Appropriation Highways Community Committee and the Builder - Term Paper Example

Procurement Routes Name Institution Date Alliance contracting Alliance contracts are a new approach to construction projects that overcomes many of the obstacles faced by construction projects. Alliancing allows for public agencies and private sector parties to come together to work on construction projects (Hughes, Champion and Murdoch 2015). Under alliance contracts, the parties on the contracts are obliged to act with integrity, in good faith and in the best interest of the project. In this case, the Burycouncil is a public agency that is working with the lottery club which is a private entity. Hughes, Champion and Murdoch (2015)defineAlliancing as a method of contract procurement and management of capital assets. In Alliance contracts, the risk of contract delivery is jointly managed, although the state has more exposure than private sector parties. In this case, a strategic procurement analysis would find anAlliance contract to be the most suitable for the£780000 project for theconstruction of theVillage Hall. According to Twort and Rees (2003), a good understanding of the suitability of a contract model can deliver value for money to the client. Although Alliancing is ordinarily used in complex and high-risk infrastructure projects it can also be used for smaller scale projects. In particular, projects that need the skill and expertise of all parties are suited for alliancing. According to Berry and McCarthy (2011), Alliancing is a contractual option that caters for the involvement of all contractual parties from the early phases of project implementation. A construction project is particularly suited forAlliancing if it has the following characteristics (Hughes, Champion and Murdoch 2015): 1. If project risks cannot be defined or measured adequately prior to tendering or in the business case. 2. It is too costly to transfer the project risks to the contractor. 3. The project is operating under a tight timeline and needs to start before full identification of project scope and risks. In addition, the project clients are ready to shoulder the burden of a suboptimal price. 4. The client possesses superior skills, preferences, knowledge, and capacity to participate and influence the project outcomes. The client might be able to participate inproject solution design and sometimes even in the delivery works. 5. In rare and special circumstances where the collective allocation and management of project risk may give better results than allocating risks contractually. This contracts scenario suits alliancing as some of the characteristics of projects suited to alliancing can be found. They include: 1. In the village Hall project not all the risks are measured or defined adequately. The committee hopes to build a youth Centre and other amenities alongside the village hall subject to availability of funds. 2. The village hall is a community project and the cost of transferring the project risk to the contractor would be prohibitive. 3. The project had a timeline; it needs to be completed by the time its 2016th anniversary is held. 4. It may be assumed thattheBury Council is an organization that is frequently involved in all forms of construction projects. To this end, the council has the knowledge, skills, capacity, and preference to influence and participate in most phases of the village hall construction project. 5. However, this project cannot be considered a rare and special circumstance where collective allocation of risk may result in better outcomes than contractual application of risk. Advantages of Alliancing Alliancing prevents thereinforcement of self-protecting behaviorthat characterizes traditional contracts. This shortcoming of traditional contracts is caused by its overemphasison project risk allocation and the possibility of failure. According to Hughes, Champion and Murdoch (2015), Alliancing also reduces the perception among contractual parties that gain or benefit is gained at the expense of the other contractual party. Many critics of the traditional model say it is costly, inefficient and counterproductive. Alliance contracts were designed as an answer to the competition that characterizes traditional contracts. In alliance contracts, the contract parties have to work together in an incentive-based relationship. Alliance based contracts are characterized by cooperative decision making, financial transparency, no blame, no dispute and risk sharing (Twort and Rees 2003). The two or more parties in the contract pursue an alignment of their goals as regard the contract. Alliance contracts have become very popular in some countries. Cooperative decision-making An alliance contract considers the contractor, owner and designer as integral parts of the contract(Hughes, Champion and Murdoch 2015). The development project is overseen by an all powerful board of management that comprises of representatives appointed by each of the contractual parties. The mandate of the board is to deliver the