Procurement PDF

[Construction Contract Administration] January 15, 2010
TABLE OF CONTENTS
1.0 INTRODUCTION........................................................................................................................................................2
2.0 THE PROCUREMENT SYSTEMS .................................................................................................................................2
2.1 TRADITIONAL SYSTEM OR DESIGN-BID-BUILD .........................................................................................................4
2.2 INTEGRATED PROCUREMENT SYSTEMS ..................................................................................................................7
(I)Design and Build ....................................................................................................................................................7
(ii) variants of design and build ...............................................................................................................................10
2.3 MANAGEMENT ORIENTED PROCUREMENT SYSTEMS ...........................................................................................12
(i) Management Contracting ...................................................................................................................................13
(ii) Construction Management ................................................................................................................................16
Concept of Construction Project Management ......................................................................................................19
3.0 TYPES OF CONTRACTS............................................................................................................................................20
3.1 Lump Sum Contracts .........................................................................................................................................20
3.2 Continual Contracts ...........................................................................................................................................20
3.3 Measurement Contracts ...................................................................................................................................21
3.4 Cost Reimbursement Contracts ........................................................................................................................21
4.0 THE BASIS OF CHOICE OF PROCUREMENT STRATEGY ...........................................................................................22
5.0 PUBLIC PRIVATE PARTNERSHIPS ............................................................................................................................24
6.0 PUBLIC PROCUREMENT ACT OF KENYA AND THE EFFECTS OF BUREAUCRACY .....................................................25
6.1 Purpose of the PPDA .........................................................................................................................................26
6.2 Procurement Procedures ..................................................................................................................................26
6.3 An Effective Public Procurement System ..........................................................................................................27
6.2 Public Entity Procurement Inefficiency .............................................................................................................29
7.0 CONCLUSION .........................................................................................................................................................32
8.0 REFERENCES ...........................................................................................................................................................32
1 1.0 Introduction | Procurement Systems in Building Works

1.0 INTRODUCTION
The procurement of construction project is vast in scope because it involves the gathering and
organizing of myriads of separate individuals, firms and companies to design, manage and build
construction products such as houses, office buildings, shopping complex, roads, bridges etc. for
specific clients or “customers”.
Procurement comes the word procure which literally means “to obtain by care or effort”; “to
bring about” and “to acquire”. System is about “organized method, approach, technique,
process or procedure”. In this context, project procurement is very much concerned with the
organized methods or process and procedure of obtaining or acquiring a construction product
such as a house, shopping complex or just a building. It also involves arranging and
coordinating people to achieve prescribed goals or objectives.
2.0 THE PROCUREMENT SYSTEMS

Procurement systems differ from each other in terms of allocation of responsibilities, activities
sequencing, process and procedure and organizational approach in project delivery. These
differences have invariably affected the project performance.
Today, there are several types or variations of project procurement systems being widely used
in the construction industry. They range from the traditional system to the many variations of
“fast-tracking” systems. The introduction of many variations of project procurement system
was induced by the quest for more efficient and speedier project delivery system and better
project performance. They are innovations to the traditional delivery method aimed at meeting
the changing demand of clients or customers. The different procurement systems present have
brought changes not only to the process and procedure of project delivery but also the aspects
of management and organization.
Procurement phase is identified as being crucial to eventual project success and a significant
component in project failure.
CLASSIFICATION OF CONSTRUCTION PROJECT PROCUREMENT SYSTEMS

Mastermann (1994) classify project procurement systems into several categories based on the
relationship and critical interaction between design and construction responsibilities. The
categorization of the various procurement systems are as follows:
2 1.0 Introduction | Procurement Systems in Building Works

1) Separated and Cooperative System
2) Integrated System
3) Management Oriented System
The different category and sub-classification of construction project procurement systems can
be as shown below:
PROCUREMENT
SYSTEMS
SEPARATED & INTEGRATED MANAGEMENT

COOPERATIVE ORIENTED
Management Construction
Traditional Variant of Design Variant of
contracting management
system Traditional and Build Design and
System Build
Sequential Accelerated Package deal Turnkey Develop

method method
method and
construct
Figure 1.0 Category of Building Procurement Systems

Source: Masterman J W E (1996) Building Procurement Systems: An Introduction
3 Classification Of Construction Project Procurement Systems | Procurement Systems in Building Works

2.1 TRADITIONAL SYSTEM OR DESIGN-BID-BUILD

This is also the Separated and Cooperative Procurement Systems. Under this system, the
responsibilities of designing and construction of the project are separated and are carried out
by different independent organizations namely the designers and contractors. It is sometimes
called linear or sequential contracting system or multiple responsibilities contracting approach.
It is a system where the project development activities that start from feasibility study,
preliminary design, documentation to construction and hand over, are carried out sequentially
one after another. Traditionally, the complete working drawings or design has to be prepared
by the designers before tender and construction activities can take place.
It is sub-divided into 2 sub-categories – Traditional System and Variants of the Traditional

Systems. The Variant System is further sub-divided into (i) Sequential Method, and (ii)
Accelerated Method.
Under the sequential method or a single stage tendering approach, the building owner will
appoint a team of consultants to act on his behalf to produce construction drawings,
specifications and tender documents and to administer the tendering processes to select a
contractor. Once selected and awarded the contract, the contractor will carry out based on the
drawings and specifications prepared by the client’s consultants.
Client
Limited delegated power as agent
Consultants Contractor
Quantity surveyor Engineers: Architect Sub- Suppliers

Electrical, contractors
Mechanical,
civil/structural
.
Figure 2.0: Traditional design-bid-build
4 2.1 Traditional System or Design-Bid-Build | Procurement Systems in Building Works

Construction Commission &

Project Feasibility Design Detail Tender &
hand over
Brief Study concept design contract
Client and Consultant’s responsibility Contractor’s responsibility
Figure 3.0 – The Linear or Sequential Process of the Traditional Procurement System
Contract for construction is between client and main contractor. Design is usually completed
prior to procurement and commencement of construction Price from the Contractor is based
upon a bill of quantities, or working drawings and specification, which describes the works in
detail. Final cost is measured, based on the actual quantities of work carried out. Usually much
of the work is sub-contracted to specialist firms but the contractor remains liable. The
consultants administer the contract on behalf of the client and advise on aspects associated
with design, progress and stage payments which must be paid by the client. The separation of
the contractor from the design can mean missed opportunities for contractor or specialist
contractor to input. Specialist elements are tendered separately and the selected contractors
appointed as nominated sub contractors to the main contractor. This strategy is seen as the
least risk approach as there is a level of certainty about design, cost and duration inherent in
the strategy if it is properly implemented. However, the exposure to risk will increase where the
design phase is rushed, where unreasonable time targets are set or where the tender
documents are not fully completed.
Cost constraints in traditional projects make it even more difficult for owners to assure project
quality. A design professional that reduces its fee as a consequence of the owner’s negotiation
pressure is likely to devote a reduced number of hours to the project, often at the expense of
quality control. An owner who uses competitive bidding to obtain the lowest possible
construction price may find that the low bid represents an unrealistically low construction cost
and that the contractor intends to cut corners, adopt an obstructionist or adversarial approach
to the project, and seek excessive change orders or other claims with which to make up the
profit that it left out of its competitive bid.
The accelerated method can be considered as an innovative approach to speed up the

