The Procurement Law of 2006 - Coursework Example

? Procurement work 10/15 Executive Summary The Principal of Heriot Watts is contemplating of build a new auditorium, with 200 seats, high specification multimedia theatre with air conditioning and comfortable tiered seating that can provide excellent visibility. The auditorium will feature a full size interactive screen and computer driven presentation facilities perfect for conference, lectures and presentations. In response to the requirements; the following report was organized for consideration by the Principal. This report demonstrates a strategic approach to procurement while differentiating the proposed approach against the other procurement routes. This report covers the potential benefits of adopting this alternative procurement strategy, examination of advance procurement practices suitable for the project and an evaluation of what factors would influence in the development of the proposed procurement strategy. Table of Contents Executive Summary 1 Table of Contents 3 Introduction 3 A Strategic Approach to Procurement 5 Factors Influencing the Development of a Procurement Strategy 6 Critical analysis of different procurement Methods 8 Traditional Route 9 Design and Build 9 Management Contracting 10 Construction Management 10 Novation 10 Two Stage Tendering 11 Develop and Construct 11 Design and Manage 12 Partnering 12 Private Finance Initiative/Public Private Partnerships 12 Recommended Strategic procurement Approach 13 References/Bibliography 14 Introduction The Procurement Law of 2006 was the government’s response to Sir Latham’s report that was published in 1994 and Sir Egan’s Report that was in itself published in 1998. The Procurement Law of 2006 was designed to prevent the occurrence of a pre-Latham and Egan report state of the construction industry in the United Kingdom. Although enacted more than a decade later the Procurement Law was designed to arrest if not prevent a repeat of the era which was considered the lowest ebb the construction industry have experience in the United Kingdom. Although generally applicable in construction project where the government is the primary client, both reports take into consideration one important aspect in construction projects that is the satisfaction of the client. This report shall tackle the procurement process in construction that is designed to deliver projects that will not only address the needs of the clients but also satisfy the requirements of the other leading proponents of the project. This report shall describe the differences and nuances of the different procurement route that is available in the construction industry to achieve the common goals of the clients, the project proponents and the organization tasked to carry out the project to its completion. This report shall likewise attempt to design or come up with a strategic procurement route that could be a hybrid or a combination of the different procurement route that is available to better achieve the requirement of the Principal of Heriot Watt University (HWU). The client in this case the Principal of Heriot Watt University (HWU) is contemplating to build a new auditorium, with 200 seats, high specification multimedia theatre with air conditioning and comfortable tiered seating that can provide excellent visibility. The auditorium will feature a full size interactive screen and computer driven presentation facilities perfect for conference, lectures and presentations. In developing the best procurement strategy for this requirement a prime consideration would be the complimenting or convergence of technology and the civil construction aspect that would provide the best comfort for the auditorium’s users. A Strategic Approach to Procurement In previous years, the construction industry has taken a passive stance in the delivery of its service to its client that could be from the public or private sector. This resulted not only to failed projects but extremely dissatisfied clients even if the organizations tasked to construct these projects only followed what their clients wanted to the letter (Egan, 1998). In retrospect, this failed relationship has been doomed to fail from the start, due to the fact that clients do not have the expertise to apply construction practices, building technology or design and apply it to their business or operation (Latham, 1994). The Latham and Egan reports even though these have been written about twenty years ago have been very progressive in ensuring the continued escalation and advancement in construction practices to cater and respond to the clients’ need. In these day and age, it should not be the client and landscape who should adapt to the building but rather the building or the construction work should adapt to the requirements of the clients and the landscape. It should be noted that clients today are not only more sophisticated but they too are required to respond to their clientele or their primary source of business aside from responding and contending with the industry landscape the client is in. It is not only unfair to expect the clients to be conversant in construction design and project management but it is also most unfair to expect them to be acquainted with the science of construction. The core competency of organizations in the construction industry is in the design of buildings, project management and construction science it is their bread and butter, their specialization and most of all their expertise. It is therefore incumbent upon the construction industry to take charge in designing infrastructure not only to satisfy their clients’ visual desires but also to enable their clients to respond to its needs using the new infrastructure as its enabler. Factors Influencing the Development of a Procurement Strategy In the context of Heriot Watt University, their primary clients are their students and their secondary clients are the lecturers, professors or teachers. The primary purpose of Heriot Watt University is to ensure the maximum absorption of knowledge by its students, its assimilation and application in real life through lectures and teach-ins. To address and respond to the primary purpose of Heriot Watt University, it is essential that its infrastructure not only provide comfort to ensure that the minds of the students are focused in absorbing knowledge and not to contend and respond to other stimulus such as noise, discomfort brought about by bad ventilation and other distractions. Thus, it is necessary for infrastructures to be designed and constructed with the foregoing or essential aspects in mind. It should also be highlighted that Heriot Watt University has a secondary client as an institution that will enable it to