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AN INTRODUCTION
TO BUILDING
PROCUREMENT
SYSTEMS
J.W.E.Masterman

E & FN SPON
An Imprint of Chapman & Hall

London • New York • Tokyo • Melbourne • Madras

Published by E & FN Spon, an imprint of Chapman & Hall, 2–6 Boundary
Row, London SE1 8HN

This edition published in the Taylor & Francis e-Library, 2003.

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© 1992 J.W.E.Masterman

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Apart from any fair dealing for the purposes of research or private study, or criticism
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this publication may not be reproduced, stored, or transmitted, in any form or by
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The publisher makes no representation, express or implied, with regard to the
accuracy of the information contained in this book and cannot accept any legal
responsibility or liability for any errors or omissions that may be made.

A catalogue record for this book is available from the British Library.

Library of Congress Cataloguing-in-Publication data available.

This work is dedicated to my wife Miki, who throughout this venture,
and many others, has selflessly supported my endeavours.
CONTENTS

Acknowledgements ix
Preface xi
Introduction xiii

1 The concept of procurement systems

1.1 Terminology 1
1.2 Categorization of procurement systems 2
References 5

2 The evolution of contemporary procurement systems

2.1 Introduction 7
2.2 1945–1972 8
2.3 1973–1979 9
2.4 1980 to the present time 12
2.5 The level of use of procurement systems 13
Summary 18
References 20

3 Separated and co-operative procurement systems

3.1 Introduction 23
3.2 The conventional method 23
3.3 Variants of the conventional method 40
Summary 49
References 52

4 Integrated procurement systems

4.1 Introduction 55
4.2 Design and build 56
4.3 Variants of design and build 69
Summary 73
References 75

5 Management-orientated procurement systems

5.1 Introduction 77
5.2 Management contracting 78

vii
viii CONTENTS

5.3 Construction management 96

5.4 Design and manage 107
Summary 116
References 119

6 The British Property Federation system

6.1
6.1 Introduction 121
6.2 Genesis 122
6.3 Share of the market 124
6.4 The Process 124
6.5 The Product 133
Summary 135
References 136

7 Clients and their needs

7.1 Categorization of clients 137
7.2 Client’s
Client's needs 139
Summary 149
References 150

8 The selection of procurement systems

8.1 How clients actually select the procurement systems they use 151
Summary 158
8.2 The methods clients should use to choose their procurement 160
systems
8.3 Guides and aids to the selection of procurement systems 165
Summary 180
References 181

9 The future
9.1 General 183
9.2 Individual procurement systems 185
Summary 187
References 188

Index 189
ACKNOWLEDGEMENTS

Grateful acknowledgement is made to following publishers and authors for their

permission to quote or reproduce extracts from the works listed below:
Walker, A. (1984) Project Management in Construction, Blackwell Scientific
Publications.
British Property Federation (1983) Manual of the BPF System, prepared by a
Working Party chaired by Mr Stanley Honeyman.
Waters, B. (1983) The BPF System, in: Building, Building (Publications) Ltd.
Centre for Construction Market Information (1985) Survey of Management
Contracting.
Skitmore, R.M., and Marsden, D.E. (1988) Which procurement system?
Towards a universal procurement selection technique, in: Construction
Management and Economics, Chapman & Hall Ltd.
Franks, J., and Harlow, P. (1990) Building Procurement Systems, Chartered
Institute of Building.
Building Economic Development Committee, NEDO (1983) Faster Building
for Industry, Controller of Her Majesty’s Stationery Office.
Building Economic Development Committee, NEDO (1985) Thinking About
Building—A Successful Customers Guide to Using the Construction Industry.
Jones, G.P. (1984) A New Approach to the JCT Design and Build Contract,
Longman Group UK Ltd.
Hillebrandt, P.M. (1985) Economic Theory of the Construction Industry, The
Macmillan Press [© Patricia M.Hillebrandt].
Fraser, I. (1980) AMM Case Study, Architects Journal, MBC Architectural Press
Ltd.
Centre for Strategic Studies, University of Reading (1988) Building Britain
2001, National Contractors Group (a sector of the Building Employees
Federation).