selection of contractor and the commencement of construction. The method can be divided
into 2 sub-categories i.e. two-stage and negotiated tendering methods. Both methods involve
preliminary discussion with selected few contractors, submission of fixed tender and/or cost
negotiation. Some construction projects are “fast-tracked,” which means that construction

commences while the final finishing details are still being added to the construction documents.
A less aggressive alternative is to bid or price the project from scope documents (construction
documents which are approximately 70% complete) so that the bidding/pricing phase
considerably overlaps the end of the design phase. In two- Stage tender, the Contractor is
appointed on the basis of a first stage tender which determines the level of overhead and profit
for each Contractor. The Contractor then works with the Project Team during the second stage
to develop the designs and establish detailed costings for separate project work elements. This
process will provide for a fixed price on a detailed design basis. This approach increases the
risks of an increase in overall price and a less certain completion date but contractor
involvement is likely to increase the likelihood that both these criteria are realistically
established.
Advantages of Traditional Procurement systems
 Competitive fairness, since all tendering contractors are bidding on the same basis
 Design-led, with the client able to have direct influence, thus facilitating a high level of
functionality and bespoke quality in the design.
 Reasonable price certainty at contract award based upon market forces ( subject always to
design changes or client-led changes which will have cost implication)
 Where public expenditure or audit demands are rigid the strategy is satisfactory in terms of
public accountability since it is transparent and based upon competition.
 Single Contractual Relationship for Construction Stage
 The procedures are well known, enabling confidence to be assured in those involved
throughout the supply chain
 Phased tendering of mechanical/electrical/fire protection sub-contracts - can award later
 Nominated Sub-Contracts for key specialist elements possible
Disadvantages
 It is possible to attempt to speed up the process by producing tender documents from an

incomplete design, but this will usually result in less cost and time certainty and can be the
cause of expensive disputes.
 The overall project duration may be longer than for strategies as the strategy is sequential
and construction cannot be commenced prior to the completion of design with no parallel
working.
 There is no input into the design or planning of the project by the contractor who will not
be appointed at the design stage.
 Does not facilitate early involvement of key specialist elements

 The strategy is based on price competition and this can result in adversarial relationships
developing.
Suitable for:
All clients, including inexperienced clients, complex projects and projects where functionality is
prime objective time predictability, cost certainty. However, it is not suitable for fast track
projects.
Particularly attractive to clients with a strictly limited budget or a limit to their borrowing
powers since construction costs can be determined with reasonable certainty before
commencement of construction.
2.2 INTEGRATED PROCUREMENT SYSTEMS

This system, as the name implies, integrates or combines the responsibilities of design and
construction of the project (Ashworth, 2001). Both responsibilities are contracted out to a
single contracting organization. It is also called a parallel or single responsibility procurement
system whereby the client will only need to deal with a single organisation for both the
designing and constructing the proposed project. In this case, the contractor will have to
engage and be responsible for design and construction teams. Design and build system falls
under this category of project procurement system. Under this system, the client together with
his/her consultants will prepare a tender or bidding document that include the project brief and
client’s requirements and invite a number of contractors to bid. For the purpose of submitting
tenders, the invited contractors will produce their own design, construction and cost proposal.
Very often the successful contractor will enter into a contract based on lump sum price and a
fixed duration (Ashworth, 2001; Edmond, 2003)
(I)DESIGN AND BUILD

Design and build method of procurement enables one building contractor or a construction
company to take full responsibility and carry sole liability for the design and construction of a
building. Hence, in effect, apart from the construction client’s role, design and build essentially
combines all the fundamental tasks in construction project design, production and
management in a single package. After identifying the need for a building, the client satets his
requirements adequately in terms of physical design needs as well as the intended physical use.
A selected number of building contractors are invited to submit their proposals together with
estimated costs. The system invokes design competition which is absent from other
construction procurement systems and permits the optimization of design and production
costs.
7 2.2 Integrated Procurement Systems | Procurement Systems in Building Works
Whilst risk is shifted to the contractor, it is important that design liability insurance is
maintained to cover that risk. Changes made by the client during design can be expensive,
because they affect the whole of the Design-Build contract, rather than just the design team
costs.
Fig. 4.0 : Design and Build process Client expresses

development need
Client’s requirements
prepared
Submission of proposals
Contractor A
Contractor B Contractor C
Contractor’s proposal
against client
requirements evaluated
Successful contractor
selected
Successful contractor
finalises design and
produces the building

Fig.5.0 : Organisation structure of design and build
Client
Client’s
agents
Main
contractor
Contractor’s project team
Quantity
Architect Engineer Contractor’s
surveyor
manager
Contractor’s site team
Site Site Site Support

Contractual relationship manager engineer surveyor staff
Organisational relationship
Project Tender Tender & Construction Commission &

Feasibility documentation Concept
brief contracting hand over
study design
Detail design
Client and Consultant’s responsibility Contractor’s responsibility
Figure 6.0 – The Integrated Process of Project Designing and Construction in the Design and
Build Procurement System

Criteria for choosing design and build option
Main characteristics under which the D&B procurement option may be appropriate for a
client’s construction project are when:
 Early delivery of project is required

 Project is of technical complexity
 There is need for early start on site
 Price certainty (usually lumpsum) is required prior to production
 Construction project is prestigious and hence, single point responsibility is required.
 Economy (time, cost, function, quality, value for money) is required.
(II) VARIANTS OF DESIGN AND BUILD

The variation or innovation to this mode of project delivery systems includes (1) Package deal
(2) Turnkey (3) Develop and construct. These systems that entail the contractor to be
responsible for both the design and construction of the project, allow for the early start of
construction through the reduction of the pre-tender activities as such they reduce process
time.
Package deal or commonly called the “all in” contracting is a type of procurement method
where a contractor is given the responsibility for everything that is required and necessary
for the design, construction and delivery of the project. Under this system, the services of
the contractor will include the preparation of project brief, sketch and final working
drawings, getting all the approval from authorities, project financing, construction,
furnishing and commissioning of all equipments and accessories and handing over the
project to the client. In otherwords, the contractor provides an off-the-shelf building.
Typical examples are farm, factory, warehouse and straightforward office buildings.
Turnkey contract is an American term for “all in” or package contract. Under this
arrangement, a contractor is commissioned to undertake the responsibilities for everything
necessary and required for the construction, completion, commissioning and hand over the
project. The word “turnkey” means that, upon completion, the client is given the key and he
can then enter the project by “turning the key”. The contractor will have to do everything
from preparing project brief, getting approval, designing, financing, construction, furnishing
and decorating to commissioning and handing over completed, cleaned and ready for use
project (Allen, 2001).