be effective in responding to the needs of its primary clients. These are the lecturers, professors or teachers that will also use the facility to impart knowledge in the minds of the students. It is essential for the lecturer using the facility to have complete control of the technical facilities or tools of the auditorium at its fingertips. It would not only be a waste of time for these lecturers to run around the auditorium to access its different facilities. It would be a distraction for the students and the flow of the lecture but more importantly, it would be a distraction to the lecturer which could lose the attention of the students as the lecturer goes around the auditorium accessing and controlling the facilities. The need of Heriot Watt University itself includes cost of ownership of the building that will cover; electricity cost, fuel cost or the overall cost of maintaining the building itself including its cleanliness. The common requirements of all the stakeholders include the facade of the auditorium which should not only compliment the landscape of the Heriot Watt University but also promote its tradition and culture. It is likewise essential for Heriot Watt University to maximize its funds while achieving all if not most of the listed requirements above since the Principal is also answerable to the owners or board of directors of the university if not the people who funded of the auditorium. The above should be converged to the needs of the construction organizations as well. The design of the infrastructure should not only comply with fealty to the requirements of regulatory authorities but it should also be compliant to the different safety statutes that are mandated to be followed to the letter. The design of the building should also be responsive if not compliant with existing design standards that will enable it to withstand climate and environmental changes or be responsive to the requirements of environmental laws that will make the building either non-contributory to climate change stimulants or be part of the solution in alleviating or reducing climate change stimulants. The risks and project management aspect of the construction process should likewise be considered as well. The delivery of the construction materials the timing of its use including the staging area where these materials will be stored while awaiting its actual use should be considered as well. The execution of the project as well as safety and security of the population including the impact of the execution are all part of construction science that will be commissioned by the Principal of the Heriot Watt University. Considering the above the best procurement route which will respond to the enumerated demands from the clients should be a combination of: Another aspect to be seriously considered is the financing aspect of the project. Universities normally do not have any funds to finance real estate development project. They may have the land but the buildings are normally donated if not financed through fund raising ((Barr & McClellan, 2011). Thus it is an essential consideration to take into account into the project the fund raising aspect of the project. It is therefore recommended by this paper that a more strategic approach be considered in the selection of a procurement route in commissioning the construction of the auditorium. The strategic approach should take into account the foregoing to ensure that each aspect as detailed above is addressed if not accounted in full. Normally construction project is predicated with the availability of funds from the owners or proponent of the project. However, in this instance the availability of funds will come after determining the amount needed in the design phase of the project. Under the proposed construction as well, the design of the building will not be limited by the amount of funds available to construct the auditorium since the amount of funds available will be determined after the design is presented to possible funder. Thus, the ideal design will first be developed and then the funding will be generated or procured, then construction will follow afterwards. The funding requirement should be provided while adhering to the limitations of the charter of the university to avoid legal and regulatory challenges. Critical analysis of different procurement Methods The Principal of Heriot Watt University is presented with the following procurement routes that can be considered to address the requirements. It should be noted that the various procurement routes are designed to manage the risks associated with the project such as but not limited to the following: the project will not function according to the client’s need, quality, schedule and costs. The procurements routes will also allow the client to have an active participation in the process and in the process share the responsibility in managing or mitigating the risks. Traditional Route The inherent design in the process or procedure of the traditional procurement route is expected to take a longer time. The design portion of the traditional procurement route alone can extend from one year to five years. The bidding or tendering portions will also add to the delay and time frame in completing the project. There is an obvious disconnect with regards to the theoretical aspect of the infrastructure construction which is the design and the implementation aspect of the construction process. The disconnection mainly comes from the different nature of the disciplines involved in the construction of infrastructures the common goal which is the construction of the infrastructure tends to be blurred if not diminished in importance because of the disintegration of unity. To illustrate: If and when failure comes or challenges in the construction appear the normal reaction is to blame it on the designers if not blame it on the construction phase depending on the party you are talking to. With the lack of unity in the execution process assigning responsibility also gets hazy or obscure that make each team complacent with their function. Design and Build This procurement route will naturally not capture the unspoken or un-verbalized needs and wants that were not covered in the RFP. The design and build will not offer any design flexibility when the owner realized some design needs normally encountered when a significant portion of the infrastructure has been built. Although this route will normally be faster and more expedient than the traditional procurement route, essential design imperatives not previously realized by the owner cannot be accommodated (Ndekugri & Turner, 1994). Management Contracting Management Contracting is one of the most expensive procurement routes