ix
x ACKNOWLEDGEMENTS

University of Salford (1988) ELSIE Expert System—Users Manual

(Commercial Application, Version 1.0), Royal Institute of Chartered Surveyors.
(The ELSIE software package is now being sold, maintained and further
developed by IMAGINOR Systems—current version is 4.0)
Brandon, P.S., Basden, A., Hamilton, W.I. and Stockley, J.E. (1988) Expert
Systems—The Strategic Planning of Construction Projects .
PREFACE

Research has revealed that the way in which many clients, and their advisors,
select the method used to control the design and construction of their building
projects, i.e. the procurement system, can be haphazard, ill-timed and lacking
in logic and discipline.
As it has also been recognized that one of the principal reasons for the
construction industry’s poor performance is the inappropriateness of the
procurement systems that have been chosen in this way, it is essential for the
future success of individual projects and the industry as a whole that, at a time
when such systems are proliferating and where building projects are becoming
more complex, the correct choice is made.
While there is much available literature relating to individual methods of
procurement, little has been done to provide an introduction to the subject and
a single source of reference which describes, examines and compares all of the
main procurement systems being used in most of the United Kingdom.
This book attempts to satisfy this need by providing information on the
history, procedures, use and characteristics associated with each of the major
procurement systems and their variants, and offering guidance to the reader
on the principles of selection of the most appropriate method of procurement.
For the sake of clarity the term ‘building’ here relates to industrial,
commercial, retail, leisure, educational and other similar facilities but not civil
engineering projects or petrochemical and process engineering installations.

J.W.E.Masterman

xi
INTRODUCTION

An examination of the historical background to the use of procurement systems

shows that in the post-war period up to the early 1970s, despite all relevant
official reports and studies recommending otherwise, the majority of building
work was carried out by conventional methods of procurement with only a
relatively small number of projects being implemented by means of, what were
then, non-conventional methods such as negotiation, serial tendering and the
use of package deals.
Because of this, many clients saw the implementation of a building project
as an expensive and risky adventure with work taking a long time to get started
and delays, disputes and extra costs prolonging the agony.
This discontent came to a head during the period of recession which ran
from 1973 to the beginning of the 1980s when for the first time client
dissatisfaction with the construction industry’s inability to meet their needs was
publicly expressed and this phenomenon, together with the financial and
practical consequences of the dramatic increases in oil prices, resulted in the
much greater use of management contracting and the design and build
procurement system.
In the period from 1980 to the present day, which has mainly been a time
of post-recession recovery, there has been a changed pattern of demand for the
industry’s resources, a lack of skilled labour and public finance and new client
attitudes to the organization of the management of the design and construction
of projects and the financing of development schemes.
However, despite the increased use of unconventional procurement systems,
and with the exception of some mega projects in the south-east of the country,
the building industry’s general performance, in terms of the usual criteria of
time, cost, functionality and quality, has continued to be mediocre and, although
it is accepted that the correct choice and use of the most appropriate
procurement system is not the only reason for inefficient project management,
there is little doubt that it has been a contributory factor in the industry’s
apparent inability to achieve a higher level of project success and overall
performance.
In order to enable the choice and subsequent use of the correct procurement
system to be made, it must first be understood that there is no standard solution,
or ‘best buy’, amongst procurement systems. Client organizations are complex

xiii
xiv INTRODUCTION

and different categories of clients require discrete solutions to their procurement