Develop and construct is another of the integrated procurement approach which is very
much similar to design and build. In this case, the contractor is still given the responsibility
for both the design and construction of the project. The difference is that, under this
method the client’s design consultants prepare the concept sketches or designs and passed
them to the contractor who will develop them and produce the detailed working drawings.
The contractor then takes on ‘finishing off’ the design and construction of the project based
on what it has developed and produced.
Design, Build and Operate This approach would involve the Client Body in selecting a
company or consortium who would carry out the design and construction of the facility, but
would also act as the operations company to manage the facility after construction.
Single Contractual Relationship for all design / construction - This approach has the benefit of
allowing the Client to hand over the complete project (design and construction) to one
company
More price certainty from early stage depending on price variation clauses
Suitable for well defined work packages, based on performance specification
You get input from the operations personnel directly at the design stage.
Advantages of Integrated procurement system
a. The integrated design and construction allows for design and management input fro the
building contractor and this leads to production efficiency in terms of cost and time
b. The method allows for simplified contractual arrangement between client and contractor
with single-point responsibility and improved communication channels between parties to
contract.
c. Project duration is shortened due to contractor’s familiarity with his system and parallel
working on design and construction
d. Client’s total financial commitment os known at an early stage and, provided the client does
not introduce major alterations, this will not change
e. Client obtains competition in design as well as price
f. The closer contractor/client relationship leads to a more efficient design
g. Client obtains a design cost element lower than which an independent designer would
charge under other methods
h. Construction projects using the system have the potential for early completion and lower
overall costs.
i. Innovation in construction production is encouraged under this procurement system and

the building contractor, being in charge of design, can reap the benefit of innovative
products and processes.
Disadvantages
a. The building contractor’s in-house design expertise may be insufficient to solve the client's
needs efficiently
b. Tendering costs are high as contractors must design and produce accurate proposals as well
as estimates
c. An inexperienced client will still require construction professionals to advise during
preparation of brief, tender information and evaluation of quality and cost of design
d. The building contractor requires adequate insurance to cover for the design failures as well
as construction
e. Tender comparison becomes complex as it involves evaluation of design, quality and
construction cost.
f. The client finds it difficult and/or costly to introduce variations once production has
commenced on site.
Suitable for:
 Complex Construction facilities - requiring specialised skills (technical in nature) or

expertise for instance museums, monuments or buildings that require non-exposure due to
security reasons or due to their sensitive functions like embassies.
 For facilities where expected risks could be very high hence Design and Build becomes a
way to avoid the risks before they occur.
2.3 MANAGEMENT ORIENTED PROCUREMENT SYSTEMS

It is a system that gives greater emphasis on the management and integration of the design and
construction of projects. Under this system, the management of the design and construction a
project is contracted out to a contractor who acts as a management consultant on behalf of the
client. The construction itself is commissioned to many “specialists” or sub- contractors who
enter into contract with either the management contractor or the client. This procurement
approach that was introduced based on the conception that a builder or contractor has more
expertise to manage the design and construction of a project. As management consultant, the
appointed contractor does not itself, carry out the design or construction of the project. Its
12 2.3 Management Oriented Procurement Systems | Procurement Systems in Building Works

main responsibility is to manage the design and construction by the design consultants and the
many specialist contractors, respectively.
(I) MANAGEMENT CONTRACTING

Management contract is a contractual arrangement in which a client appoints a construction
company termed as the management contractor (MC) to manage and coordinate the design
and production phases of a construction project. On appointment the MC works alongside the
client’s professional advisers and this gives the client expertise not normally available at pre-
contract stages of construction projects executed under the traditional procurement method.
The early appointment of MC enables that person to contribute to the design of the project.
Although the MC does not directly design or construct any part of the permanent works, he/she
gives expert advice on construction techniques and uses on-site knowledge to avcoid the design
of sections/elements that will be problematic to produce. He also seeks to meet the design
requirements by the provision of specified common user and service facilities (e.g tower cranes,
scaffolding, site offices, storage facilities, security) and letting each element of the project to a
number of sub-contractors in works packages. The MC provides the necessary coordination and
back-up services to the works contractors and is responsible for both the terms of their
contract and the management of their works. The MC is paid for the provision of common user
and service facilities in addition to an agreed fee based on a percentage of the estimated
construction cost, for management input.
Fig. 7.0 Organisation structure for management contract
Client
Design team Management

Contractor
Contractual relationship Works

contractor
Organisational relationship

Detail design
and/or shop
drawings
Project brief Tender doc. & Concept Bidding & Commission &
Feasibility Construction
client req. design contracting hand over
study
Package Contractor’s
responsibility
Client and Consultant’s responsibility Management Contractor’s responsibility
Figure 8.0 – The Process of Project Designing and Construction in the Management Contracting
& Professional Construction Management Procurement System
Criteria for choosing a management contract
1. Early start on site: Where time is of the essence and production cannot wait until design
is fully defined and, hence, the production must proceed in parallel
2. Complexity of project requirements: complex technologically and therefore require

input of multiplicity of specialist designers and ultimate users with diverse
requirements.
3. Size: Project fairly large and require complex organization and coordination
4. Maximisation of competition: client require maximum competition in respect of price
for production management expertise and resources
5. Early completion: client requires early completion hence compressed and expedited
development programme
6. Efficient use of resources: client wishes to capitalize on efficient use of resources and his
awareness that contractor’s advice on buildability at design phase achieves this
objective
7. Lack of in-house management resources
8. Flexible budget: client has flexible budget and can take major risky financial decisions for
9. Contractor’s expertise: required at design phase
Advantages of Management contract
 Early contractor involvement at design phase may lead to better design and detailing which
facilitates productivity and savings on production cost.
 The traditional design/construct split is eradicated, enabling the contractor to advise on
quality, buildability, suitability and availability of labour, plant and materials and
construction methods during the design phase.
 Design and construction are overlapped as well as overlapping the various work packages.
This saves on project time.
 Risk of potential contractual claims is minimized as, from the project’s onset, the MC
identifies contentious project information and recommends its modification prior to
contract.
 The ‘them and us’ attitude is eradicated as; from the project’s onset the MC becomes part
of the project team working together to achieve a client’s objectives of time, cost and
quality.
 Price is not the only criterion for selection of MC. Rather, in addition, the ability to make
some technical and managerial contribution to the design and production of a prohect is
also considered.
 Advance purchasing of essential materials/components and plant can be effected to ensure
their availability for use when required.
 Early management contractor’s appointment enables him to give information on the
organization of construction work, site layout, possible works contractors and tendering
arrangements.
 Client obtains keener prices owing to the increased competition for his construction project.
Disadvantages
 Problems of coordination can lead to production delays and be grounds of contractual

claims
 Client pays twice for duplication of site services, attendances and general preliminaries
 Client is not aware of the financial commitment before the commencement of project on
site
 Client may have no redress against a MC in respect of performance and quality, work
contractor’s work, late completion and recovery of damages for late completion.
 Client has two sets of fees to pay for the professional services of design and
construction management.
 Full financial commitment not known at outset of construction

