B214MEC PART 02 - BLOCK B - ASSIGNMENT 02

Question No: 2
Selecting a correct procurement method is a main key requirement of a
project. As it will be directly affect to the time, cost and risk of the project.
There are seven successful steps identified by NEDO (1985) for building
procurements.

Selecting an-house project executive

Appoint of a principle adviser
Care in deciding the clients requirements
Timing the project realistically
Selecting the procurement path
Choosing the organization to work for the client
Designating a site or building for remodeling

Implementing a good procurement method will be helps to deliver the project

in scheduled time whiting the project cost. An experienced Project Manager
of particular contractor can align building function or running costs or speed
to completion or capital cost to an appropriate procurement strategy. For
successful outcome of a project, identifies and priorities key project
objectives as well as reflects aspects of risk and establishes how process will
be manage are the main keys. Mainly in project the procurement methods
should be developed considering the Risk assessments of the project. Main
key points where a risk can be occurred is;

Completing the project that does not match with the functional
requirement of the building / project / client.
Project that delivered later than the initial programme
The project that cost more than the estimated cost in Pre-tender stage.

A good procurement method can be balance those risks against the project
objectives.
Mostly the following factors should be considered when evaluating the most
appropriate procurement method;

External factors Such as economic, commercial, technological,

political, social & legal factors
Clients Resources Such as clients knowledge, his ability to do the
project, experiences.
Project Characteristics Type of the project, size of the project, area of
the site (location of the site), complexity and uniqueness will be affect
to the time, cost & risk of the project.
Ability to make changes normally all the design and technology used
to build the project will decide in the early stage. This will mainly cause
to the time and cost of the project.

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Cost issue if the design changes occurred the cost issue will
automatically raise and it will affect to the cash flow of the project.
Timing - adequate design time is allowing in the design stage. The
project duration will decide on that time and based on the project plan
and the cash flow will be decided. In any case if the timing got delay,
the cost and the risk will be rise accordingly. It will affect to the whole
project budget.

Mainly there are 3 types of procurement methods can be found in the

industry.

1. Traditional Procurement Method

In this method generally the design and construction work will be
separate and both design and cost control consultants are appointed
for the project. The contractor is fully responsible for the carryout the
project at site. This will extended to all workmanships, materials,
subcontractors & suppliers. There are 3 types of procurement contracts
can be found in Traditional Procurement Method

Lump sum contracts where the contract sum will determined before
the construction starts. The contractor somehow has to complete the
project within the budget. Contractor has no opportunity to claim
variations if occurred during the project stage. Lump sum fixed amount

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not subject to recalculation. Recoveries may be use of a formula or by

checking the actual invoices for the particular works. Again this type of
contact can be divided in to two;
Lump sum contracts with quantities are priced on the basis of drawings
and a firm bill of quantities. Items which cannot be quantify will
recovered by an approximate quantity or provisional sum.
Lump sum contracts without quantities these are priced on the basis
of drawings and specifications. The job might be more satisfactory
described as a Schedule of works.

Measurements based contracts Project cost is accurately known in

the completion of the project and prices will be in unit rates and
budget will prepare as per the re-measured quantity in this method.
This method also known as Re-measurement contracts. This can be
used where the time is not enough to prepare the contract documents
or even the approximate quantities for the project. Employer has to
accept the risk involved in starting work with no accurate idea of the
total cost, and generally this type of contract is most suitable for small
jobs.

Cost Reimbursement or Cost plus contracts The contractor has to

carry out an intermediate amount of work on the basis of the
contractor will be paid the prime or actual cost of labour, plant and
materials and contractor will receive agreed amount for his overhead &
profit including management charges. There are 3 types in this
method;
Cost plus percentage fee in this contract fee is related to prime cost
usually a flat rate percentage. Contractor has no real incentive to work
at maximum efficiency.
Cost plus fixed fee the fee to be charged is tendered by the
contractor in this type of contracts. Contractor has an incentive to work
efficiently so as to remain within the agreed budget.
Cost plus fluctuating fee the fee will be varies differences between
the estimated cost and the actual prime cost.

