Three Different Types of Procurements - Essay Example

POSSIBLE PROCUREMENT ROUTES There are a number of ways in which the process of procurement may be initiated within the context of a construction project. Numerically, there are three different types of procurements namely: The traditional procurement approach. The Design & Build approach. The Management approach (CE, 2004),. When it comes to the comparison of each of them for their inherent advantages & disadvantages, it needs to be emphasized that the comparison needs to take into consideration the fact that the process of procurement itself encompasses a number of stages, within which each of the available procurement approached may be compared. The various processes involved under the procurement process are as listed below: Identifying the requirements: identifying the elements required for construction before proceeding with the procurement is essential to limit the budget as far as possible. Defining Targets: along with the requirements, it is crucial to identify and set certain targets that must be feasible and realistic. Requirements estimation: Upon having determined the various construction elements, it is important to calculate various aspects of each of these elements such as cost, quantity, time that needs to be spent etc. Tender Evaluation: this essentially points towards the selection of the most suitable among the providers. Contract Management: the managers have to ensure that the procurement process in is tune with the contracts that have been framed. Keeping these in mind, it is apparent that the three popular procurement approaches will have to be evaluated for each of these stages of procurement. These are as discussed below: a) Traditional approach (Stephen M. Rowlinson, Peter McDermott, 2001): Under this approach, the client prepares the business case and hence the requirements for the project. As such, identification of needs is taken care of. The clients specify the budgetary constraints to the consultant who are then supposed to determine the targets and requirements from the business case prepared by the client. As the requirements and specification are prepared by different entities, certain amount of time is spent in the transformation and is hence slow in comparison to other approaches. The design of the project is often completed without the involvement of the contractors, which indicates that valuable inputs are sometimes unheard of. However, this approach involves low risk and is suitable for entities that do not wish to go beyond a specified budget. Time and cost are predictable. b) Design-Build approach (Peter David Victor Marsh, 2000): As the name suggests, the contractor is responsible for the design as well as the construction of the project. Thus, this allows the involvement of inexperienced clients as well as all the planning and coordination is handled by the contractor. There is a greater efficiency in terms of cost certainty. Given greater control, the project can commence at a faster pace. However, this route is not suitable for projects that evolve over time ads there are very high chances for missing targets and deadlines and most often costs overshoot the budget. This approach has also not been found to be suitable for complex construction projects due to a lack of prolonged involvement of the client in the design and build, due to which there is a gap between desired outcomes and the actual implementation. c) Management contracting (Peter S. Brandon, 1992): The design and construction are performed by separate entities. There is a greater degree of sub-contracting of certain aspects of the construction to specialized sub contractors due to which work progresses on numerous fronts simultaneously, which is why it is suitable for fast-track and complex projects. This approach facilitates the design and tender to evolve simultaneously. An additional management contractor is employed to maintain correspondence with all elements connected with the project involved in the project. This way, the management contractor has full freedom to choose specialized companies to handle specific works of the project qualitatively and at a brisk pace. However, improper selection of sub-contracts has led to not all of the intended objectives being realized. This approach also provides less cost certainty as both design and construction commence at the same time, which means adjustments and modifications to cost, budget and raw materials always take place. RECOMMENDED PROCUREMENT ROUTE The preceding paragraphs have described the various procurement routes that have evolved as part of the process of procurement. However, not all are suitable in the current context of the issue surrounding the Conlon’s Chemicals site. As such, it is deemed appropriate to evaluate each procurement approach with the given problem and arrive at the most suitable procurement route. The client in this case has only specified the budget and has made it clear that the cost of the two projects have to stay within the specified budget. When considering the traditional approach, it is evidently clear that the client employs an architect who evaluated the cost and time required for the project. As such, some may perceive it to be a cost and time certain approach. However, it must however be pointed out that in spite of cost certainty, the fact that the construction responsibility is transferred to a different entity is evidence that the earmarked costs may not be possible to control in the long run and there is every chance that the cost and schedule may overshoot at any point of time. Also, this process is known to be sequential in approach and hence is unsuitable as the process is quite slow. One may also argue that the management approach is the best suited in the current scenario as it is best suited for complex and fast-tracked projects. However, it must be clarified that the management approach to procurement is seldom useful in this case as the costs involved in the project cannot become certain right till the very end of the project. This means that the factors governing the project will not only be uncertain till completion, but will also induce a greater degree of chance that the budget may not be consistent with the actual costs especially in the second project, which is a complex one. The design-build approach however, has been known to accommodate the ideas and requirements of clients even in case where they ay not have been experienced. In fact, the design-build procurement approach allows the client to have a distance from the project and allows the cost certainty to be maintained at all times thereby allowing the time required to be more flexible. Besides, the provision for including specialized sub-contractors allows the contractor to select the most suitable, qualified and experienced parties to complete specific parts of the projects thereby assuring optimum quality to the construction. As the work is done at a parallel level by individual sub-contractors, it is most certain that the project can be completed at a faster pace and the budget can still be kept under control by the contractor who adopts a central managerial role. Thus, it is asserted that the design-build approach is the most suited approach for the proposed projects. The recommended form of standard construction contracts for the two projects is as described below: The construction contract must clearly specify the identity and details of the client and the contractor involved in the project. The contract must also clearly mention all the roles and responsibilities and the tasks that shall be performed by both the client and the contractor as part of the project. This is important in view of the fact that there needs to be a clear and transparent approach for both the parties to mutually understand each others responsibilities. The responsibilities under design and construction (all sub-phases of every process included) must be clearly specified. The parameters that need to be achieved by the contractor to be deemed as complete must also be clearly mentioned. The quantity and cost of all materials and resources required for th project is an essential part of the construction contract. The construction contract must provide details on the steps that need to be taken and must clearly determine the agreed norms and procedures between the parties in situations where changes are required for the project. It must also specify who will pay for the additional costs. Since a number of subcontractors will be involved under the design-build approach, the contract must contain details and the work roles of every subcontractor involved in the project. The terms of payment and the price of the project as a whole needs to be clearly specified. Various legal norms that are being followed by the parties such as the construction act 1996, building act 1984 must be clearly determined. In fact, the contract must contain details of how each of these individual legal rules are being upheld within the project. Finally, the contract must contain details of how disputes between the client and the contractor will be settled. As such, it must provide information on how disputed under different and all possible circumstances will be settled by the parties. The above details must be included in the contract as these provide information on all possible situations and provides details of every single element involved within the project. Additionally, the involvement of the sub-contractors makes it mandatory that their job roles and the details of tasks performed by them be specified. The clear specification of costs means that both parties are aware of the budget and understand that all costs need to be kept under control and constant monitoring. REFERENCES 1. CE (2004), Constructing Excellence: Procurement. London: Constructing Excellence. 2. Stephen M. Rowlinson & Peter McDermott (2001), Procurement Systems: A Guide to Best Practice in Construction. London: Barnes & Noble. 3. Peter David Victor Marsh (2000), Contracting for Engineering and Construction Projects. New York: Gower Publishing. 4. Peter S. Brandon (1992), Investment, Procurement And Performance In Construction. London: Barnes & Noble. Read More