 Need large contingencies for work interfaces
Suitable for:
This approach is generally considered to be appropriate for large, complex fast-track projects
particularly where there is a requirement for maximum flexibility and to overlap design and
construction phases.
(II) CONSTRUCTION MANAGEMENT

Fig. 9.0 Organisation structure for construction management
Client
Design team Construction

manager
Works
contractor
contractual relationship
organizational relationship
Project brief & Feasibility Bidding & Commission &

Construction
client reqms Concept Detail design
study contracting hand over
design
Design consultant’s responsibility Package Contractor’s

responsibility
Construction manager’s responsibility

Figure 10.0 – The Process of Project Designing and Construction in the Design and Manage
Procurement System
The Construction management (CM) approach to construction procurement emerged due to
clients demand for better quality and faster production at lower costs. Under this strategy, the
client does not allocate risk and responsibility to a single main contractor. Instead, the client
employs the design team and a construction manager is engaged as a fee-earning professional
to manage, programme and co-ordinate the design and construction activities and to facilitate
collaboration in order to improve the buildability of the design. Construction work is carried out
by trade contractors through direct contracts with client for distinct trades or work packages.
The construction manager supervises the construction process and coordinates the design
team.
This is a strategy with little certainty for the client at the outset and one usually adopted where
the primary objective for the client is relative speed for completion. In adopting CM strategy,
the client will be closely involved in each stage of design and construction. The client must have
administrative and project management staff with time and ability to assess the
recommendations of the CM and take necessary action. The client needs to maintain a strong
presence of through a project management team that is technically and commercially astute.
This strategy is therefore not suitable for inexpert or inexperienced clients. The work packages
are tendered individually, for a lumpsum price usually on basis of drawings and/or
specifications. The final costs will only be known once the final work elements have been
awarded.
Criteria for choosing a construction management
a. Early completion of the construction project is required by client
b. The project is of fairly large size and technologically complex
c. Complicated requirements of the project
d. Design and production phases must overlap to expedite production
e. Input comes from several sponsors/ultimate users with diverse requirements
f. The requirement of a maximum price
g. The demand of an effective utilization of production resources
h. A need for management input at design phase

Advantages of Construction Management
 Allows overlapping design/construction stages - Shorter Duration

 Work can commence once first Contract Package is awarded
 Construction expertise can be deployed during design process (especially in specialist areas)
hence their contribution to the design and project planning- advance ordering of items
 More direct control and influence over production by client due to contractual relationship
with the design team, CM and works contractors.
 Fixed price tenders are likely due to timing of Tenders and Works
 The client has direct contracts with the trade contractors and pays them directly ( There is
evidence that this results in to lower prices due to improved cashflow certainty)
 Changes in design can be accommodated later than some strategies, without paying a
premium, provided the relevant trade packages have not been let and earlier awarded
packages are not adversely affected.
 More control over each element of the works and hence control of Quality
 Roles, risks and responsibilities for all participants are clear.
Disadvantages
 Full financial commitment not known at outset of construction- price certainty not known
till last trade package is let. Budgeting depends heavily on design team estimates.
 An informed, pro active client is required is required to operate such a strategy
 The client must provide a good quality brief to the design team as the design team will not
be complete until the client has committed significant resources to the project
 Multiple Construction Contracts with Client
 Close time and information control is required.
 Risk of conflict at Sub-Contract interfaces – need for co-ordination
 Client pays more in professional fees
 Client is exposed to a high degree of risk as CM does not take responsibility of late
completion, faulty workmanship etc.
Suitable for:
 Considered appropriate for large / complex projects particularly where there is a

requirement for maximum flexibility and overlapping of the design and construction phases
and where there is high degree of design innovation where clients wants ‘hand-on’
involvement.

 Construction Management requires constant involvement by the client so it is really only

suitable for experienced clients.
CONCEPT OF CONSTRUCTION PROJECT MANAGEMENT
Construction project management (CPM) is a management function in construction design and

production which comprises the planning, costing evaluating and controlling projects on behalf
of the client, so that it is completed on time, to specification and within budget. Under this
system, the client appoints a construction professional (project manager) who is given the
responsibility for various functions of site identification, land assembly, approval, funding,
design, construction and marketing and he is paid an agreed fee based on a percentage of the
total cost of the construction project. Generally, the project manager is the bridge between the
client and the project team and is responsible for the task of helping to establish the overall
project objectives and directing , controlling, planning and coordinating the efforts of the
project team to the achievement of those objectives.
Note that, construction project management is not a construction procurement system. The
role of the project manager is to select the most appropriate procurement system for the
project. CPM is therefore concerned with management of the whole construction project i.e
the translation of client’s needs into finished functional physical product. The project
management covers:
 Coordination of the diverse interests of ultimate users of completed facility and the client
in order to formulate unified client requirement.
 Organization of the process of design and construction of project to comply with the client’s
requirements economically and timely.
Advantages of Construction Project Management
 Client’s brief is prepared by skilled construction professional – adequate briefing document

 The ‘them and us’ confrontation is averted as the PM welds all participation into effective
construction project team
 Client benefits from having only one person to deal with in all matters concerning the
project
 The architect is released from the tasks and problems associated with managing the project
and hence concentrates on design matters the PM performs an independent and
disinterested role and uses this position well in directing, coordinating and solving
construction problems
 Design can be tailored to overlap production, thereby reducing the overall project time
Disadvantages
 Client’s project cost increases – due to engagement of a representative, PM s fees

 PM carries no financial risk and can only be sued for damages incase of profdessional
negligence or breach of contract.
3.0 TYPES OF CONTRACTS

Regardless of the procurement systems one chooses, the type of contract the parties enter into
plays a crucial role in determining the allocation of risks in execution and administration of the
project.
3.1 LUMP SUM CONTRACTS

