Value Management in Procurement Process - Construction Industry in Australia - Case Study Example

Running Header: Value Management in Procurement Process Student’s Name: Instructor’s Name: Course Code & Name: Date of Submission: Value Management in Procurement Process CHAPTER ONE 1.0 Introduction Projects that involve construction are among the activities that that require high level of organizations for the overall implementation of the project process to be successful(Han, Lee and Peña-Mora 2012). Such a project requires subdivision of roles and responsibilities to different individuals and parties each of which takes a specific responsibility. The management has to monitor and coordinate the different individuals involved in the project and ensure that it sums up to a complete project. For such a project to be complete, there is involvement of different parties each taking its role as a unit. The main measure of the success of such project is whether the constructed structure meets the specifications that were on the initial design(Watt,Kayis& Willey 2010). However, since there are many parties that are involved in the implementation of the project, many elements have to be considered during the construction process. Among the major factors that need critical attention are time, cost and the utilization of the resources.Moreover, integrating, balancing and organizing the role played by each of these factors are an issue that needs to be considered. If not properly organized and planned, these elements may affect the process of project implementation either directly or indirectly. Planning is therefore critical in ensuring that such a project completes efficiently and effectively. The choice of the right people or parties to do certain types of jobs in a way that is not going to cause unnecessary delays while utilizing minimum resources is important. Additionally, there is need for coordination between the available resources and time frame of the project to complete the project effectively. However, even in situations where planning is done, there are some elements that arises during the implementation of the project that were either overlooked or unforeseen during the planning stage. Moreover, the human resources and other parties taking role in the implementation of the projects may fail to effectively or efficiently play their role. These factors would either directly or indirectly result to delay in the implementation of the construction project. Where delays are experienced, they results to extension of time used to complete the project. Where poor planning is done, extension of time frame of the project is a situation that may not have been planned for by the players of the project(Watt, Kayis& Willey 2010). Additional materials would have to be used, new plans have to be made to ensure the project meets the new targets and therefore more additional resources would have to be utilized to ensure that the project completes. Obtaining the right contractor to do the job is another key factor that determines how successful a construction project would be. It is therefore important that during the procurement process, caution is taken to ensure that the right kind of contractor is chosen to do each of the specific jobs. If caution is not taken in choosing the contractor, the chosen contractor may either not do the job well or extend the duration of time allocated to the implementation of the project. All this would either directly or indirectly result variations of the project duration, cost or both. An ideal successful project is one in which the management is able to plan on the requirements of the project and during the implementation of that project and everything is utilized as per the plan. Although it is not possible to fully implement the entire project as per the plan, it is possible to minimize the variations of the construction process from the actual plan. A good implementation plan ensures that it minimizes these variations as much as possible. Furthermore, such a plan accounts of alternatives to be taken when such deviations arises so that the project can be taken back on track. Value management is a knowledge based technique that is employed by the management systems to minimize these variations. When the knowledge of value management is employed in construction industry, each distinct work program is well planned and calculated in a manner that the value of money in the construction project is improved. Through this knowledge, elements that results to project variations are managed in a manner that makes the implementation of the entire project easily attainable. Therefore, it is possible to reduce the variations that may arise during the construction process. Among the major elements that are incorporated in the value management study are:- An approach to the project that is systematic The scope and objectives of the project are clearly outlined in a way that they suit its implementation Integration of elements that promotes multi-disciplinary team effort that generates positive results for the project Objective of the research The objectives of this research areto: • Examining the factors that contribute to variation and extension of time claims. • Examining how the utilization of value management during the procurement stage can minimize both variation and extension of time claims. • Identify the general items in a tender schedule that may incur variations and increase project durations. • Identify factors that needs to be discussed between stakeholders decrease variations and extension of time. This report starts by looking on how construction industry operates in Australia. In details it shall explain the factors that make many projects have variations of time. The report shall then looks on to how value management can be applied in the construction industry so as to eliminate the problems that shall be observed in the industry. In details the report shall outline the procedures that need to be followed during the tendering process to ensure the right contractors are selected for construction. CHAPTER TWO 2.0 Construction Industry in Australia In Australia, the construction industry is the fourth largest industry employing about 9 percent of the total population in the country. The industry operates in both public and private sectors and engages in three broad areas of activity; engineering construction, non-residential building and residential buildings. Since 2007, there have been very high demands for these structures majorly driven by the economic factors. Changes in inflation and interest rates and high population growth have been the major pressure that pushes the construction industry to continuously deliver its services to the customers. However, planning and implementation of these plans have become a major issue in accelerating development in