since an independent project manager is procured at the onset of the project. However, this procurement route adds another layer in the decision cycle that may cause some delay if not put a pressure in the time frame. Despite the assurance that the project manager will represent the interest and desires of the proponent or the owner it may prove difficult to find a project manager that is conversant with construction, finance management and fund raising including what an education institution needs. Construction Management Construction Management includes hiring a specialist to assist the owner or proponent of the project in making decisions about the project. This also makes this procurement route very expensive as well. In conjunction, it also requires the owner or the proponent themselves to hire specific parts of the project to other specialists. Novation Novation occurs when the design team will come up with a design for the building then a construction team will take over the project including the management and ownership of the design team. The construction team’s own design team will work with the original design team for the purpose of executing the project. This process can result to demoralization on the design team’s part, for two possible reasons that would include drastic design changes if not possible assignment of construction problem if they occur. This may also result to misunderstanding and confusion in the team most especially if design changes are necessary for whatever reason. Two Stage Tendering The problem in two stage tendering is when a design solution of the work package subcontractors does not meet the client’s requirements. Two stage tendering requires careful coordination of the activities that will introduce additional cost and risk. Even with the additional cost involved the risk of non-completion and also design specifications not being followed is increased this is due to possible disconnect between the first tender and the second tender. Develop and Construct This procurement route is a variation of design and build, two-stage tendering and novation. The combination is designed to give the client greater control over both design and costs. In this instance, the overall project manager or contractor is procured after a preliminary design has been approved and agreed on by all the proponents have been finalized. There are instances where the design team gets confused on who has the final decision over the project since this type of procurement route allows the owner to step back from the management of the project. The novation part of the “develop and construct” procurement route normally disconnect the handover of responsibilities with regards to construction risks and their remediation. Design flaws will likewise be hard to pin down in this set-up. Design and Manage Design and Manage procurement route requires the client to have intimate knowledge of their requirements including its technical aspect. It also requires the client to leave the design decisions including its management to the contractor solicited for such services. The project manager hired for this purpose will now become the client of the different contractors and would require all decisions from the project manager. Most common problem areas of design and manage is the acceptance and desirability of the final product to the actual owner or client. Partnering It should be noted that partnering is not a procurement route per se. It is a philosophy in the strictest sense that is applied to projects when possible frictions will be apparent between two if not all the contractors commission to complete a project. Mandating all contracting parties to corroborate or partner with one another to deliver the final product to the client is not only a contractual obligation but is ethical expected from all the contractors. Private Finance Initiative/Public Private Partnerships Private financing initiative and public private partnerships are normally associated with government projects and may not be applicable with the requirements of Heriot Watt University. This involves the procurement of services rather than the procurement of a package service that will complete or deliver a finished product in a form of a building (Pantouvakis & Vandoros, 2006). Recommended Strategic procurement Approach It is essential to note that the project contemplated by the Principal of Heriot Watt University includes technological aspects that normally is not included or covered by traditional infrastructure construction discipline. Thus it is proposed that a hybrid project management procurement route as recommended and described above be adopted instead of the traditional approach or even the alternative or advanced procurement routes. The approach will ensure that all the design consideration enumerated above is not only covered but professionally covered from its design phase to its execution stage in conjunction and coordination with the other disciplines. It is noteworthy to consider that educational institutions may not have the necessary funding to ensure the completion of an auditorium on its own. Thus it is essential that the project management procurement route will also secure the funding for the project through various means that is within the limitations of the university. Essentially, a hybrid partnership initiative may be obtain to finance the construction of the auditorium. The recommended strategic procurement approach will include the assignment of a project director from within the Heriot Watt University who holds the confidence of the Principal. The Principal himself will be the project owner and shall have the final say through the project director and by extension the University’s desire, preference and decision. The project director shall be the representative of the principal while the project manager shall execute what is necessary in executing the different aspect of projects. His expertise should include securing funding, coordinating and gathering the different inputs of the various discipline involved in properly executing the project. References/Bibliography Barr, J. M. & McClellan, S. G., 2011. Budgets and Financial Management in Higher Education (Jossey-Bass Higher Adult Education). 1st Edition ed. New Jersey: Jossey-Bass . Egan, J., 1998. Rethinking Construction, London: HMSC. Latham, M., 1994. Constructing the Team, London: HMSO. Ndekugri, I. & Turner, A., 1994. Building Procurement by Design and Build Approach. J. Construction Engineering Management Volume 120, Issue 2, pp. 243-256. Pantouvakis, J. & Vandoros, N., 2006. A critical Revuew of Published Research on PFI/PPP in Construction, Athens: Civil Engineering National Technical University. Read More