Where the contract sum is determined before construction work is started.
Under this contractual arrangement, the contractor consents to execute the entire work
described or specified for a stated total sum. Agreed sum is based on information from
drawings, specifications, BQs or site inspection. To arrive at pre-estimated price, contractor
takes in account all contractual risks, condition of construction market and current workload.
No variations allowed. Lumpsum contract may be procured either lumpsum or fixed.
Adjustment to contract sum for labour, plant and materials price changes is permissible in
former but not in latter, except statutory fluctuations like taxes.
Suitable for: On minor and maintenance works or where there is adequate information to
enable client know his financial commitment.
3.2 CONTINUAL C ONTRACTS

When the client wishes to pursue a programme of construction, his or her professional advisers
may recommend one of the following contractual arrangements to effect a saving in tendering
cost and expedite production.
a. Serial contracts – contractor undertakes to enter into series of separate lumpsum contracts
in accordance with the terms and conditions set out in initial offer. Standing offer may be
determined by competitive pricing of key items in the proposed projects.
b. Continuity contracts – when client wishes to obtain benefits from continuity of work,
building contractor may be asked to enter into negotiations based on original lump sum
contract. One of the negotiations are completed and an agreement reached, the contractor
20 3.0 Types Of Contracts | Procurement Systems in Building Works

executes the construction works as separate contract packages within their own
parameters.
c. Term contracts – client commissions a building contractor to undertake specified

construction works within a defined cost limit for a definite period, often 12-36months
duration. Valuation of the contractor’s work is priced on either schedule of rates or a cost
reimbursement basis. Suitable for: low-value ongoing repair and maintenance work where
contractors submit invoices for payment on completion of the specified works.
3.3 MEASUREMENT CONTRACTS

Where the contract sum is not finalised until after completion, but is assessed on
remeasurement to a previously agreed basis.
Prices of sections of work are pre-estimated but the total price cannot be ascertained until
work is measured and valued on completion. Evaluation of measured construction work is by
application of agreed unit rate from either BQ or schedule of rates. Can be procured on
approximate BQs (client s requirements not known in advance) or schedule of rates (clients
requirement insufficient to permit production of approximate BQs). A schedule of rates is
commonly used where the extent of works has not been or cannot be fully determined.Some
uses include: Earthworks, Foundations, Below ground services works, Maintenance period
contracts.
Measurement contracts are suitable for projects where clients requirements are not clearly
defined or where prompt commencement on site is required.
3.4 COST REIMBURSEMENT CONTRACTS

Where the sum is arrived at on the basis of prime (actual) costs of labour, plant and materials,
to which there is added an amount to cover overheads and profit.
The client undertakes to pay contractor the prime cost (actual cost of labour, plant and
materials utilized in the execution of the works). In addition to the prime cost, the contractor is
paid an agreed sum to cover for profits and establishment charges.
Suitable for projects where:
 Client may wish to influence the execution of works hence, assume entire risk of site
operations
 An early start is required but the extent of work cannot accurately be predicted.
 High standard of work is required
21 3.0 Types Of Contracts | Procurement Systems in Building Works

 Work is of emergency, repair.
Variations to this contractual arrangement may be introduced to motivate and enhance the
contractor’s site performance.
a. Fixed fee – contractor is paid agreed fee based on estimated cost of works. This induces
contractor to work efficiently for profit.
b. Target cost – An estimate is produced for construction project, and once the estimate is
agreed, it becomes the target price which establishes basis for the determination of a fee for
overhead charges and profit. On commencement of site production, contractor is paid the fee
which is adjusted to correspond with increase or decrease of prime cost over target cost. Main
problem of this approach is reaching an agreement of realistic target and the effects of costly
variations which eventually take the construction cost over the agreed target price.
4.0 THE BASIS OF CHOICE OF PROCUREMENT STRATEGY

The choice of an appropriate procurement method and type of contract is influenced by various
factors. Once the client establishes the primary strategy depending on nature of the business
case and priorities of the client, the following factors should then be considered:
a. Factors outside control of the project team – Consideration must be given to economic,
commercial, technological, social, political and legal factors which influence the client and
the project team or are likely to do so during the lifetime of the project. These may include
- Changes to interest rates
- Increases in level of fluctuations – affect product and trades to be used in the works
- Changes in national or local demand for construction –affect tender price levels
- Changes to legislation – affect design of work or achievement of the design
By adopting a simple risk analysis judgement can be done whether contingency sums should
be budgeted for.
b. Client resources – The client’s knowledge, the experience of the client company’s
organization and the environment in which it operates are vital in assessing the appropriate
procurement strategy. The extent to which client is prepared to take a full or active role is a
major consideration.
c. Project characteristics – The size, complexity and location of the project should be carefully
considered and particular attention given to projects with novel elements. e.g if building is
22 4.0 The Basis Of Choice Of Procurement Strategy | Procurement Systems in Building Works
large and complex, there may be a bigger risk of time and cost overrun. Novel projects
present special risks.
d. Ability to make changes – It is preferable to identify the total needs of the project at early
stages but it is not always possible. Rapidly changing technology often means late changes.
Changes in scope of project often means increased costs, especially if during construction.
Some procurement strategies are better than others in handling the introduction of
changes later in the project and reducing the possibvility of having to pay some form of
specific premium.
e. Cost issues – The following cost issues are important:
- Estimates of costs of future buildings at early stage are notoriously inaccurate but
necessary for decision purposes. Where there’s need for price certainty, this influences
both project timing and the procurement strategy to be used. Generally design should be
complete if price certainty is required before construction commences.
- Inflation will inevitably affect total cost where level of variance and increased proce
clauses exist
- Changes to design should be avoided if cost certainty is to be maintained during

construction. Changes whether by client or consultant have cost and time implications. It is
important to fix a date of no more changes or then choose a procurement strategy that
enables such changes and accepts the consequences.
f. Project timing – Most projects are needed within a time frame or by a specific date. Timing
will influence whether subsequent can occur as planned and in many cases may severely affect
those factors identified as critical or high priority in business case. The programmes of a project
is influenced by many factors and usually a large and complex is likely to require more time for
design, specification, and construction than would for a simple small building. Some
procurement strategies enable overlap between the design and construction stages, so
construction can start earlier than sequential strategies and offer the potential for earlier
completion. Time has both a cost and a value. If the worth of a project is identifiable then the
cost of relatively late completion and the value of relatively early completion can be assessed
and may form an important factor in decision-making process – referred to as time/cost trade
off.
g. Construction times – Total construction time is a consequence of design. More complex

structures will almost certainly take longer given the same cost or size, and may require
resources. Although it is possible to work longer hours on site or increase resources, the law of
23 4.0 The Basis Of Choice Of Procurement Strategy | Procurement Systems in Building Works
diminishing returns will have influence because of the limited space and the nature of
traditional construction methods (such as concreting, bricklaying).
h. Performance - The required performance of the project measured in terms of both its
response to the needs of the client expressed in the business case and the quality of individual
elements should be clearly identified. If quality and performance are particulary important the
client will probably want to keep direct control over the development of the design. This can be
achieved by employing the design team directly.
i. Assessment of risks - For example – is this to be a contract with the lowest possible risk to the
client overall; what are the priorities in apportioning the risks concerning cost, time, and quality
or performance; where are the speculative risks intended to lie? Your risk management
strategy will strongly influence your choice of procurement method.
5.0 PUBLIC PRIVATE PARTNERSHIPS

