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Procurement systems Assignment

Procurement systems Assignment. Procurement Report

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Procurement systems Assignment

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  1. Procurement systems Assignment Procurement Report This 2000 word report should describe and analyse the positive and negative aspects of three different procurement methods for construction projects. Benefits and problems for the client/developer, the consultants, the builders, the subcontractors and the end-users should all beconsidered. The report must be divided into subsections and must be provided with an executive summary of one paragraph, a contents page at the beginning as well as page numbers. Referencing should conform to the Harvard system. You are advised to consult the electronic journals available in the library for reference sources. The report should describe the characteristics of the three contrasting procurement systems which you have selected. You should express an opinion about the kinds of projects which are suited to the different procurement methods. Remember that you have ethical obligations when recommending a course of action to a potential client. Support your opinions with high quality references. Assessment Criteria Due: Week 10, Wednesday 21st September in class or in the after-hours assignment box beside the front doors of Building Y Total marks: 50% of the total marks for the unit

  2. Procurement systems • Procurement systems are construction or engineering project delivery methods. • Some procurement types are Design, Bid, Build (DBB), design and construct (D&C), construction management method, project management method or Public Private Partnerships (PPP).

  3. Procurement systems • Why do we need to have a procurement system in place when delivering a construction or engineering project?

  4. Procurement systems • The difference in the procurement systems is based on the: • Project team members and their roles, • The relationships of the relevant parties, • The timing of events, and • The formal contract agreements of the chosen contract. Courtesy of Uher and Davenport (2009)

  5. The Design Bid Build approach • The main parties involved in a Design Bid Build (DBB) project are the principal, the design consultant and the contractor are the main parties. • The process of a DBB procurement approach is:

  6. The relationship between parties in a DBB approach: principal and design consultant • The design consultant will assist the principal in selecting an appropriate construction contractor. • Drafts the tender conditions. • Recommends the procedure in the tender process. • Evaluates tenders. • Recommends a winning tenderer. • Can also recommend preferred sub-contractors.

  7. The relationship between the principal and the head contractor • The relationship between the principal and the head contract is an important one. • A contract is issued to the head contractor and the contractor in turn will build or construct the project. The conditions of the contract are: • To build within the agreed cost. • Complete within specified time. • Finish to a high quality standard. • The design consultant assumes control of the main contract once the tender has been awarded.

  8. The relationship between head contractor and subcontractors • The head contractor is awarded a contract (eg. Lump sum), while the work is usually carried out by specialised subcontractors in their related fields. • The head contractor breaks down the whole contract and splits it into smaller contracts. • The head contractor now assumes the role of the “manager of construction activities”. • Programming and budgeting, • Resource allocations, • Co-ordination of subcontractors, and • Control the production process.

  9. Advantages and disadvantages to the principal in a DBB procurement approach:

  10. Design and Construct (D&C) procurement approach • A Design & Construct procurement approach is exactly that! You design then construct. • It is known as the package deal or a turn key method. • Usually carried out in a: • Joint Venture (JV) (utilising a design company and construction company), • A company that has the capacity to do the design and construction, or • A construction company that subcontracts the design to design consultants.

  11. The framework of a D&C approach • The main parties involved in a design and construction approach are the principal and the head contractor, with the head contractor being the point of contact for the design consultants and the subcontractors. Principal Head contractor Designers Sub contractors Courtesy of Uher and Davenport (2009)

  12. Design and Construct (D&C) procurement approach • Requires some fast tracking during the process (overlapping the design and construction stages). • The principal has more involvement in this approach than compared to a DBB approach. • Experienced principals in D&C play an active role in the construction as they have previous experience in dealing with the processes and add value to the final product. • The principal in a D&C approach has a single point of contact which is usually the construction contractor.

  13. Design & Construct features • As the head contractor is involved in the early stages, some of the risks are removed as they provide their construction expertise from the start of the design stage. • Generally, a D&C contracts includes contingencies as the documentation and drawings may not be fully complete at the estimating stage. • If a lump sum contract is sought in a D&C approach, the time required in the tendering stage is extended, as the tenderers need time to design and tender, whilst the client needs time to examine the tenders and the individual companies may have completely different designs.

