Choosing the right or wrong procurement route will have an effect on a project. The correct routes must be chose by considering the clients backgrounds and objectives such as resources, timing, quality and performance, cost issues and risk management.
In this report I will compare and analyse the types of procurement routes which are available and the one that will be suitable for "Cinnamon Grand".
2. Introduction
2.1 Client
2.1.1 Client background and business objective
"Cinnamon Grand" is a privately owned large hotel chain which offer comfortable accommodation across UK. They are committed to preserving their rich heritage therefore they are very passionate about the outlook of their hotels.
2.1.2 Client reputation and experience
"Cinnamon Grand" have a strategy of adopting neglected landmark buildings and bringing them back to their former magnificent look. This make their management board experienced at renovation of buildings.
2.1.3 Client scenario
A recent period of bad weather and severe storms has resulted in three of their hotels being significantly destroyed. All of which are located in prime locations of the towns in the South East of UK.
In August 2012, the hotel management board agreed to reconstruct the destroyed hotels to create a vibrant and attractive environment. They are keen on taking this unexpected event as an opportunity to improve the quality of the buildings and facilities provided.
2.1.4 Client project objective
The design solutions will be develop along similar lines adopted for previous hotel buildings with a new intention to reconstruct the three hotels to a better quality than they were before the severe storm.
The Client has obtain finance from Commercial Bank estimated £120 million. The
revamp work of these three hotels will undergo 2 phases. The overall design solution
of these three hotels will be similar to the existing hotels.
In phase 1, works are planned to start on the 1st March 2014. Buildings are required to be handed over on the 28th February 2015 with completed roofs, guest rooms, restaurant and swimming pools as the clients planned to reopen on the 1st April 2015.
For phase 2, client intent to construct new facilities such as dance studios, health and fitness centre, conference and meeting room, at the same time without disturbing the guests. The new Conference and meeting room require high technology multimedia facilities with air conditioning.
2.1.5 Client key issues
There are a few key issues that the client would like to be considered. They does not have any experience executive to overlook the reconstruction project. And therefore, the appointed contractor shall also be responsible for the risk avoidance.
The client has also emphasised, that the quality of the buildings is very important to them. This reconstruction project should match their existing hotel or better, as their reputation was founded on quality of accommodation and its service.
2.2 Types of procurement routes
There are three categories of procurements routes, consisting of Traditional, Design & Build and Management. Each haa a few variations
2.2.1 Traditional
Variations - Sequential, Acceleration and With Measurement.
Employer
Architect
Consultants
Contractor
(Listed)
Subcontractors
Subcontractors
Suppliers
Contractual relationship
Administrative responsibility on behalf of client
Advantages
Competitive fairness
Relatively low tender preparation cost
Satisfactory public accountability
Procedures well known
Changes reasonably easily arranged and valued
Disadvantages
Slow to start on site (no concurrent working)
Open to abuse when design incomplete (resulting in less certainty)
Contractor not involved in design or planning (poor build ability)
Potential for adversarial relationship
Design risk rest with the client
Risks
Low cost risk due to lump sum contract.
Medium time risk due to fixed contract date (but contractor has right to claim extensions).
Low quality/design risk at the majority of the work is designed by insured consultant working directly for the client.
2.2.2 Design & build
Variation - Turnkey (complex), Competitive (two stage tendering), Negotiated and D&C
(Develop & construct*)
Employer
Supplier
Project Manager
Client's Consultant
(Design And Build Contractor's Consultant
Design And Build Contractor
Subcontractor
Contractual relationship
Advantages
The client liaises with a single point of contact and responsibility.
Inherent build ability.
Firm price available prior to construction.
Reduced total project duration when compare to traditional routes.
Contractor's design liability can be extended to include fitness for purpose.
Disadvantages
Client need to appoint contractor before design is complete.
No design overview unless consultants are appointed.
Difficult for clients to prepare adequate brief.
Bids are difficult to compare.
Design liability limited by standard contract.