Public Private Partnerships (PPPs) are increasingly becoming the main form of procurement for
large projects e.g in the transport, schools sector. With PPP, one contractor provides and
operates the assets over an extended period, usually 25-30 years. PPP is still a relatively new
form of procurement and its application is developing rapidly. PPP at present typically involves
the client specifying outputs as opposed to inputs. The benefits of PPP solutions include:
greater risk transfer to the private sector partner; use of private sector management to reduce
costs; more innovative solutions that offer the possibility of higher quality provision, wider
social benefits from more ambitious schemes, and commercial utilisation that can cross-
subsidise the project. PPP procurement is more complex than traditional methods and
therefore is less well suited to small building contracts under about £10 million in value.
TOTAL PACKAGE OPTIONS –BOOT, BOT, BOO….

BOOT is a relatively recent procurement method. a client’s project need is met by an entity that
contracts to ‘design’, build, operate, own for some period of time and transfer the facility back
to the owner. Developers use their own funding sources to build a public facility in return for
the right to operate it and charge a fee for its use. At the end of an agreed period the facility
may revert to the landholder, which would often be the Crown.
This type of contract focuses on final service delivery and relies upon the required performance
standards being properly documented. Building contractors involved in this type of
development are usually part of a consortium. The consortium has responsibility for the design,
construction and delivery of the project.
24 5.0 Public Private Partnerships | Procurement Systems in Building Works

Government and its agencies, as either direct or indirect purchasers of services from BOOT
projects, bear some level of financial and viability risk. The BOOT process can be modified to
suit particular needs. A few variations already in use are BOT (Build, Own, Transfer) and BOO
(Build, Own, Operate).
This arrangement is more common for infrastructure projects than buildings because the
concession allows for tolls or other payments to be made by end-users to cover the cost of both
procuring the facility and its operation. Extensions of this idea have been cited where buildings
have been renovated and leased back on this basis and other where the facility is required to
be removed and the site returned to an acceptable environmental standard.
An advantage of this is that it extends the ideas of constructability further to embrace lifecycle
cost effectiveness. If the entity proposing the design solution is responsible for maintaining and
operating the facility then they will have the incentive to reduce long term costs and thus
develop a highly cost effective product over the product lifecycle.
The BOT entity undertakes financing, design, and construction as well as operation and so the
client is taking no direct cost risk other than the possibility that the facility does not meet its
needs or that the concession agreement is unsatisfactory. The cost of establishing the
arrangements can be considerable, as there are legal and financing costs to be met. These
should be compared with the client’s legal and finance costs in undertaking the project in other
forms or options. Clearly the option is unlikely to be viable for projects of small scope,
However, governments are increasingly using this option for hospitals, prisons and other
projects previously undertaken through other procurement scenarios.
Experience with BOO/BOT/BOOT schemes reveals some notable failures. Generally, theses have
been based on failures of trust and/or communication.
6.0 PUBLIC PROCUREMENT ACT OF KENYA AND THE EFFECTS OF BUREAUCRACY
The Public Procurement and Disposal Act (PPDA), effective as of 1st January 2007, applies to all
procurement of goods, works and services, as well as the disposal of assets by public entities.
Public entities are those that procure goods, services or works utilising public funds. The
definition of public funds includes donor funds in so far as donor stipulations do not supersede
the Act. If they do, the donor terms and conditions take precedence. As such, public entities
include the central and local governments, courts, commissions, state corporations,
cooperatives, and educational institutions such as colleges, schools and universities.
25 6.0 Public Procurement Act Of Kenya And The Effects Of Bureaucracy | Procurement Systems in
Building Works
6.1 PURPOSE OF THE PPDA

This Act does not directly seek to regulate the private sector, though it does regulate its
interaction with public entities. The PPDA was established in order to:
• Maximise economy and efficiency,
• Promote competition and ensure that competitors are treated fairly,
• Promote the integrity and fairness of procurement procedures,
• Increase transparency and accountability in those procedures,
• Increase public confidence in those procedures,
• Facilitate the promotion of local industry and economic development.
In order to achieve these objectives, the Act establishes procurement and disposal procedures.
It also sets up the necessary structures to ensure that the procedures are followed and to
provide oversight and compliance through Public Procurement Oversight Authority (PPOA). Its
primary role is to ensure that procurement procedures established under the Act are adhered
to. In doing this, the PPOA is required to advise, establish standards, and train procurement
entities and persons, as well as advise government on policy issues.
The Act also establishes the Public Procurement Administrative Review Board, which handles
complaints, reviews and appeals stemming from procurement.
Public sector procurement can be broken down into two categories:

 Project specific procurement- goods, works or services are sought for a particular initiative
(e.g. a new road, a hospital, plant and equipment).
 General consumable procurement relates to items that are required for a ministry or
authority to perform its duties (e.g. fuel, stationery, vehicle parts, road maintenance and
security).
6.2 PROCUREMENT PROCEDURES

The PPDA makes provision for the following forms of procurement:
1. Open tendering
2. Alternative procurement procedures, under which fall:
• Restricted tendering
• Direct procurement
• Request for proposals
• Request for quotations
Building Works
• Procedures for low-value procurements

• Specially permitted procurement procedures
6.3 AN EFFECTIVE PUBLIC PROCUREMENT SYSTEM

