Construction procurement methods pdf

The main procurement method that falls under this category is the design-bid-build. This traditional procurement method is popular in construction Love, because it is simple and all parties understand their roles and obligations.

However, construction risk is mainly borne by the contractor Oyegoke, Completion of the design in advance allows for greater certainty of cost of construction Bramble, The integrated approach refers to a situation where a single organisation takes responsibility for design and construction work with the client dealing with only one organisation Masterman, There are variations of this procurement method such as novation, design and build, and partnership, which are distinguishable by the different levels of risk allocation and information handling.

Partnering, on the other hand, tries to reduce conflicts through an improved form of dispute resolution and innovative management techniques Sakal, In the management approach, the management function involves a construction project management organisation that works with both the designers and the contactor Masterman, Some of the procurement methods under the management approach include design, build and manage, build-own-operate-transfer BOOT , construction management, and management contracting.

In design, build and manage and BOOT contracts, the service provider is responsible for design, construction, finance, operations and maintenance of the project Arndt, Characteristics of different procurement methods are summarised in Table 3, which reveals some interesting aspects about procurement methods where collaborative procurement methods have positive impact on profitability, time flexibility and risk and controllability but lead to a complex operational framework.

Identifying which procurement method is suitable for a particular project is vital for overall productivity of the project. It is one of the most important decisions that a project owner makes in the development of a project Naoum, Suitability of LC principles in each procurement type is determined by using two approaches.

The first is ascertaining the existence of LC principles in the selected procurement method, and the second is where a judgement is made on whether there is a favourable environment to apply LC principles. In this way, a suitability matrix is produced from principles of both LC and procurement methods. The matrix is presented in Table 4.

The separated approach design-bid-build in construction project procurement is in common use in the construction industry because of its simplicity Bramble, ; other methods contain complex frameworks for payment criteria, dispute resolution and management structure Quick, As observed generally all procurement methods except partnerships are used to achieve value for money under price-based competition.

This can lead to adversarial contractual relationships among different parties. On the other hand, the methods do not provide incentives for value addition or waste minimisation. The commercial core of partnership arrangements is the setting up of relationships based on quality improvement and reduction of underlying costs by taking out wastes and inefficiencies Cain, Therefore, it can be seen that customer focus, system thinking, culture and people development, work flow management and performance measurement principles feature more in partnerships.

Since strategic alignments are addressed only in partnership contracts, there is a possibility for implementation of continuous improvement principles. There seems to be no clear incentive for other project participants to contribute to delivery of client requirements or any improvements in the design or construction process.

In management contracting, all contractual risks are transferred to the construction manager, meaning that the possibility for disputes exists, with less priority given to customer requirements.

All integrated procurement methods novation, design and build and partnership and some management procurement methods design-build-manage, build-own-operate-transfer involve collaboration and decentralisation of decision making. It is doubtful whether these procurement methods provide for enough decision making authority to lower tier participants, which is necessary for adoption of lean principles. In construction management and management contracting methods, decision making mainly rests with the project owner Rashid et al.

The authors believe collaboration for the exchange of project specifications and work information among supply chain participants improves process transparency. This can be achieved through early collaboration, which is available in novation, design-build, partnership, design-build-manage and build-own-operate-transfer procurement methods. Other aspects of lean principles which are lagging in the partnership method include the continuous improvement culture and people development. These aspects can be implemented and practiced through innovative contractual arrangements where there are mutual benefits for owner participants and non-owner participants designers, contractors or suppliers are referred to as non-owner participants.

However, generally, partnerships can be expected to facilitate implementation of lean principles better than other traditional procurement methods. This can be attributed to the collaborative culture imbibed in the partnership method. It is worthwhile to improve partnership contracts with client collaboration, using a set of strong, mutually held core values and guiding principles. From a relationship management perspective, partnerships seem more in tune with lean implementation.

Partnerships encourage relationships that cover both external and internal project participants, with a strong focus on collaboration and systems thinking sub-principles.

Internally, partnerships encourage culture and people development sub-principles as well. Apart from the integrated approach of procurement methods, the other two systems, namely, seperated and management approach, allow one party to impose its view on other parties, which can result in adversarial relations.

These relationships create more conflicts and disputes which cause waste and are, therefore, contradictory to lean principles. Hence the seperated and management type procurement methods can undermine the application of lean principles. Lean Construction Reading Primer. An assessment of clients' performance in having efficient building process in Uganda. Journal of Civil Engineering and Management, 14 2 , 73— Arndt, R. Victoria, Australia: The University of Melbourne.

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Miles, R. Following through the process of the model, client will then be gauge and guided towards their receptiveness and state of readiness to embrace new practice within procurement. The model shall then examines the different procurement choices based on the factor wider than cost, time and quality criteria. Additional aspect such as protecting the supply chain shall also be considered along with other government initiative and best practice.