Client driven changes can be expansive.
Risk
Low cost risk as most contracts will be on a lump sum basis.
Low time risk as the design and build contractor will usually fix the time and be committed to it.
High design / quality risk as when the design and build contractor controls the design there are risk related to both design suitability and to the capacity of the design and build contractor to perform such task.
2.2.3 Management
Management contracting
Employer
Management Contractor
Project Manager
Client's Consultants
Works Contractor
Works Contractor
Works Contractor
Sub
Consultants
Suppliers
Suppliers
Construction management
Employer
Construction Manager
Project Manager
Client's Designers
Works Contractor
Works Contractor
Works Contractor
Consultants
Subcontractor
Suppliers
Contractual relationship
Advantages
Time saving potential in overall project duration.
Build ability potential.
Breaks down traditional adversarial barriers.
Concurrent working is inherent.
Late changes easily accommodated.
Work packages let competitively. (M/C)
Trade packages let competitively. (C/M)
Clarity of roles, risk and relationship for all participants. (C/M)
Disadvantages
Needs a good quality brief.
Relies on a good quality project team.
Poor certainty of price. (M/C)
May become no more than a 'postbox' system in certain circumstances. (M/C)
Removes resistance to work contractors' claims. (M/C)
No cost certainty at outset. (C/M)
Needs informed client, able to take an active role in the project. (C/M)
Needs effective control of time and information. (C/M)
Risk
Medium cost risk as the actual cost is unknown until the last is let.
Low quality design risk because there is a close link between client designers and constructors.
Medium time risk as the total construction duration is a consequence of package selection. (in Management Contracting)
Medium time risk as no single organisation is solely responsible for timed completion. (in Construction Management)
3. Analyzing
In selecting a suitable procurement route, we will need to identify which are the client main priorities in the project.
3.1 Priority matrix
It is generally accepted that only two of the three criteria below can be achieved, and therefore the procurement route should be chosen to maximise the most important criteria.
Cost
Time
Quality
Taking note from the client's key issues, I have created their criteria table below. With this table, it is clear that the client 1st priority for this reconstruction project is the Quality. Followed by the 2nd, which is Time
Cost
Quality
Time
£120 million to reconstruct / rebuild the whole three damaged hotels buildings.
Rapid without neglecting the quality exterior and interior.
Start on:1st March 2014
Hand over: 28th February 2015
1 year to be completed.
Outlook of buildings - preserve external façade.
Proceed with phase 2 with non-disruption to business.
To construct new facilities dance studio, health / fitness centre, conference / meeting.
Conference / meeting room requires a high technology multi media.
Risk avoidance is most importance. Cost overrun and delay in the completion
time are to be avoided.
Maintaining good service to hotel guest while undergoing works.
Project should match their existing hotel or better, as their reputation was founded on quality of accommodation and its service.
3.2 Sequence diagram
This diagram, it shows each procurement routes main priority base on their project schedules.
Procurement Routes
Schedule
Priority
1st
2nd
Traditional
Design
Cost
Quality
Construction
Design & Build
Design
Time
Quality
1
Construction
Management
Design
Quality
Time
3
2
Construction
3.3 Recommended suitable procurement routes
Following the client's priority, the most suitable routes should be Management Routes. However there are two variations in the management routes. The Management Contracting and the Construction Management
4. Conclusions
As one of the main key issues of the client is that they do not have an in-house executive who is either experience enough or is able to devote sufficient time to advise the reconstruction of their properties, the most suitable procurement route should be Management Contracting.
Employer
Management Contractor
Project Manager
Client's Consultants
Works Contractor
Works Contractor
Works Contractor
Sub
Consultants
Suppliers
Suppliers
Unlike in Construction Management, there will be a management contractor in Management Contracting procurement routes to overview this project.
HERIOT
WATT
UNIVERSITY
Procurement
And
Contracts
Task 2
December 2012
Name: Mohamad Nasrin
I/D: H00136168
Course:
