1. Procurement Methods (Student)

7/26/2019 1. Procurement Methods (Student)

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1.0 PROCUREMENT METHODS

ATGB3663 BUILDING ACTS AND CONTRACTS

Tunku Abdul Rahman University College

Faculty of Engineering and Built EnvironmentDepartment of Quantity Surveying and Real Estate


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hat is

rocurement System?

Procurement method is a system used to obtain and manage

a building project.

Types of procurement method commonly used in buildingprojects:

1. Traditional System (Sequential & Accelerated)

2. Package Deal/ Integrated

3. Management Oriented (Management Contracting &Construction Management)


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Procurement Process

Initiation / Inception / Feasibility Studies

Funding

Tendering

Construction

Pre-contractstage

Post-contractstage


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Procurement Selection

Factors to consider in selection an appropriate procurementmethods:-

Size

Design

Accountability ..

Organization

Risk

Finance


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Types of Procurement Methods

Apart from the traditional approach, there are now otherfast-tracking or innovative procurement systems used bythe construction industry world wide.

The different procurement systems differ from each other interm of allocation of responsibilities, activities sequencing,process / procedure and organizational approach in projectdelivery.


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TRADITIONALPROCUREMENT METHODS

SEQUENTIAL

ACCELERATED


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Negotiated

tenderAccelerated

Traditional

Sequential

Traditional Methods

Competitive

tender


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Traditional Methods

The contract requires the contractor to carry out theconstruction according to the drawings and specificationdrawn up by the design team.

All work is supervised on behalf of the client by the designteam leader, which is normally the architect or on civilengineering projects, the Consultant Civil Engineer.


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Employer

Professional Team

Main Contractor

Sub-contractor / Supplier Nominated Sub-contractor

Contractual Relationship for

Traditional Methods

Responsibility

Contractual Link

Traditional Methods


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Traditional Methods

A Fixed Price Contract involves the contractor agreeing toconstruct the building as specified in the drawings and Bills ofQuantities (BQ) for the client for an agreed sum, by an agreeddate.

Although it is called a fixed price contract it does allow for thecontractor to claim additional costs for any variations to thespecification.

Allowance can also be claimed by the contractor for anextension of time if there is a delay which is beyond hiscontrol.


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Traditional Methods

When constructing new buildings it is possible to assess thecost of the work to be done, in which case a fixed price can bethe basis for the contract.

A fixed price can, however, be on the whole contract, a sectionof work or can apply to a unit rate. The price is fixed althoughthe amount of work is not known.


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Traditional Methods (Sequential)

A drawn and specified design is prepared and,together with cost documentation - contractor bid,generally in competition.

The building owner will appoint a team ofconsultants to act on his behalf to produceconstruction drawings, specification and tenderdocument and to administer the tenderingprocesses to select a contractor.

Once selected and awarded the contract, thecontractor will carry out based on the drawings andspecification prepared by theclientsconsultants.

Sequential


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Inception &Feasibility

StudyDesign Tendering Construction

Handover &Maintenance

Sequence of Activity for




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Traditional Methods (Accelerated)

A contractor is appointed earlier in the sequence ofdesign on the basis of partial information, either bynegotiation or in competition.

Can be considered as an innovative approach tospeed up the selection of contractor and thecommencement of construction.

Involve preliminary discussion with selected fewcontractors, submission of fixed tender and/or costnegotiation based on partial information.

Accelerated


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StudyDesign

Tendering ConstructionHandover &

Maintenance


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Advantages of Traditional Methods

Time tested methods in construction

Most parties in industry familiar with its working

..

..

Minimizes professional conflict


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Disadvantages of Traditional Methods

Length of time taken in the design and preparation of the Billof Quantities.

Cost of preparation for the Bill of Quantities (approximately3.5% of the contract sum).

Creates athemandusattitude


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PACKAGE DEAL/INTEGRATED

PROCUREMENT METHODS

DESIGN & BUILD

TURNKEY

DEVELOP & CONSTRUCT


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Package Deal

Commonly called theall incontracting.

A contractor is given the responsibility for everything that is

required and necessary for the design, construction anddelivery of the project.

The services of the contractor will include the preparation of

project brief, sketch and final working drawings, getting all theapproval from authorities, project financing, construction,furnishing and commissioning of all equipment and accessoriesand handing over the project to the client.


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StudyDesign Tendering

ConstructionHandover &

Maintenance


Package Deal (Integrated Procurement Methods)

Package Deal


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Responsibility

Contractual LinkEmployer Professional Advisor

Main Contractor

Sub-contractors/

Suppliers

Contractual Arrangement for Package

Deal

Professional TeamSub-contractors/

Suppliers

Package Deal


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Design Build

Under this system, the client together with his/her consultantswill prepare a tender or bidding document that include theproject brief andclientsrequirements and invite a number ofcontractors to bid.

For the purpose of submitting tenders, the invited contractorswill produce their own design, construction and cost proposal.Very often the successful contractor will into a contract based

on lump sum price and a fixed duration.

The contract may be on a fixed price or cost reimbursementbasis, which may be either negotiated, or subject to tender.


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Design Build

Purposes / Uses:

Normally used for standard type buildings i.e. industrial units.

Useful for repetitive types of buildings, which the contractorhas constructed previously.

Past experience and familiarity of the design and constructionshould result in cost savings for the client.


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Turnkey

Turnkey contract is an American term for all in or packagecontract. Under this arrangement, a contractor iscommissioned to undertake the responsibilities for everythingnecessary and required for the construction, completion,

commissioning and hand over the project.

The wordturnkeymeans that, upon completion, the client isgiven the key and he can then enter the project by turning

the key. The contractor will have to do everything frompreparing project brief, getting approval, designing, financing,construction, furnishing and decorating to commissioning andhanding over completed, cleaned and ready for use project.


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Develop Construct

Develop and construct is another type of the integratedprocurement approach which is very much similar to designand build.

The contractor is still given the responsibility for both thedesign and construction of the project.

The difference is that, under this method the clients design

consultants prepare the concept sketches or designs andpassed them to the contractor who will develop them andproduced the detailed working drawings. The contractor willthen construct and complete the project based on what it hasdeveloped and produced.


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Advantages of Package Deal Methods

Single point responsibility

.

.

Permits price certainty


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Disadvantages of Package Deal Methods

Difficulty in evaluation

Compromise in quality

Higher professional fee outlay

Employersinvolvement is minimal


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MANAGEMENT ORIENTEDPROCUREMENT METHODS

MANAGEMENT CONTRACTING

CONSTRUCTION MANAGEMENT

DESIGN & MANAGE


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Management Contracting

Fast-tracking procurement approach. A contractor iscontracted and paid a fee to manage, procure and supervisethe construction of a project rather than to build the project.

The actual construction works are contracted out to manypackage or specialist contractors/sub contractors.

The management contractor is employed as a construction

consultant to be part of theclientsteam.

The package contractors are in contract with the managementcontractor.


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StudyDesign

Tendering


Maintenance


Management Contracting (Management Procurement Methods)



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Work / Trade Contractors

Work / Trade contractors enter into a contract with the managementcontractor to carry out construction work.

It is the management contractor who has a contractual relationshipwith the subcontractors who carry out the work, not the client.

If any problems arise it is the management contractor who mustpursue the subcontractor for a remedy.

Subcontractors are normally appointed by competitive tenderingbased on the drawings and bills of quantities.


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Responsibility

Contractual Link

Employer

Professional

Team

Management

Contractor

Work Contractor

Contractual Arrangement for



Work ContractorWork Contractor


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To Developer

To Contractor


Advantages of Management Contracting Methods

to Developer and Contractor


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Construction Management

Construction management is similar in most respects tomanagement contracting except that whereas withmanagement contracting the contract is between the clientand the contractor (the subcontractors are engaged through

the main contractor) in construction management thecontracts for the work packages are with the client.

The construction manager is employed to manage the

construction work. This system tends to be used only on large,specialist technical projects such as power stations.


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StudyDesign

Tendering


Maintenance


Construction Management (Management Procurement Methods)



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ProjectManager

May be an organisation or an individual.

Guides the client in the selection of a suitable procurementsystem, appoint all members of the construction team andcontrol and organise the project.

Appointed on a fee basis, which is not dependent on the costof the contract. This tends to ensure that the project managerworks solely for the client's interest, as he earns nocommission.



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Responsibility

Contractual LinkEMPLOYER

PROFESSIONAL

TEAM

MANAGEMENT

CONTRACTOR

WORK

CONTRACTOR

Contractual Arrangement for


WORK

CONTRACTOR

WORK

CONTRACTOR



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Design Manage

A single organization or firm is commissioned to be responsiblefor designing the project and managing its construction.

The firm is does carry out the work itself, but it is contractedout to a number of specialist sub-contractors or packagecontractors, who enter into contract with the client.

A design and manage firm or company is engaged as aconsultant for the client and become a member of the projectteam.


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Responsibility

Contractual Link

EMPLOYER

PROFESSIONAL

TEAM

DESIGN AND

MANAGEMENTCONTRACTOR

CONSTRUCTION

CONTRACTOR

Contractual Arrangement for Design

and Manage

DESIGN TEAM

Design Manage


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Comparison of Procurement Methods

RISK

Traditional Design & Build Management

Contracting

The risks are

generally fair and

balanced between

the parties to the

contract.

All the risks can lie

almost wholly with

the contractor.

The client retain

most of the risks.


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PRICE COMPLETION

Traditional Package Deal Management

This method allowscertainty in cost

and time before

commitment to

build. There will be

clear accountability

and cost

monitoring at all

stages.

The client canexpect a

guaranteed cost

and completion

date

The client iscommitted to start

building on a cost

plan, project

drawings and

specifications only.


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RESPONSIBILITIES

Traditional Package Deal Management

This method can be a

clear cut division ofdesign and construction

works. The client will

engage different

consultant to design

the works and they will

take full responsibilities

for construction of the

works from the pre-

tender stage until the

completion stage.

This method provides a

single point contact andresponsibility by the

contractor. Therefore

the contractor is solely

responsible for failure

in design or the

construction. In short,

the client has only one

person to deal with if

the project is faced

with any problems.

The client will have to

choose the professionalteam who will be well

coordinated through all

the stages. The success

of the project will

depend on the

management

contractors skills and

an element of trust is

essential.


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THE END

Documents

1. Procurement Methods (Student)