For the first part of the model, the client will first need to determine the sort of project which is to be funded. A construction project can refer to any building activity such as refurbishment, repair, maintenance, and alteration, installation of machinery or building a new building or even a stadium. Once the project have been selected, the size of the project will then be required to be determine.

All of these rationale approach is categorize under the factor which is the project characteristic. External factor should also be considered when the project is expected to be constructed in long term. These factor can comes in term of changes of interest rates, legislation or economic decline. Greenhalgh B commented that although the client might be commissioning the building, they might not be familiar with the working of the construction industry.

The construction industry is not like the automotive industry where projects is designed and produced separately on different sites, at different times and with different requirement. Therefore, the client resources will then be needed to be considered. An experienced client such as the government or large private companies will generally have: 1.

Detailed knowledge and understanding of the construction industry and its procedure 2. The ability to produce a comprehensive initial brief incorporating prioritised objectives for the cost, timing, quality and functionality of the project 4. Expertise in the overall management and control of construction projects and of construction consultants and contractors 5.

The employment of in-house construction managers and sometimes designers of various construction disciplines 6. A desire to be constructively, consistently and continuously involved during the life of the project without detriment to the power, responsibilities and the status of the appointed consultants or the contractors 4. The construction industry is no stranger to risk and deciding upon the procurement route will decide on how the risk might be distributed.

This method of procurement have the theory design and construction seen as separate elements. Collateral warranty will be needed between the client and sub-contractor if the client decided to select his choice of sub- contractor.

The contractor is chosen through competitive tendering or negotiation if they need to be appointed earlier with the full set of document. Negotiated tendering can enable an early start on site but provide less cost certainty. The design and construction of the project can run in parallel but only to a limited extent.

Using the lump-sum payment method will provide certainty of cost before the works begin. Other methods such as cost approximate quantities and etc can be adopted but will have less cost certainty. There will be cost and time certainty as the contractor awareness of current market condition can ensure the contract runs smoothly, economically and expeditiously.

The contractor can start the work early since detailed design work can proceed in parallel with the construction. If the aesthetics of design is considered less important than performance and cost certainty, client may opt for the engineering construction and construction contract. If the client wants to appoint their own trade contractor, client may opt for the engineering procurement and construction management contract.

The project is basically managed by the contactor and depend on a high degree of confidence and trust. Like the design and build procurement, detailed work can be left to be proceed in parallel with site operation. Since management procurement is used for large, complex and fast moving project, the contractor and its staff need to be familiar with the sophisticated technique for dealing with the coordination of large number of work contract and also in providing a service in the interest of the client.

Traditional method is still deem suitable in this case. On large scale project, the preferred procurement route is partnering. Since traditional method have been available for such a long time that it have become the most understood procurement method. As such, traditional method might be used for high value project which seem least suitable causing an overrun of budget and time as seen in the Wembley stadium case when it cannot adapt to the changes that arose in the design stage.

In design and build procurement, risk is transferred to the contractor with a single point of responsibility. Traditional procurement have a balance of risk distribution but might differ depending on which payment method the client decided to use. In management procurement, the client holds the risk but have a considerable degree of flexibility on design matter which can comes at the expanses of cost.

The first action of using an amended form of contract is to pass it to a legal advisor. The standard form of building contract is detailed and comprehensive with relevant guidance based on authoritative legal opinion therefore the risk allocation is mostly balance. JCT form is widely used since it have a unique distinction product of tribunal with representation of profession, the industry and client body. An example is selecting the JCT minor work contract form for small project. As covered by Frank J and CIOB , government still plays a major role in the construction industry and the best method to promote new contractual is through government incentive.

One such incentive is the Public Contract Regulation which is aim to safeguard the supply chain through a 30 day payment. Practicing open book accounting or using the project bank account will enable client the ability to safeguard their supplier or subcontractor. This would also prevent contractor from earning a profit through subcontractor. Usage of BIM is a disruptive technology and will certainly be the future of collaboration in construction since BIM is able to enable new and more efficient of working at all stages of the project life-cycle.

In addition to that, UK government is also pushing toward collaborative framework by having early contractor involvement, transparency and integration. The government have then initiated three new method of procurement which are cost led procurement, integrated project insurance and tow stage open book. All these method is set out to obtain the best value for money construction by having a realistic cost benchmark.

IPI is the solution where a single policy covers all the risk. Besides having the best value for money, sustainability is also a major concern as Dutil have researched and recognised that the construction industry is responsible for large portion of waste produced worldwide. This process should be simple to be completed and focused so that tenderer can assess whether or not they have the appropriate experience, capacity and financial standing. The process of selecting the tender can be open, selective or negotiated.

Once the choice have been made, to decide whether to have a single stage, two stage or three stage tender. If complete and full document is possible a single stage can be opt.