project as per agreed principles and goals. Alliance project achieve great cohesiveness as all the decisions made in relations to the contract have to be unanimous. According to Twort and Rees (2003), the alliance contract results in a “virtual organization” that is responsible for the delivery of the contract. Risk sharing Risk sharing is considered one of the main advantages of alliance contracts. However, the reality of most alliance project is that the project risk is retained by the owner (Hughes, Champion and Murdoch 2015). The contractor will still be repaid for all direct costs even if they arise by way of delay, negligence, faulty design or cost overruns. Risk sharing comes in terms of aligning the project to cost estimates and projected completion times (Oyegoke et al 2009). The two variables are estimated to make sure the contractor somehow shares the pain of overshooting cost and time budgets. In addition, the contractor may be incentivized to complete the project on time by earning a greater profit or lesser profit depending on the time taken to complete the project. In this case, the council can use the extra funds raised for the completion of the project to setup an incentive scheme to reward the contractor depending on how early the project is completed. Transparency Transparency is another advantageous characteristic of alliance contracts. The contractor is obliged to operate his accounts openly and the owner can inspect the contractors cost and overheads any time he wishes (Potts and Ankrah 2014). In many instances, the owner can scrutinize the owner’s accounts from previous assignments to understand his overheads, cost, and margins (Hughes, Champion and Murdoch, 2015). The risk of procurement and subcontracting is often allocated to the subcontracting party to maximize benefits for the alliance partners. No blame and no dispute An alliance contract is characterized by a clause that releases both parties from liabilities arising from the contract. Contractual parties in alliance contract are only liable for willful default contract violation (Laan, Voordijk and Dewulf 2011). Otherwise, contract disputes are settled amicably. Alliance contracts avoid the costly and time-consuming legal processes that characterize other contracts. In alliance contracts there is little incentive for the parties to resort to litigation even if they differ greatly. According to Laan, Voordijk and Dewulf (2011), alliance contracts save the time and energy expended in litigation in developing solutions to the disagreements that occur. Risks However, Alliance contracts are characterized by higher risks than other contracts. It is very difficult to quantify and manage risk as a lot relies on the quality and competence of the project’s participants (Oyegoke et al 2009). If the project lacks genuine commitment from the participating parties it never gets off the ground as its success is based on the good faith of participating parties. Secondly, the alliance model does not rely on fixed prices and there is great uncertainty as regard the completion date of the project. In most cases, the alliance contract is not suitable for projects that need greater time and price certainty (Oyegoke et al 2009).Thirdly, it remains in doubt whether courts would enforce the alliance model if asked to do so. The alliance contract model contract bears close familiarity to “agreements to agree” contracts which courts are reluctant to enforce (Oyegoke et al 2009). Finally, the unfamiliarity of alliance contracts means it is difficult parties who use alliance contracts to get coverage of certain insurance risk that are coverable under other types of contracts. Part 2: Tendering for the Sound Proofing Works Negotiation Tender The village hall construction committee can use the negotiation tender to select the contractor to work on the £40000village hall’s sound proofing project. In negotiation tender, one or more preselected contractor is invited to submit proposals or bids (Wong, Holt and Cooper, 2000). The method is suited to conditions where the work is of extreme urgency and brought about by unforeseen events. In this case, the environmental agency visited the village hall and ordered that sound proofing be added to the halls structure(Eriksson and Westerberg 2011). According toEriksson and Westerberg (2011) negotiation tendering are widely used in the construction and engineering industry. Negotiation tenders allows for closer collaboration in the pre-contract and post contract negotiation (Sweet and Schneier 2012). The negotiation tender is suited to situations where the client wants to use one or more contractors for the work in question. In this case, the village hall committee will prefer to use the contractor they had already engaged in an alliance agreement to construct the village hall. A typical negotiation process tender proceeds as follows (Eriksson and Westerberg 2011): 1. Client identifies suitable contractor In most cases, the contractor is chosen from the client’s own list of preferential contractors. In this case, the village Hall committee will select the contractor who completed the hall in the first instance. 