Procurement

Question 1

What will the choice of procurement strategy be dictated by?

Answer 1

• Experience of the client
• Cost certainty required
• Apportionment of risk
• Time constraints
• Design Responsibility
• Quality

Question 2

Name five types of procurement route

Answer 2

1) Traditional
2) Design and Build
3) Management Contracting
4) Construction Management
5) Partnering

Question 3

What is involved in a traditional procurement route?

Answer 3

Client appoints a design team who design the works, and produce the tender information (including drawings, schedules etc.). Contractors are then invited to tender for the works, normally on a single-stage, competitive basis.
Therefore the design is separate from the construction, with little to no design responsibility with the contractor.

Question 4

What are the advantage of a traditional procurement route?

Answer 4

• Level field for tendering (easily comparable)
• Time and cost risk are with contractor
• Design is tailored to meet clients needs - quality and functionality
• Cost and programme certainty
• Clients are familiar with it
• Variations and costs are controlled by the employer
• Client has greater control

Question 5

What are the disadvantages of a traditional procurement route?

Answer 5

• It is sequential, design and then build - can be long time periods
• Design risk lies with the client
• No “buildability” input from the contractor
• Contractor will seek variations for any changes

Question 6

What is involved in design and build as a procurement route?

Answer 6

The contractor holds design and construction responsibility.
Client novates their design (or design team) to the contractor. At some point the employer will submit their “Employer’s Requirements”. CA is an Employer’s Agent.

Question 7

What are the advantages of design and build as a procurement route?

Answer 7

• There is a single point of responsibility
• Contractor’s experience is involved in the design from the outset
• Can allow for an earlier site start time (as design progresses)
• Good route for a client who’s priorities are time and cost (not necessarily function/quality)
• Opens the possibility of a Turnkey Contract

Question 8

What are the disadvantages of design and build as a procurement route?

Answer 8

• Comprehensive Employer’s Requirements are difficult to produce (difficult to get correct level of info)
• Variations can be costly
• Quality is not guaranteed
• Not as competitive, and less equitable competition
• Less contractors undertake D&B, therefore less choice

Question 9

What is an Engineering, Procurement and Construction contract?

Answer 9

Sometimes referred to as a Turnkey Contract. They are similar to D&B in that there is a single contract for the design and construction of the project. However, an EPC contract will likely have less client input and control over the design, and the contractor will take on more risk.

Question 10

What is involved in management contracting as a procurement route?

Answer 10

Management contracting involves the appointment of a “management contractor” who procures individual works contracts for different packages of works. They are generally appointed at an early stage to allow input into design and buildability.

Question 11

What the advantages of management contracting as a procurement route?

Answer 11

• It can allow for the best contractor for each individual package be selected, resulting in greater quality overall (good for complex projects)
• Client gets to maintain some design control, while using contractor’s expertise
• Risk of procurement and delivery are on contractor
• Possible cost saving against fixed price
• Possible time saving, as packages can be onsite while design is ongoing (ie groundworks)
• Allow for flexibility in design, as packages are separate

Question 12

What are the disadvantages of management contracting as a procurement route?

Answer 12

• Unsuitable for inexperienced clients, works often start while design is ongoing
• Lack of specialists can result in unproductive time
• Collateral Warranties required between client and works contractor, as possibility that management contractor will suffer no loss from lack of performance of works contractor as all loss passed directly back to client
• Decision required on whether to have a directly appointed cost consultant or use managing contractor as point of contract for financial report. Risk on relationship

Question 13

What is the difference between management contracting and construction management as procurement routes?

Answer 13

• Management contractors contract works contracts directly, whereas in construction management the client contracts with management by the construction manager.
• Management contractor acts as a principal contractor, while a construction manager acts as an agent
• Clients have one contract to administer in management contracts, but can have many with a construction manager

Question 14

What is involved in construction management as a procurement route?

Answer 14

All works are constructed by different trade contractors. All of these trade contracts are are contracted directly to the client and are managed by a construction manager. The construction manager is not contractually linked to the trade contractors, but instead acts as an agent for the client, administering and coordinating the works contractors.

Question 15

What are the advantages of construction management as a procurement route?

Answer 15

• All roles are clearly defined
• Client has direct contracts with the contractors carrying out the works
• There is a single point of responsibility
• Quicker start on site possible as some contracts can start while others are still being designed
• Variation can be accommodated easily in those contracts still being designed
• Good where design evolution is required, or where its a complete project

Question 16

What are the disadvantages of construction management as a procurement route?

Answer 16

• Price and time certainty are not provided until the last package is let
• Requires client knowledge to select correct team - client experience is vital
• Little incentive for contractors to reduce cost

Question 17

What is involved in partnering as a procurement route?

Answer 17

Partnering is a broad term used to describe a collaborative management approach to management, aims to encourage openness and trust between parties in a contract. Inspired by the 1994 Latham Report.