Must be effective in all the following four pillars of the system:
Pillar I – legislative and regulatory framework
This covers the legal and regulatory instruments from the highest level (national law, act,
regulation, decree, etc.) down to detailed regulation, procedures and bidding documents
formally in use.
Pillar II. Institutional Framework and Management Capacity
Pillar II looks at how the procurement system as defined by the legal and regulatory framework
in a country is operating in practice through the institutions and management systems that are
part of the overall public sector governance in the country.
Pillar III. Procurement Operations and Market Practices
This Pillar looks at the operational effectiveness and efficiency of the procurement system at
the level of the implementing entity responsible for issuing individual procurement actions. It
looks at the market as one means of judging the quality and effectiveness of the system when
putting procurement procedures into practice. This Pillar is distinguished from Pillars I and II in
that it is not looking at the legal/regulatory or institutional systems in a country but more at
how they operate. It looks at the efficiency of the operations and operational practices as
implemented by the procuring agencies. Efficiency is considered to mean that the operational
practices result in timely award of contracts at competitive market prices as determined by
effective and fair implementation of procurement procedures. There are four sub-indicators (a-
d) to be rated under this indicator.
Pillar IV. Integrity and Transparency of the Public Procurement System.
Pillar IV covers indicators that are considered necessary to provide for a system that operates
with integrity, has appropriate controls that support the implementation of the system in
accordance with the legal and regulatory framework and has appropriate measures in place to
address the potential for corruption in the system. It also covers important aspects of the
procurement system that include stakeholders as part of the control system. This Pillar takes
Building Works
aspects of the procurement system and governance environment and seeks to ensure that they
are defined and structured to contribute to integrity and transparency.
While respecting and acknowledging the goals and principles of the system of public
procurement, the prevention of corruption in the system of public procurement is based on the
following measures:
1. Strengthening the legal framework
The aim of strengthening the legal framework is to ensure that all procedures in which the state
is a partner or a contractual party are subject to strict rules, thus reducing the risk of
corruption. It is therefore necessary to regulate the overall system of public procurement,
which, along with the conclusion of public contracts for products, works and services, includes
concession contracts and public-private partnerships. By amending the legislative framework of
public procurement, stricter rules and conditions for the participation of economic operators at
competition tender procedures will apply if they are in any way (in terms of interests,
ownership or family relations) connected with the contracting authority. In addition, the
provisions on the nullity of public contracts will be amended if the conclusion of such contracts
is a consequence of corruption by the tenderer or the responsible person in the tenderer.
Transparent procedures contribute to reducing corruption risks.
2. Strengthening the control mechanisms
Further strengthening of the control mechanisms will proceed in the domain of supervision and
control. An anti-corruption body, which provides assistance to the system of public
procurement through its visible work.
3. Co-operation with other control bodies
This is with the aim of better co-ordination and joint activity of internal and external institutions
of control and audit, and to avoid any overlapping of competencies.
4. Training concerning anti-corruption and ethics
Methods and conditions of training in the public procurement system, along with other
educational programmes for the system of preventing corruption in public procurement should
be encouraged. This should include both basic and advanced knowledge of the professional
integrity of all those involved in public procurement activities. The programme to include
education of officials who work on public procurement in state, local and regional self-
government units , and other persons involved in the procedures. The course should serve to
acquire basic and advanced knowledge about the harmfulness of corruption, its appearance,
recognition, risks, prevention and criminal prosecution of the perpetrators.
5. Raising awareness of the importance of preventing corruption in the system of public
procurement
Building Works
Activities aimed at raising public awareness of the importance of public procurement and the
risks of corruption to be organised both independently and in co-operation with civil society
organisations through campaigns, round tables and conferences, brochures, clips and posters,
etc.
6. Encouraging the use of e-procurement
The use of new ICTs in all segments of public administration and the openness of access to
information, in accordance with the legislation in the field of the protection of the secrecy of
data and other regulations relating to the accessibility of data, may have a major role in
preventing corruption through better transparency of the procedures of the authorities and
economic operators involved in the processes of building and procuring new values.
7. Establishment of central public procurement bodies
By providing advisory and consulting services and implementing pilot projects, efforts are made
to encourage the establishment of central public procurement bodies with a view to achieving
financial savings by reducing costs and the number of staff conducting public procurement
procedures, and the risks of corruption.
6.2 PUBLIC ENTITY PROCUREMENT INEFFICIENCY

The Public Procurement system in Kenya can be said to be ineffective to some extent arising
from poor implementation of the Act and/or challenges that most organizations in application
of the PPDA. Inefficiencies in public entity procurement cost the GOK about KSh.30 billion
annually. Prime contributors to this inefficiency are:
i. Corruption
Corrupt practices are clearly evident in the procurement process. These practices permeate the
systems and occur at every level. Confidential interviews with small enterprises indicate that in
some instances it is the only way they are able to participate in the process. Officials all give the
impression that their procurement processes are above board, yet meetings with suppliers
waiting in corridors outside the offices give a totally different perspective. These enterprises
often indicate that this is the cost of doing business with public entities, and the amounts they
pay are all factored into their quotations.
ii. Payment delays

As legislated, payment should take place within 30 days. The reality is that payments may take
as long as 180 days. Delays are a result of several factors that work together. Failure to adhere
to legislated accounting stipulations, excessive bureaucracy, insufficient funds, quarterly draw-
downs by public institutions (procurement is done in one quarter and the entity has to wait for
Building Works
the next quarter to receive government funds to pay the supplier), corruption, staff absences,
and poor work ethics all contribute to delays in payment. Contractors/Suppliers tend to factor
in these delays in their quotations and raise their prices as a result. Given the bureaucracy
attached to payments, authorisation takes long. Most suppliers are not aware of the penalty
provision. Even those suppliers who know of the provision do not try to enforce it. They feel
that it would prejudice future business with the entity.
iii. Personnel constraints

Personnel capacity constraints are rampant in many of the public procurement entities.
Constraints related to knowledge of the PPDA and its application. At central government level,
POs may receive training on the application of the PPDA and Regulations, but on other levels
training is sporadic. This aspect needs to be addressed through a comprehensive training
programme. ROCUREMENT AND SUPPLY IN KENYA
iv. Limited use of information technology

An issue at all levels of the public entity procurement process is the limited use of information
technology to record and manage the procurement process. The use of information technology
is more advanced at the central government level, but is less so at the provincial, district and
local authority levels. Computers are most often used to draft letters, prepare spreadsheets,
and compile tenders. E-tendering would also relatively reduce tendering costs. Software that
links the procurement process to the accounting authority would make the process much more
efficient.
v. Poor planning
Despite being required by the PPDA, very little procurement planning seems to take place in
public entities. This is particularly evident at provincial, district and local authority levels. It
should be noted, however, that in many instances this is not the fault of the PO. POs rely on the
various departments or ministries for their procurement plans and often do not receive them.
In instances where they do receive them, procurement often does not take place as laid out in
the plan, but rather occurs on an ad hoc basis. The resulting multiple small volume
procurement not only significantly adds to the cost of goods, works and services, but also puts
tremendous strain on the procurement and financial bureaucracy. Overall this results in high
acquisition costs in both price and effort.
EFFECT OF BUREAUCRACY IN PROCUREMENT AND DEVELOPMENT
Building Works
Mouzelis (1975) suggests that bureaucracy is the typical administrative apparatus