needs, added to which construction projects vary so considerably, in every
respect, from one to another that no single method of procurement can be
suitable for every project for all time.
Secondly, it is essential that each project is analysed and its primary and
secondary objectives identified and incorporated into the technical brief for the
work. The client’s needs, expressed in the briefing document, must then be
compared with the characteristics of all available procurement systems and a
logical and disciplined choice made of the most appropriate method.
The range of available procurement systems has proliferated in recent years
as a result of the increased complexity of building designs, escalating costs, the
magnitude of projects and increasing demands of building owners, but despite
this the majority of clients continue to select the procurement systems they use
from a very small number of the wide range of available methods.
The intention of this guide is to provide the reader with sufficient information
about building procurement systems to ensure an awareness of all the methods
that are currently available and their main advantages and disadvantages.
No attempt has been made to describe in detail the way in which each system
is processed through the various stages of a project as this is not seen as the
function of this guide but rather that of the substantial amount of available
literature that deals with the various individual procurement systems on a
specific basis.
Specifically, Chapters 1 and 2 describe the concept and categorization of
procurement systems and the evolution of those methods currently in use. The
next four chapters deal with each of the various categories and the individual
systems themselves. Chapter 7 looks at the needs of clients in the context of
project success while Chapter 8 investigates the way in which clients decide
which method to use, then identifies the principles that should govern the correct
choice and the various aids that are available to assist clients during this process.
Finally, in Chapter 9 an attempt is made to forecast the future in the context
of procurement systems and their use.
It has been suggested that where there is a clearly defined and communicated
set of objectives, and an understanding and acceptance of their responsibilities
by each member of an expert and competent project team, construction projects
are much less likely to encounter significant difficulties whatever the
procurement methodology. Whilst this may be true, it is strongly advocated that
this combination of criteria is rarely achieved in practice and success can best
be guaranteed by the correct choice of the most appropriate procurement system
within the discipline and framework of which the project team are more likely
to achieve the necessary level of efficiency to enable them to bring the project
to a successful conclusion.
1
THE CONCEPT OF
PROCUREMENT
SYSTEMS

1.1 TERMINOLOGY

The fragmented nature of the building industry particularly the separation of

design and construction, the uniqueness of construction projects and the
resulting ephemeral nature of the project organization places great dependence
on the project team in setting up the building process and bringing the project
to a successful conclusion [1].
One fundamental aspect of the building process that requires early and
particular attention if success is to be achieved, is the selection of the most
appropriate organization for the design and construction of the project.
For the purposes of identification and communication it is necessary to adopt
a term to describe this organization. An examination of past research and
literature reveals that phrases such as ‘building procurement method’,
‘procurement form’ and ‘procurement path’ have been used by various
authorities when referring to this concept.
Franks [2] describes ‘the amalgam of activities undertaken by a client to
obtain a building’ as a ‘building procurement system’ and an examination of
the definitions of the last two words of the phrase confirms that when conjoined
they relate to the method or organizational structure used to acquire a product,
in this case a building project.
The term ‘building procurement’ system has therefore been adopted and used
throughout the succeeding chapters and it is suggested could, with benefit, be
generally accepted within the industry to describe:
The organizational structure adopted by the client for the management of
the design and construction of a building project.
The choice of building procurement systems available to clients is now so wide
that the need to carry out the selection process in a disciplined and objective
manner should be self-evident, but the fact that such a course of action is not

1
2 THE CONCEPT OF PROCUREMENT SYSTEMS

adopted by many of the construction industry’s customers suggests that the

philosophy and advantages of a systems approach to both the detailed and
general management of construction projects is still not widely accepted.

