manager has little risk
  • Client has to be experienced in order to undertake this type of contract

4. Design and Build

For design and build strategy, the only main contractor will undertake both design and construction responsibility. Client provides contractor the specification of the building for the contractor to design and build. Normally, the work carried out will achieve the minimum requirement. In some cases, this type of procurement is extended to cover maintenance and operation of the building for a substantial period.

Advantages :

  • Low tendering and design cost
  • Most of the risk falls on contractor
  • Early completion

Disadvantages :

  • It can be very expensive if client change the scope of project during construction
  • Client has little control on design and quality of work
  • Not suitable for project with high level of complexity

For the tendering procedure, the type available for contractor are :

Open tendering: All interested contractor company can submit tender.

Restricted/Selective Tendering : Only those contractor company with tender invitation can submit tender.

Negotiated Tendering : available in two forms

  • competitive – available with limited condition in the regulation, client can negotiate the term of contract with tenderer
  • without a call of competition – only available with the most special condition in the regulation

Conclusion

Each of the procurement strategy has its own advantages and disadvantages. In order to get the most suitable strategy for this particular project, it is necessary to look for the background of the project. Other than that, the appropriate type of tendering also has to be select for this construction project. Both procurement strategy and type of tendering are important and it may lead to construction failure if wrong decision had made. As a conclusion, client has to clear and understand about each type of procurement and tendering procedure to select the best type of contract.

Recommendation

After analyzed each type of procurement strategies, it is recommended to adopt Design and Build strategy. The reason this type of strategy is strongly recommended is because the primary factor to consider for this particular project is time. The background of the project identified that the project have to be completed in 12 months duration from today. Yet, the architect needs 7months time to complete the full design, bills of quantities and tendering. Therefore, traditional method is no longer suitable due to lack of time to construction which after the 7 months of design and tendering, only 5 months left.

The management contracting and contract management are most suitable in this case because the secondary factor to consider is cost. Due to the client, Robert Gordon University is a public funding type, the value of money is very important. Therefore, management contracting and contract management strategy which need extra fees are not suitable for this project. Design and build is the most suitable procurement strategy to be adopted because it saved up the time and cost of design.

Regarding the type of tendering, it is recommended to use Restricted/Selective Tendering because this is the best way to select a most suitable contractor to handle this project and at the same time, to insure the quality of work is good by invite those experienced and good reputation contractor.

References

  • S. RATNASABAPATHY & R. RAMEEZDEEN (2006) A multiple decisive factor model for construction procurement system selection [online] London : Royal Institute of Chartered Surveyors. Available from : http://www.rics.org/NR/rdonlyres/69EBAB3D-7830-4FC8-B1E7-75AE6CC7BAC6/0/COB06Ratnasabapathy_Rameezdeen.pdf [ Accessed 18 April 2008]
  • THE SCOTTISH GOVERNMENT (2005) Construction work procurement guidance, [online] Scotland : The Scottish Government . Available from : http://www.scotland.gov.uk/Publications/2005/11/28100404/04095#1a [ Accessed 19 April 2008]

Bibliography

  • S.KENNEDY & A. AKINTOYE (1995) Quantity Surveyors’ role in design and build procurement method, [online] London : Royal Institute of Chartered Surveyors. Available from : ttp://www.rics.org/NR/rdonlyres/F9C84EA0-C08A-40BE-8273-A433160D62FB/0/quantity_surveyors_role_in_design_19950901.pdf [ Accessed 18 April 2008]