corresponding to legal (legitimate) domination and has many distinct characteristics, e.g., high
degree of specialization, hierarchical authority structure with limited areas of command and
responsibility, impersonality of relationships between organizational members, recruitment of
officials on the basis of ability and technical knowledge, and differentiation of private and
official income (Weber, 1947; Mouzelis, 1975; Bozeman, 2000).Bureaucracy and corruption
have long been considered to be intrinsically connected. Bureaucrats are stereotyped as
greedy, corrupt drains on the economy, siphoning away public funds and extracting bribes for
their own personal gain. Through various mechanisms, such as competition, heightened
oversight, and increased efficiency of public services, it is possible that increases in the size of
bureaucracy may lead to a decrease in the frequency and size of bribes.
Corruption can occur at different points of the government hierarchy and have varying effects.
Public procurement is a complex matter in a two-dimensional way. First, it represents many

different situations, anything from the construction work of a new international airport to the
acquisition of pencils. Second, the tender procedures usually include several steps, from
designing the tender to evaluating the bids. Both the procedures and the opportunities for
corruption vary significantly among the categories of procurement.
Effect of bureaucracy in procurement systems
Many appeals and tribunals/committee
a. Cost and time overruns
b. Corruption
c. Inefficiencies
d. Product is comprised due to quality concerns
e. Improves accountability
f. Fairness is exercised
g. Firms can enter and exit
h. Lack of innovation and creativity
Building Works
7.0 CONCLUSION
The use of the various project procurement systems shows that the construction industry is
now trying to meet the clients’ needs. This is because the different procurement method will
have different effect on the cost, time and quality of the project. Each project procurement
system has its own peculiarity in term of the pre-tender and post tender activities and
processes, division of risks between client and contractors, and the effectiveness of project
monitoring and control.
It is very important at the very outset of the project to carefully consider all factors when
selecting the most appropriate procurement approach for a construction project. This is
because each system has its own feature and peculiarity that will have effect on the cost, time
and quality of the project i.e. the project performance.
8.0 REFERENCES
1. Akintoye, A and Fitzgerald E (1995) – Design and Build: A Survey of Architects’ Views, Engineering, Construction
and Architectural management
2. Ashworth A (2001) Contractual Procedures in the Construction Industry, UNITEC, New Zealand
3. Chitkara K K (2005): Project Management - Planning, Scheduling and Controlling – Tata McGraw Hill, New Delhi
4. Kwakye A A (1997) Construction Project Administration In Practice – Longman, London
5. Lam, E W M, Albert P C and Chan D W M (2003) Is Design and Build the Preferred Option to Procure all Projects?
Research Fellow, Department of Building and Real estate, The Hong Kong Polytechnic University
6. Masterman J W E (1996) – Building Procurement Systems: An Introduction, E & FN Spon, London

rd
7. Murdoch J and Hughes W ( 2000) Construction Contract: Law and Management: 3 Edition E&FN Spon, London
8. Rowlinson, S (1987) Design and Build – Its development and Present Status, Ascot – CIOB
9. Songer A D and Molenaar K R (1996) : Selecting Design and Build – Public and Private Sector Owner Attitudess,
Journal of Management in Engineering, ASCE.
rd
10. The Aqua Group (2001) Tenders and Contract for Building- 3 . Edition Blackwell Science, London
32 7.0 Conclusion | Procurement Systems in Building Works

Procurement PDF

Загружено:

Сведения о документе

Оригинальное название

Авторское право

Доступные форматы

Поделиться этим документом

Поделиться или встроить документ

Параметры публикации

Этот документ был вам полезен?

Это неприемлемый материал?

Авторское право:

Доступные форматы

Procurement PDF

Загружено:

Авторское право:

Доступные форматы

[Construction Contract Administration] January 15, 2010

1 1.0 Introduction | Procurement Systems in Building Works

2.0 THE PROCUREMENT SYSTEMS

CLASSIFICATION OF CONSTRUCTION PROJECT PROCUREMENT SYSTEMS

2 1.0 Introduction | Procurement Systems in Building Works

1) Separated and Cooperative System

3) Management Oriented System

SEPARATED & INTEGRATED MANAGEMENT

Sequential Accelerated Package deal Turnkey Develop

Figure 1.0 Category of Building Procurement Systems

3 Classification Of Construction Project Procurement Systems | Procurement Systems in Building Works

2.1 TRADITIONAL SYSTEM OR DESIGN-BID-BUILD

It is sub-divided into 2 sub-categories – Traditional System and Variants of the Traditional

Quantity surveyor Engineers: Architect Sub- Suppliers

Figure 2.0: Traditional design-bid-build

4 2.1 Traditional System or Design-Bid-Build | Procurement Systems in Building Works

Construction Commission &

Client and Consultant’s responsibility Contractor’s responsibility

The accelerated method can be considered as an innovative approach to speed up the

5 2.1 Traditional System or Design-Bid-Build | Procurement Systems in Building Works

Advantages of Traditional Procurement systems

 It is possible to attempt to speed up the process by producing tender documents from an

6 2.1 Traditional System or Design-Bid-Build | Procurement Systems in Building Works

2.2 INTEGRATED PROCUREMENT SYSTEMS

(I)DESIGN AND BUILD

Fig. 4.0 : Design and Build process Client expresses

8 2.2 Integrated Procurement Systems | Procurement Systems in Building Works

Fig.5.0 : Organisation structure of design and build

Contractor’s project team

Contractor’s site team

Site Site Site Support

Project Tender Tender & Construction Commission &

Client and Consultant’s responsibility Contractor’s responsibility

9 2.2 Integrated Procurement Systems | Procurement Systems in Building Works

Criteria for choosing design and build option

 Early delivery of project is required

(II) VARIANTS OF DESIGN AND BUILD

10 2.2 Integrated Procurement Systems | Procurement Systems in Building Works

Suitable for well defined work packages, based on performance specification

Advantages of Integrated procurement system

i. Innovation in construction production is encouraged under this procurement system and

 Complex Construction facilities - requiring specialised skills (technical in nature) or

2.3 MANAGEMENT ORIENTED PROCUREMENT SYSTEMS

12 2.3 Management Oriented Procurement Systems | Procurement Systems in Building Works

(I) MANAGEMENT CONTRACTING

Fig. 7.0 Organisation structure for management contract

Design team Management

Contractual relationship Works

13 2.3 Management Oriented Procurement Systems | Procurement Systems in Building Works

Client and Consultant’s responsibility Management Contractor’s responsibility

Criteria for choosing a management contract

2. Complexity of project requirements: complex technologically and therefore require

Advantages of Management contract

 Problems of coordination can lead to production delays and be grounds of contractual

 Full financial commitment not known at outset of construction

(II) CONSTRUCTION MANAGEMENT

Design team Construction

Project brief & Feasibility Bidding & Commission &

Design consultant’s responsibility Package Contractor’s

Construction manager’s responsibility

16 2.3 Management Oriented Procurement Systems | Procurement Systems in Building Works

Criteria for choosing a construction management

a. Early completion of the construction project is required by client