The primary of the procurement route is the need to obtain best value for money in the whole life of service or facility, this is most likely to be achieved through integration of the design, construction, operation and on going maintenance.
Client Scenario
Due to recent bad weather and severe storms that has contributed in 3 Cinnamon Grand Hotels being destroyed in the south east of the UK. Client decided to reconstruction the 3 hotels to a better quality with preserving the outlook of the buildings heritage, the construction costs of £120 million will be acquires from a commercial bank.
Targeted Construction Schedules :
Commencement of construction work by 1st March 2014
Handover by 28th February 2015
Re-open to business by 1st April 2015
Overall reconstruction period for Phase 1 & 2 is 24 months
Reconstruction of 3 hotels will be separated into 2 phases :
Phase 1 : works scope shall includes : roofs, guest rooms, restaurant and swimming pools
Phase 2 : works scope will be : Dance Studios, Health and Fitness Centre, Conference and Meeting Rooms
Client Issues, Concern And Objectives
Client lacks of proper in-house executive to handle reconstruction works
Client concerned possible project delays and overrun of costs
Client to provide high service to hotel guests while phase 2 reconstruction works in progress
High quality of workmanship
The building hotels will be their primary business strategy
There are 8 basic issues to be considered by client prior selecting a procurement route :
Factors outside the control of the project team - such as changes in finance costs and the availability of required skills from the construction industry
Client resources - experienced of in-house executive to advise on the reconstruction works and funding availability
Project characteristics - technical complexity that may influence on possible cost and time overruns
The need to accommodate changes - the extent to which the client is willing to exchange cost certainty for the ability to continue to accommodate changes in later project stages
Risk management - to ensure risk is distributed to those organisations best able to manage so that excessive cost is avoided
Cost issues - cost certainty required at each stage of project progression
Timing - to consider the project to be delivered in whole or in a phased handover and the impact of delay
Quality and performance - ensure implementation of quality assurance system and issue surrounding whole-life use of the services & facilities
(D39PZ Procurement and Contracts : Course Handbook,2009;P.11-2)
There are 4 types of procurement routes to be consider in deciding upon most appropriate for reconstruction Cinnamon Grand Hotels:
Traditional Procurement Route
Source: D39PZ Procurement and Contracts : Course Handbook,2009;P.3-2
The design team are engage by the client to fully develop the design before call for tender. The lower price contractor is usually appointed only for the construction works.
However, design changes would resulting to cost increase if the comprehensive set of developed design are unable to produce prior tendering.
Sequence of activities (not to scale)
Brief design completion construction
(tendering)
Source: D39PZ Procurement and Contracts : Course Handbook,2009;P.3-2
Advantages
Disadvantages
Open tendering
Low preparation costs & certainty of price
Responsibilities are well understood
easily arranged and value on client's changes
prominently quality in design & cost
slow to start on site
destitution buildability due to contractor not involved in design process
an adversarial relationships may develop due to incomplete design
client bears the design risks
fixed lump sum price is hardly achievable
Base on the outlines above, Traditional procurement methods might not be suitable to propose reconstruction project due to the client bears a high level of risk on :
Time in late completion
Overall design responsibility
Risk avoidance
Buildability
Not suitable for fast track projects
2. Design And Build Procurement Route
Source: D39PZ Procurement and Contracts : Course Handbook,2009;P.11-5
The client provide concept design where the detailed design and construction is responsible by a single contractor by lump sum which allow overlapping on both design and construction.
Sequence of activities (not to scale)
Brief Competition Design
Construction
Source: D39PZ Procurement and Contracts : Course Handbook,2009;P.11-5
Advantages
Disadvantages
Single point responsibility by contractor
potential buildability
price certainty prior construction
shorter project duration
client obtain an earlier occupation and return on investment
design liability offered by contractors is limited
may lack of aesthetic appeal
challenge for clients to produce satisfactory brief
unsuitable for complex and challenging project
changes by client can be expensive
Base on the outlines above, D & B procurement methods might not be suitable to propose reconstruction project due to the client bears a high level of risk on :
Quality
Variations
Complexity
Professional responsibility
Buildability
3. Management Contracting Procurement Route
Source: D39PZ Procurement and Contracts : Course Handbook,2009;P.11-9
This is a 'fast track' strategy which overlaps the design and construction stages and enables early work packages to be placed before the design is complete. An experienced management contractor is appointed by the client to manage the overall contract in return for a management fee.
