Procurement

• Procurement


  The framework within which construction is brought about, acquired or obtained
• Procurement


  • The acquisition of new buildings, or space within buildings, either by directly buying, renting or leasing from the open market, or by designing and building the facility to meet a specific need
• Procurement process includes: development of the procurement strategy, preparation of contracts (i.e. design, drawings & specifications), selection and acquisition of suppliers, and management of the contracts
• Procurement strategy


  A generic term: Method, Path, System, Arrangement, etc.
• Procurement strategy development


  1. Initiated by devising a project strategy

  2. Weighing up the benefits, risks and financial constraints

  3. Reflecting in the choice of contractual arrangements

  
• Procurement strategy


  • Aims to achieve the optimum balance of risk, control and funding for a particular project
• Types of procurement strategies

  • Traditional: Design-Bid-Build (DBB)
  • Integrated: Design and Build (D&B or DB)
  • Management / Fee Oriented
  • CWAs: Partnering, Alliancing, Early Contractor Involvement, etc.
  • PPP / PFI / BOT

  
• Design-Bid-Build (DBB)


  • Separation of design & construction responsibilities
  • Completion of design prior to selection of contractor
  • Sequential activities of design, bidding and construction
  • Different specialists (e.g. architects, quantity surveyors, etc.) are appointed separately and at different times
  • Assumes accuracy of bill of quantities (BoQ)
  • Contractor selection is by competitive tender: mainly price only consideration
  • Less suitable for fast track

  
• Design & Build (D&B) is also known as 'Design-construct', 'single responsibility' or 'integrated' approach
• Design & Build (D&B)


  • Overlap of design and construction, so fast-track
  • One entity performs both Design (Architectural / engineering), and Construction under one single contract
  • Design is in competition
  • Construction expertise > input in design
• Novation


  A process of transferring design risks, where Client prepares an outline design, which may vary between 20% & 80%, with or without the help of external consultant; D&B contractor is then selected, who legally assumes the risks of outline design
• Variations of Design and Build

  • Turnkey
  • Design-Build-Operate (DBO)
  • Design-Build-Finance-Operate (DBFO)
  • Integrated Project Delivery (IPD)
• Construction Management (CM)


  • Suitable for large and complex projects, involving work packages, phase-wise working, simultaneous working, etc.
  • CM appointed early
  • Not allowed to carry out any significant construction work
  • Provides advice to client & designer on Construction matters, Cost, Safety, etc.
  • Responsibilities > Overall coordination: construction programme, work packaging, overseeing the design, integration, … …overall
  • May take responsibility for arranging procurement, contracts, managing bidding phase of works contract, appointing consultant and/or contractor
  • Little risk to Construction Manager: as client contracts with contractor, client bears risks associated with works contract
• Management Contracting (MC)


  • Responsible for planning, management & coordination of construction
  • Sub-contracts work in usual manner
  • Risks to client are reduced
• Design and Management (DM)


  • Early involvement of contractors/subcontractors in Design-Documentation
  • Architectural / Designer knowledge /perception is interacted with construction
  • CM to deliver project with GMP (Guaranteed Maximum Price)
  • a stake in 'project development'
• Contract Strategies based on

  • Method of selecting the contractor
  • Method of payment for the work
  • Allocation / integration of technical & administrative responsibility
• Method of selecting the contractor

  • Direct negotiation
  • Competitive tendering
• Method of payment for the work

  • Price based: Schedule of Rates, Bill of Quantities, Lump Sum
  • Cost based: Cost plus percentage, Cost plus fixed fee, Target Contracts
• Technical & administrative responsibility options

  • Separate Design-Bid-Build (DBB) contract
  • Design and Build (DB) contract
  • Design and Management (DM) contract
  • Construction supply or installation contract
  • Management contract (MC)
  • Construction Management (CM) contract
  • Turnkey Contract