this nation. Most of the construction projects are unable to meet the time frame within which they have been allocated. In some situations, the management involved in these projects is not able to give a reliable time frame within which a specific project would be able to complete. The situation becomes more complicated in situations where some projects have to run concurrently or are interdependent. In some of these situations, one or more of the parties that are involved in the project will feel delayed or inconvenienced. These further results to conflicts between parties involved and some of the cases may end up in court which further delays the projects. Ensuring that the project finishes within the specified time is one thing that project managers fight to do. Value management principles recommend that in the planning stage of the project, all the aspects that are likely to affect the duration of the time that the project is going to take place be identified. This way, the management shall be aware of the issues that it needs to address to ensure that the project runs out smoothly. Whenever time taken to complete a project exceed from the one in the initial plan, additional resources are required to complete the project. This results to more problems in the situations where the projects are interrelated and one projects makes other project lag behind. Factors that contributes to Variation and Extension of time Construction industry is one where each project is unique and specific to the type of work involved. As a result the factors that would determine how long a given project is going to take in one project may not necessarily be applicable in another project. This is even applicable in situations where the projects seem to be running in similar conditions. There are many varying factors that determine the time frames of a given project and all of them collectively work as a unit. What is important though is to ensure that all the constituents of the project work are organized in a manner that they minimize delaying the project(Watt, Kayis& Willey 2010). There are however some factors which are directly related to the value management which in most situations are overlooked and therefore makes it impossible for the project to complete in time. These factors are procurement delay factors, work delay factors, productivity delay factors and conditional sequence factors. Procurement Delay Factors Even when a construction project is well planned, the activities involved starts depending on the nature of the preceding activities. There are some activities that have specific starting dates that are constrained with them(Forgues&Koskela 2008). If such a date is delayed, then the entire project will be affected in one way or another and in some situations it may require that the entire project be delayed or re organized again. Procurement has been observed to be the major contributor to the delay of these kinds of dates even in situations where there have been proper planning and organization of work. Whenever procurement delay occurs, the start of the activity is delayed by the period which the procurement period delays. In some situations where the activities are interlocking, delay in such an activity may cause destabilization of the entire schedule. One way through which these kinds of problems can be solved is through formalization of the procurement delay factor(Watt, Kayis& Willey 2010). In some situations it may not be possible to point out the activities that have a potential problem of procurement delay. Furthermore, where there are many activities involved, it may not be possible to determine the activities and the nature of delays that is going to be associated with them. Most of the construction manager does not give too much emphasis on trying to curb events or situations that would result due to procurement delays. However, being aware that these kinds of situations and the potential risks that are going to be associated with this types of delays can help the managers to put efforts in looking for ways of preventing such delays from happening. There are known factors that results to procurement delays which includes relation between the suppliers and contractors, the stability of the contractors and the subcontractors, status of the construction project, the general economic factors, priority procurement status and the location of the site. During the planning stage, both the contractors and the management should be well aware of these factors and establish multiple precise ways through which delays due to procurement can be minimized. Work Delay Factor This is mainly applicable in situations where certain activities have to start after other activities are complete. Some of the activities that are involved in a project may have to be done depending on the status of other activities. In the event where the preceding activities are delayed for whatever reason, then all the other activities that have to follow may have to be delayed. Some of work delay factors include remote site locations, poor subservice conditions or breakages that occur in the preceding stages. In order to ensure that the project still remains in track, urgent measures need to be employed whenever work delay factors arises. If no measure is to be taken to recover the time lost within the activity time frame, then the consequent of the entire project will have to delay the entire duration of the project by the same proportion. According to Forgues&Koskela(2008), advanced value management skills would require that a special unit of the management to be put in place in order to deploy counter measures whenever work delay factors arises. For example, in cause of implementing an activity the management may realize that the conditions on the ground are different from the one they had planned for. This would mean that the entire project will have to be delayed by the same some magnitude of time. It would be advisable for the management to come up with immediate measures such as temporally employing more staffs and maintain the project in the schedule rather than delaying this single activity and therefore delaying the entire project. In some situations, depending on how the activities are organized, the only thing that may be required is to shift some of the staffs from other activities to accelerate the completion of the activity that has been encountered by the work delay. Weather Delay Factor In construction industry, weather is a very well know factor that influences when the project would complete. In most situations, weather factors are overlooked during the planning and the conceptual schedule(Luoetal 2011). It is difficult to predict at which stage weather is going to affect the duration of the project. Extreme weather conditions such as flood, excess rainfall and wind would either delay the either