The management contractor is appointed early to award elements of work progressively as a series of package contracts called 'work packages'. The works contractor who are directly employed by the management contractor, final cost can be determined upon last works package has been completed.(Scottish Government Publications, 2005)
Sequence of activities (not to scale)
Brief Design
Construction
Source: D39PZ Procurement and Contracts : Course Handbook,2009;P.11-9
Advantages
Disadvantages
time savings leads to an earlier occupation
buildability & programming input
breaks down traditional adversarial barriers
concurrent working is allowed
client changes easily to adopted
best for fast track complex projects
required good quality of brief
uncertainty of price
depend on an experienced project team
little responsibility for management contractor
works contractor have no right to claim direct from client
Risk :
Medium cost risk as the preliminaries and management fee can be fixed that allow for a degree of cost certainty
Medium time risk due to the process is particularly for fast track complex projects where minimal design information is available at the beginning of the project
Low quality/design risk due to tight co-ordination involving between client, designers and contractors
Base on the outlines above, Management procurement methods will be encourage to the propose reconstruction project, it was best suited to inexperienced client, complex, fast-moving project where early completion is desirable.(A A Kwakye MSC MCIOB ARICS,1991)
4. Construction Management Procurement Route
Source: D39PZ Procurement and Contracts : Course Handbook,2009;P.11-11
The works packages are let before the design of later packages has been completed. A construction manager is appointed by the client to manage the overall contract in return for a management fee. Client form direct contractual relationship with the trade contractors, the final cost will only be known once the final works package has been awarded.(Scottish Government Publications, 2005)
Sequence of activities (not to scale)
Brief Design
Construction
Source: D39PZ Procurement and Contracts : Course Handbook,2009;P.11-11
Advantages
Disadvantages
time saving leads to early handover
client is more control of the process and better cost control
breaks down traditional adversarial barriers
concurrent working is allowed
easily to accommodate client's changes
poor cost certainty
client to have effective mechanisms for issue monthly payments to all individual contractors
client hold the contract & design risks
requires experienced client
Base on the outlines above, Construction management methods might not be suitable to propose reconstruction project due to the client bears a high level of risk on :
Cost uncertainty
Responsibility
Risk avoidance
Damage recovery
It is mainly suitable for experienced clients.
Proposed Best Procurement Route To Reconstruction Cinnamon Grand Hotels :
Management Contracting Procurement Route
In view of time constraint to handover both phase 1&2 within a year period, proposed ''Management Contracting'' is the best procurement option that fulfil various aspect concerning :
Buildability
Programming
Sequencing
Risks managing & procurement of the various work packages
Sufficient time on the overall works programme
Data from Table A shown general terms of appropriateness of contract strategy to each types of procurement routes, ''Management Contracting'' represents the most suited to the client's needs and project objectives.
The work can commence as soon as the employer has approved the design proposals, management contractor becomes a member of the design team and provide construction knowledge & management competency to fulfil client's needs.(D39PZ Procurement and Contracts : Course Handbook,2009;P.11-08)
Costs are controlled by the development of a cost plan in which estimates of the costs of works packages are initially used for budgeting purposes prior to being replaced with actual costs obtained in final completion.
Contracts are entered into near the time of commencement of the works package, making firm price tenders possible compare to others available options which submitted several month or even years ago.
These would minimise the likelihood of delays, extra costs and inefficiency.
Example, ''Marina Bay Sands Integrated Resort Singapore'' was adopted 'Management Contracting Procurement Methods' in year 2008 for their new project development in Singapore which consisted 3 hotels tower of 57-storey, museum and casino.
In term of cost and quality been delivered,the project was successfully handed-over in targeted schedule on year 2010 and open to business.
References
D39PZ Procurement and Contracts: Course Handbook(2009) Edinburgh: Heriot-Watt University
Scottish Government Publications(2005) Construction Procurement Manual[Online]Available at : http://www.scotland.gov.uk/publications/2005/11/28100404/04095 (Accessed 25 september 2012)
Construction procurement manual(Anon.,2005)[e-book] Edinburgh: Scottish Exucutive. Available at : http://www.info4education.com/ (Accessed 24 september 2012)
AA Kwakye MSC MCIOB ARICS (1991)Fast Track Construction, Englemere : CIOB