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Advantages and disadvantages of this method

Main advantages are;
Accountability due to a competitive selection.
Competitive equity as all tendering contractors bid on the same basis.
Design lead and the client is able to have a direct influence which can
facilitate a high level of functionality and improve the quality in the
overall design.
Price certainly at the award of the contract
Variations to the contractor are relatively easy to arrange and manage
A tried and test method of procurement which the market is very
familiar with.
Main disadvantages are;

Can be a timely process to produce the full contract documentation.

Tenders document form as incomplete design can be produced but can
lead to less cost and time certainly, and may lead to dispute.
Overall project duration may be longer that the other procurement
methods
No input in to the design or planning of the project by the contractor as
they are not appointed during the design stage.

2. Design and Construct Procurement Method

In this method the contractor will accept some or all responsibility of
the design. The contractor should have to provide the liabilities and
some kind of indemnity insurance to the client before the tender
accept. Some design and construct forms limit the design liability of
the contractor to the normal professional duty to exercise reasonable
care and skill. If the contractor doesnt have any in house designers
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the contractor uses external consultants, their identity should be

present before accepting the tender. This leaves the responsibility for
design and selection firmly with the contractor. Design and construct
method offer certainly on the contract some and bring cost benefits. It
is possible ensure a quicker start on site.

Advantages and disadvantages of this method

Main advantages are;
Client has to deal with one firm and reduces the need to commit
resources and time to contracting designers and contractors
separately.
Price certainty is obtained before construction commences as clients
requirements are specified and changes are not introduced.
Use of guaranteed maximum price with a savings option split can
stimulate innovation and reduce time and cost.
Overlap of design and construction activities can reduce project time.
Improved constructability due to contractors input into the design.
Main Disadvantages are;

Difficulties can be experienced by clients in preparing an adequate and

sufficiently comprehensive brief.
Client changes to project scope can be expensive
Difficulty in comparing bids since each design will be different, project
programme will vary between bidders, and prices for the project will be
different for each design.
Client is required to commit to a concept design at an earlier stage
before the detailed designs are complete.
Design liability is limited to the standard contracts that are available.

3. Management Procurement Method

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In this method the contractor has direct contractual links with all the
works and the contractor is responsible for all construction works. In
this method the contractor paid an amount for professionally manage,
develop a programme and coordinate with the design and construction
team and activities to improve the project constructability. There are 3
types of Management procurement methods;
Construction Management The management contractor is selected
after careful selection based on their experiences and is paid a
management fee and this will gives the client a greater measure of
control.
Management Contracting The client will be appoint an independent
professional team in pre tender and also post tender stage to gives the
advice to the team and they will responsible in the execution stage. In
this type of contract there will be a possibility to make an early start on
site and achieve early completion. To get a good result on this there
must be trust and good team work on the part of the client.
Design and manage This method also similar to the management
contracting. The contractor is paid a fee and assumes responsibility,
not only for works contractors, but also for the design team.

Advantages and disadvantages of this method

Main advantages are;
The client deals with only one firm, which enables improved
coordination and collaboration between designers and constructors;
Potential for time savings for the overall project as design and
construction activities are overlapped.

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Under a design and manage form, the contractor assumes risk and
responsibility for the integration of the design with construction.
Works packages can be let competitively at prices that are current
Improved constructability through constructor input in to the design
Roles, risks and responsibilities for all parties are clear
Flexibility for changes in design
Main Disadvantages are;

Price certainly is not achieved until the final works package has been
given
Informed and proactive client is required
Poor price certainty
Close time and information control required
Client must provide a good quality brief to the design team as the
design will not be complete until resources have been committed to
the project.
Client loses direct control of design quality which is influenced by the
constructors.

No of words without bibliography: 1673

Bibliography:

CEM Study materials, Technical Skills M&E QS Practices, Part 02

Block B, paper 0260V11-0, Collage of Estate Management, Reading,
UK.
Sandra Lee, William Trench, Andrew Willis (2014), Williss Elements
of Quantity Surveying, 12th Edition, WILEY Blackwell.
Peter Davis, Peter Love, David Baccarini (2008), Building
Procurement Methods, CRC Construction Innovation, Australia
Search engine, www.google.com

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