make it difficult for the staff to work, decelerate the rate at which the staff are working or destroy the part or entire structure that is under construction. The duration of the delay in project associated with weather conditions is often directly proportion to the duration of time that the weather conditions were unfavorable. Though weather factor delays are some of the conditions that are difficult to control, there are a number of ways through which delays that arises due to weather can be regulated. First, there is need to have interactive procedures that could be followed for each of particular activity till it is complete. Whenever delays due to weather arises, then determine the activity that is going to be affected by the kind of weather condition. If the weather delay is in a state that it is going to affect the entire project, then the entire find out whether there is a way of accelerating the activity to counter this delay. If there is no way of doing this, the only option would have to delay the entire project. However in the event that the test shows that the delay is less than minimum acceptable weather delay, then every effort need to be done to ensure that the project still remain in course. In the situations where the constructions are sensitive to weather, it the entire project should be delayed until such a time that the contractor is able to work appropriately. Productivity Delay Factor Production delay factor is a type of delay that allows the planners of the project to evaluate the flow of the work(Watt, Kayis& Willey 2010). This often happens in situations where the work is allocated to the contractors and the management may want to evaluate the progress so as to either control or better enhance the coordination of the project activities. By the fact that the productivity of the contractors depends on the amount of work they do, most of them prefer to do work or engage in their activities in a way that they do not have to temporally split. Production delay causes split and this would therefore mean that the operations of certain activities by the contractors would be affected in a way. To ensure that delays due to productivity factor are controlled, the best way is to ensure that they are incorporated in the initial plan. In this case, time frames should be allocated within the entire project duration at which the progress of the project would be evaluated by the management. In some projects, it is possible to carry out evaluation while the contractors are still on site. In the rare situations where this is possible, a parallel evaluation team should carries out its activities while the contractor goes on with the work. Unfortunately, the duration of both productivity and weather factor cannot be known till the initial sequence and timing of the activities is known. Condition Sequence Factors There are some conditions that arise in the process of implementation of the project that changes the predetermined sequence that the project is supposed to follow. The sequence of two activities is based on the characteristic of work that needs to be accomplished in the project. For instance, the building that needs to be constructed may not have underground stories and therefore nothing needs to be excavated. In this situation, site preparation could be constructed concurrently with the site preparation. However, in the situation where there are underground stories then site preparation would need to be done before site utilities. To ensure that minimum and predicable time is maintained in the situations where condition al factor prevails, there are three options that could be observed in modeling the conditional logic. The choice of the option to apply is unique depending on the kind of the condition factor that delays the project. If there are some constraints that are satisfied, then the management needs to set the start of the activity that follows equal to the finish of the activity that precedes it. In the situation where some constraints are not satisfied, then setting the start date of the activity that follows equal to the starting date of the activity that precedes it would be the best thing to do. Where all the constraints are not satisfied then then one need to set the finishing date of the activity that follows equal to the finishing date of the preceding activity. Effects of Time Variations When either of the above factors results to variations of time in the process of implementation of the projects, there are problems that would accompany these delays. Variation of time in the process of project implementation has the effect on the allocation and utilization of the resources used to implement the project(Lewis 2002). In most situations, agencies that fund the large construction projects are not directly involved in the management of such projects. Prior to releasing of the finances, the funders would require a comprehensive budged on how the amount of money that would be required to complete the project. In the course of project implementation, these individuals may require progress reports and may even evaluate how the project is progressing. For the construction management team to convince the funding agencies, it should be able to show that the funds allocated to the project are utilized as per the plan. In the situations where there are variations of time in course of project implementation, it would be difficult to comprehensively convince the funding agencies on how the resources were utilized. In most situations, variations results to extension of the deadline. This would require additional resources since the workers would require to be paid in the additional days they have to work in order to complete the project. Eventually this would disrupt the entire budget and projections that had initially been done. References Lewis, J.P. 2002, Fundamentals of project Management. New York : AMACOM. Watt, DJ. Kayis, B. &Willey, K 2010,‘The relative importance of tender evaluation and contractor selection criteria’.International Journal of Project Management.Vol. 28, no.1, pp. 51-60. Han, SW. Lee, SH & Peña-Mora, F 2012.‘Identification and Quantification of Non-Value-Adding Effort from Errors and Changes in Design and Construction Projects’.Journal of Construction Engineering and Management.Vol. 138, no.1, pp.1-176. Forgues, D &Koskela, LJ 2008, ‘Can procurement affect design performance?’, Journal of Construction Procurement, Vol. 14, no.2, pp. 130-141. Luo, XC.,Shen, GQ., Fan, SC.&Xue, XL 2011. ‘A group decision support system for implementing value management methodology in construction briefing’. InternationalJournal of Project Management.Vol. 29, no.8, pp. 1003-1017. Doloi, HK. 2011, ‘ Understanding stakeholders' perspective of cost estimation in project management. International Journal of Project Management.Vol. 29, no.5, pp. 622-636. Read More