Construction Procurement - Essay Example

Two Alternative Procurement Routes, Their Characteristics and Relative Advantages and Disadvantages Scenario Following a long period of fund raising, together with a number of grants from local and central government and others, Littletree Parish Council are now able to proceed with the construction of a new community centre/village hall. The Parish Council own the site, formerly a garage located adjacent to the village green in a conservation area. The Council has narrowed the choice of procurement down to traditional or design and build. Introduction Understanding of procurement paths has led to analysis of traditional procurement route and development of other routes. With a variety of procurement routes available, clients have to critically analyse the best available option. There are different approaches to procuring projects. These approaches are complicated since they lack clarity and particular description of particular procurement routes. The common types of procurement routes available are; 1. Traditional arrangement, 2. Design and build, 3. Measurement, 4. Prime cost and 5. Separate Management functions. The basis for selection of the best option towards the project is: I. Accountability II. Design input III. Experience form the past procurement route used IV. A background knowledge of the route chosen V. Costs to be incurred VI. Punctuality VII. Efficiency in relation to the time when the project kicks off VIII. Life span of the project IX. Risks involved and X. Relationship between the client and contractor during execution of work ((CRC Construction Innovation). Procurement Routes 1. Traditional or Design-Bid-Build For this type of procurement route, the client develops the idea of the project and comes up with a budget. A consultant prepares the design and tender documents for the scope of work to be executed. It is the work of the client to appoint a suitable contractor to execute the work according to the design. The contractor has to complete the work within the specified time frame after an agreement on the contract amount. The contractor remains in a position to sublet the work although he remains liable to the client. During the execution of works, the consultant remains as the administrator, advising the contractor in matters pertaining to design, progress of work and payment certificates ought to be paid by the client. The contractor is therefore obliged to execute work according to the design, failure of which may lead to his disqualification. This route is preferred and used by most clients on the basis of these facts; a. It is beneficial to all clients especially to the inexperienced clients b. Suitable for complicated projects and those which rely on functions as their prime objective c. Suitable for projects whose time frame can be predicted d. Suitable for projects whose costs are certain. The clients are provided with low-risk options in terms of costs, delays or failure in the design of the project. The clients are exposed to risk when; a. The design phase of the project is rushed b. The project time frames set are abnormal and c. Incomplete tender documents are submitted (Greenhalgh and Squires 2011, p.95). Refinements To minimize these risks, some refinements are made to this method. This refinement is called Two stage tender. The contractor’s tender rely on consultant’s design partially. This is the stage 1 tender. Thereafter, the contractor will assist in the development of the design and complete tender documents. These documents are then used to develop tenders for the work to be executed (stage 2 tender).the party involved in stage 1 tender has the opportunity to participate in the construction stage. This refinement adds risks to the final tender sum, uncertainty in date of completion of the project. The only variance that is involved in this route is called contractor design portion. This involves the consultant completing most of the work in design. The contractor completes the rest. This is only applicable when special design input is needed. By the fact that the contractor was involved from the initial stages of the project, the client is likely to get the real value for his resources. It is restricted to fast track projects. 2. Design-Build Under this method, the contractor bears the responsibility of designing and execution of work. The contractor has the option of incorporating in-house designers or consultants to work on the design. Most part of the work is executed by sub-contractors or specialists chosen by the contractor. The client brief is used by the contractor for tendering depending on the design developed by the appointed consultants whose main work is to advise the client. The design and execution of work is done by the contractor at an agreed contract amount with the client. It is best suited for; a. All clients plus those that lack experience in the type of project with those who are far from where the project is to be carried out. b. Projects whose costs can be estimated c. Faster track. However, it is not convenient to; a. Complicated projects b. Uncertain client brief. The tendering process is expensive hence increasing the risks incurred by the contractor in comparison to the traditional approach. The reason behind this is because the contractor develops an outline of the design as well as detailed price. The tender lists are always shorter than those of traditional contracts. The client is only left with one point of contact and a commitment to the costs of design and construction. This is done earlier in advance in relation to the traditional approach. Risk involved is shifted to the contractor and this can be shielded through design liability insurance cover. The client has an opportunity of changing the design according to his preference. This affects everything in the Design-Build contract instead of the affected area which is the costs incurred in the design team. As a result, it becomes more expensive than the traditional approach (Greenhalgh and Squires 2011, p.99). Variations on Design-Build Approach The variation to this approach is called Develop and Construct. This implies that the contractor is obliged to re-appoint the original designers to finish the design. This happens in a scenario when the client owns the prepared design to scheme design stage and the contractor carries out the duty of completing design and construction. In the package deal, the contractor provides off-the-shelf building. The project is completed in a way that its size can be later adjusted. This is called modular building. Reasons to Choice for the Best Route The criteria that need to be used on the best choice of procurement route should be based on; I. Risks involved, surety, complications involved in the project and competition II. Period for completion of the project, cost to be incurred and the quality of the product III. Services provided in relation to money spent on project and IV. Capital available, the interest rates, inflation, factors affecting the market and skill required for the project. Speed The traditional approach is slower than Design and Construct. This is so because, the client must have all information during the tendering stage and consider either the two stage or negotiated tendering. Design and Construct serves best because the two aspects of design and construction run parallel. The employer’s requirements determine pre-tender time. Complexity The traditional approach is simple although complications are likely to be developed when the contractor opts to use a sub-contractor. On the other hand, Design and Build remains efficient because only one party is involved in designing and construction. Certainty Design and Build approach ahs a guaranteed cost and completion of the project while traditional approach offers accountability and monitoring of costs at all stages. The client is also assured of the completion of the project within the projected time frame and costs incurred before construction. Competition Traditional approach has both competitive tenders option and negotiated tenders option. The former being open to all items while the later reduce the room for competition. The client is likely to get the best offer with best quality. In Design and Build approach, the client is in a difficult situation to compare notes that include design and prices. It is not fit for inexperienced clients. Competition cannot be easily evaluated hence the client is likely to incur highest costs in comparison to the product (CRC Construction innovation). Summary Traditional approach offers great benefits in costs incurred for the project and quality at the expense of the time spent in completion of the project. Design and Build approach offers benefits in costs incurred for the project and period spent for it’s completion at the compromise of quality. The important issues that the council need to look at are; a. A critical look at the priorities in relation to its budget, development programmes and project design b. Constraints likely to be faced when executing the project in relation to risks involved, incentivisation and the project’s compliance with building regulations and c. The desire for change (CRC Construction Innovation). Bibliography CRC Construction Innovation (No date). Procurement Routes: An Overview. (pdf) Curtin University of Technology. Web; www.costruction-innovation.info. Accessed on 2 March 2012. Greenhalgh, B. and Squires, G. (2011). Introduction To Building Procurement. New York:NY, Spon Press. Read More