1.2 CATEGORIZATION OF PROCUREMENT SYSTEMS

As an aid to adopting a more logical approach to the selection of the most

appropriate method from the proliferation of systems currently available it is
suggested that the different methods need to be categorized and there are a
number of ways in which this can be achieved, for example:
1. by the amount of risk taken by all of the participating parties;
2. by the extent to which design and construction are integrated;
3. on the basis of the way in which the contractor is reimbursed;
4. in the way suggested by The National Economic Development Office
(NEDO), in their publication Thinking about Building [3];
5. by the approach suggested by Bennett [4] after Mintzberg;
6. in accordance with Perry’s categorization [5].
The adoption of the first and third methods would only result in categorizations
which would be based upon single characteristics of procurement systems and
thus provide an insufficiently wide basis for selection. The second method
touches upon a critical element within the design and construction process, i.e.
the relationship between the two processes but is again too narrow in its
approach.
The NEDO guide adopts a practical approach and identifies four different
basic procurement systems, or paths, i.e. traditional, design and build,
management, and design and manage, each of which have a number of variants,
but makes no attempt to establish a grouping of systems based upon common
characteristics.
Bennett [4] maintains that, from a construction-project management
viewpoint, there are three distinct idealized patterns of project organizations
each with consistent links with different types of projects:
1. programmed project organizations which relate to standard construction;
2. professional project organizations which relate to traditional construction;
and
3. problem-solving project organizations which relate to innovative
construction.
This approach is considered to be too academic for the purpose of
categorization, added to which it does not relate to any of the accepted
fundamental characteristics of procurement systems.
Perry’s [5] approach categorizes all procurement methods as:
 CATEGORIZATION OF PROCUREMENT SYSTEMS 3

1. divided management of design and construction;

2. co-operative management of design and construction;
3. special emphasis on management;
4. integrated management of design and construction;

and is considered to be, for the purpose of assisting in the simplification of the
selection of procurement systems, the most appropriate categorization relating
as it does to the critical interaction between the design and construction
processes.
Therefore for the purposes of use in this guide the following categories have
been adopted:
1. separated and co-operative procurement systems, where the responsibility
for the design and construction aspects of the project are the responsibility
of separate organizations, e.g. design consultants and contractors, but where
variants of the basic system may also be used which enable the contractor
to be appointed at an early stage so that he may co-operate with the client
in pricing, providing advice on construction methods and buildability and
accelerating the commencement and completion of the project;
2. integrated procurement systems, where design and construction become the
responsibility of one organization, usually a contractor and the client has
only one organization to deal with;
3. management-orientated procurement systems, where the emphasis is placed
upon overall management of the design and construction of the project with
the latter element usually being carried out by works or package contractors
and the management contractor having the status and responsibilities of a
consultant.

Figure 1.1, adapted from Perry’s [5] original diagram, illustrates this
categorization and shows the main choices of procurement systems that are
currently available. The non-categorization of the British Property Federation
system results from the fact that it is, in reality, a very detailed administrative/
managerial framework into which other procurement methods can be fitted
to suit the requirements of a particular project and thus does not exhibit the
specific characteristics which would enable it to be placed with any certainty
into any particular grouping.
These groupings and the individual systems are themselves discussed in
succeeding chapters but it should be understood that, while on the
majority of projects the use of one procurement system will normally
ensure that the client’s needs are satisfied, on larger and more complex
projects it may be necessary for several of the methods to be used in
combination, or singly on different geographical sections of the same
scheme, and it is not unknown for a bespoke procurement system to be
designed for a specific project.
 Systems for the management of the design and
construction of building projects

Separated and co-operative Integrated Management-

procurement systems procurement orientated
systems procurement
systems

Conventional Variants Design Variants British

system of the and of design Property
conventional build and build Federation
system system

Negotiation Serial contracts Package Develop

deals and
construct
Two-stage Continuity Cost-
selective contracts reimbursable Turnkey
tendering contracts

Construction
management
Management Design
contracting and
manage
Figure 1.1 The categorization of building procurement systems
Source: Perry [5]
 REFERENCES 5

REFERENCES

1. Sidwell, A.C. (1982) Paper to seminar on Management Contracting,

sponsored by the Institute of Quantity Surveyors, London, 1 December.
2. Franks, J. (1984) Building Procurement Systems—a Guide to Building
Project Management, CIOB, Ascot.
3. Building Economic Development Committee (1985) Thinking about
Building—a Successful Business Customer’s Guide to Using the
Construction Industry, NEDO, London.
4. Bennett, J. (1985) Construction Project Management, Butterworths,
London.
5. Perry, J.G. (1985) The development of contract strategies for construction
projects, unpublished PhD thesis, University of Manchester.