2. The client appraises contractor for the work scope The contractor must have the capacity to complete the work needed by the client satisfactorily. To gauge this capacity, the client issues the contractor with scope of work documents, designs; relevant drawings and other information that enables him understand the client’s needs and the obligation of the contractor (Chong, Staropoli and Yvrande-Billon 2014). In some instances, the client may sometimes issue the contractor with tender documents that assist the contractor in coming up with the prices for the construction works. According to Adriaanse (2010), negotiation tendering is suited for partnering and alliance contracts. In this case the village council and the contractor have already successfully partnered in building the village hall. In addition, negotiation tendering is suited to situation where the client and the contractor have developed long-term business relationships (Chan, Chiu and Hung 2007). The negotiation tender also comes in handy where the contractor is involved in financing the project. Indeed, negotiation tender suited for this kind of work that is to be done in the village hall. According to Sweet and Schneier (2012), negotiated contracts are suited to situations where the client’s needs the contractor to continue work on existing or initial contract works. In addition, the negotiation tender facilitates an early start to work so that completion can be fast tracked. Negotiation tendering is an approach to construction work which has various advantages to the client (Chong, Staropoli and Yvrande-Billon 2014). In this case the village hall committee can benefit from the following advantages. First, they will only be able to engage the contractor whose reputation they are aware of. Secondly, the contractor can offer his input in the early phases of the construction project including the problematic design stage. Thirdly, the hall’s sound proofing works can begin immediately as the time taken to choose a contractor is significantly shortened (Chan, Chiu and Hung 2007). One of the most significant advantages of negotiation tendering is that it reduces the risk of failure greatly. In addition negotiation tendering results in fewer claims and disputes during the construction phase. These advantages make the negotiation tender particularly suited for sound proofing work to be undertaken at the village hall. However, the Negotiation tendering also has a number of disadvantages. First, the cost of work may be priced higherthan the£40000 budgeted in comparison to alternative tendering processes like competitive bidding (Eriksson and Westerberg 2011). Secondly, negotiation tendering reduces the amount of work available to other contractors in the industry. The effect of negotiated tenders on competitiveness has some legal implication that may mean only competitive tendering can be used (Hughes, Champion and Murdoch 2015). Thirdly, the negotiations contract results in wastage of resources by both the client and the contractor should negotiations be unsuccessful. References Adriaanse, M.J., 2010. Construction contract law: The essentials. Palgrave Macmillan. Berry, C. and McCarthy, S., 2011. Guide to sustainable procurement in construction. London: CIRIA. Chan, L.S., Chiu, D.K. and Hung, P.C., 2007, July. E-tendering with web services: a case study on the tendering process of building construction. In Services Computing, 2007. SCC 2007. IEEE International Conference on (pp. 582-588). IEEE. Chong, E., Staropoli, C. and Yvrande-Billon, A., 2014. Auction versus negotiation in public procurement: Looking for empirical evidence.The Manufacturing Markets, Legal, Political and Economic Dynamics, pp.120-142. Eriksson, P.E. and Westerberg, M., 2011. Effects of cooperative procurement procedures on construction project performance: A conceptual framework. International Journal of Project Management,29(2), pp.197-208. Hughes, W., Champion, R. and Murdoch, J., 2015. Construction contracts: law and management. Routledge. Laan, A., Voordijk, H. and Dewulf, G., 2011. Reducing opportunistic behaviour through a project alliance. International Journal of Managing Projects in Business, 4(4), pp.660-679. Oyegoke, A.S., Dickinson, M., Khalfan, M.M., McDermott, P. and Rowlinson, S., 2009. Construction project procurement routes: an in-depth critique. International Journal of Managing Projects in Business,2(3), pp.338-354. Potts, K. and Ankrah, N., 2014. Construction cost management: learning from case studies. Routledge. Sweet, J., &Schneier, M. (2012). Legal aspects of architecture, engineering and the construction process. Nelson Education. Twort, A. and Rees, G., 2003. Civil engineering project management. Elsevier. Wong, C.H., Holt, G.D. and Cooper, P.A., 2000. Lowest price or value? Investigation of UK construction clients' tender selection process.Construction Management & Economics, 18(7), pp.767-774. Read More