  14. Some implications of the D&C procurement approach • Extensions of time are difficult in D&C contracts, therefore, we apply: • Bonus for early completion. • No bonus for late completion. • Liquidated damages. • Variations will cause: • Budget blowouts. • What will be allowed as a “variation” and what will be classified as a “design error”?? • Special conditions need to be included in the contract.

  15. Construction management procurement approach • The construction management procurement approach is a type in which the principal has more involvement and is an active member in the “team”. • The term “construction management” refers to a team approach. The principal, design consultant and construction manager work in a cohesive environment to get the project completed. • This approach involves all members of the “team” from the inception of the project to it’s completion. • Fast tracking the construction timeline is encouraged.

  16. Construction management procurement approach • The Construction Management approach has two alternatives; (i) Agency CM method and (ii) Non-agency CM method. The main difference of these methods is the construction manager’s role in relation to the project. • The agency CM approach uses a construction manager to act as the principal’s representative in managing the construction and also co-ordinate the subcontractor activities. • The principal directly contracts with the subcontractors (the CM only manages and plans the construction and administrates the subcontracts).

  17. Construction management procurement approach • The non-agency CM method requires the construction manager to take on more responsibility including managing and contracting the subcontract work. • The construction manager is responsible for the costs related to preliminaries, subcontracts and suppliers after receiving payment from the principal.

  18. Project management procurement approach • The project management procurement approach utilises a project manager to be an integral part of the team. • The project manager (PM) assumes control of the project from the inception to completion. • The PM can be the principal or an employee of the principal. • The principal appoints and empowers the PM and the PM is responsible to represent the principal’s interests. • The PM leads the project team (designers and construction manager) but the principal still deals with letting contracts to subcontractors.

  19. Project management procurement features • The principal engages the PM early in the conception stage. • PM assists in selecting designers and construction manager. • The PM periodically reports to the principal but also relays the principals directions and requests to the designers and construction manager. • The PM has responsibilities in the stages at the conception, design, tendering, pre-construction, construction and commissioning periods. • The success of this approach is dependent on the PM’s ability to lead, delegate, manage and motivate the relevant team members.

  20. Public Private Partnerships (PPP) • PPP is the specific method of transferring (in a construction contract) the responsibilities from the public sector (eg. Government) to the private sector (eg. a construction company). • A PPP approach can be a Build Own Operate Transfer (BOOT) or a Build Operate Transfer (BOT) delivery method in which the construction company (in a BOOT project) builds the project, owns it for a certain period of time, operates it for the time owned and then transfers the asset back to the original owner. • The M7 motorway project is a prime example of a PPP contract.

  21. Public Private Partnerships relationships and features • The relationship in a PPP approach is between a principal along with a promoter and a consortium. The promoter and consortium undertake the construction and manage the infrastructure. • The consortium and the promoter are responsible for the funding of the project. • The promoter then engages the construction contractor (could be multiple contractors if large project) and the contractor take on the design and construction risks. • The principal can include guarantees into the operate component (minimum traffic flow) or allow an operator to operate the infrastructure in return for rent.

  22. Procurement systems Assignment Procurement Report This 2000 word report should describe and analyse the positive and negative aspects of three different procurement methods for construction projects. Benefits and problems for the client/developer, the consultants, the builders, the subcontractors and the end-users should all be considered. The report must be divided into subsections and must be provided with an executive summary of one paragraph, a contents page at the beginning as well as page numbers. Referencing should conform to the Harvard system. You are advised to consult the electronic journals available in the library for reference sources. The report should describe the characteristics of the three contrasting procurement systems which you have selected. You should express an opinion about the kinds of projects which are suited to the different procurement methods. Remember that you have ethical obligations when recommending a course of action to a potential client. Support your opinions with high quality references. Assessment Criteria Due: Week 10, Wednesday 21st September in class or in the after-hours assignment box beside the front doors of Building Y Total marks: 50% of the total marks for the unit

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