  
• Procurement Strategy Selection Criteria

  • Speed or time, i.e. the time taken to complete the project
  • Cost Certainty for completion of the project
  • Flexibility, i.e. the ability and authority for the client to effect change
  • Quality level required for the project
  • Complexity: The suitability of the procurement method to tackle
  • Risk avoidance: The transfer of risk to the contractor
  • Price competition: For minimum price purposes
  • Management / Point of responsibility: The ability to manage different parties and the clarity of allocation of responsibility

  
• Types of construction contracts

  • Design-Bid-Build (DBB) contract
  • Design and Build (DB) contract
  • Design and Management (DM) contract
  • Construction supply or installation contract
  • Management contract (MC)
  • Construction Management (CM) contract
  • Turnkey Contract
• Procurement Strategy Selection


  Criteria for priorities include: Speed or time, Cost Certainty, Flexibility, Quality level, Complexity, Risk avoidance, Price competition, Management / Point of responsibility
• Procurement Strategy Selection: Example 2

  • Traditional
  • Integrated
  • Management
• Procurement Strategy Selection: Example 3

  • Traditional Sequential
  • Design & Build Accelerated
  • Management Direct Competitive
  • MC
  • CM
• Elements of Construction Contract

  • form of agreement (incl. letter of acceptance)
  • form of tender
  • conditions of contract (both general & special )
  • specification
  • tender (or pricing) drawings
  • form of bond (or performance bond)
  • bill of quantities
• Roles of Contract Documents

  Form of agreement: To describe liabilities and responsibilities

  Form of tender

  Condition of Contract

  Specifications: To describe the scope of works

  Tender Drawings

  Form of Bond (or performance bond): To provide a guarantee of satisfactory completion

  Bill of Quantities: To provide a vehicle for pricing, for price comparison, for valuation and for pricing variations
• Main types of Contract Conditions

  • General (conditions of contract)
  • Special
  • Others
• Examples of General / standard conditions of contract

  • FIDIC
  • JCT: Joint Contractors Tribunal
  • ICE: Institute of Civil Engineers
  • NEC: New Engineering Contract
• Examples of Special conditions

  • Dispute resolution

  Special risks

  Technology transfer

  Partnering/ alliancing
• Partner selection methods


  • direct / single source selection or negotiation

  identification from references/reputations > negotiation

  open competition e.g. Expression of Interest (EOI)

  registered / licensed lists (e.g. maintained by client)

  short-listing, e.g. from any existing list / database

  prequalification, as from 3 to 5 above
• Partner selection award process

  • Long List >>> Short List >>> Final Award
• Prequalification


  General (frequently referred to as registration)

  Project specific
• Registration


  Static: All in same band treated equally, usually annual review

  Dynamic: No band or category, but 'rating', can be reviewed at any point
• Partner Selection Evaluation


  • Price only from preselected or registered list

  Long List >>> Short List >>> Award

  Two envelope (after prequalification): Technical bid / offer and Financial bid / offer

  
• Key information sought in partner selection

  • key staff qualifications, experience and competence

  capability to provide professional services in a timely manner

  past performance (in terms of cost control, quality of work and compliance with performance schedules)

  previous relevant experience

  demonstrated knowledge of local conditions/ building codes, etc.

  other factors, such as ISO certification, insurance requirements, claims attitude, quality of proposed key subbies, and location of firm's head office

  Approach to sustainability, payment o subcontractors , attitude to teamworking / partnering, health & safety, etc., as required by client and/or project
• Consultant Selection: Example


  • Marking Scheme of Technical Proposal: Consultant Experience, Response to the brief, Approach to cost-effectiveness, Methodology and work program / schedule, Staffing
• Consultant Selection: Marking Example

  • Nature of project or work: A) Multi-disciplinary projects that require special emphasis on technical input, B) Less complex feasibility studies and investigation-stage consultancies, and Design & Construction consultancies of the complexity as in A, C) Technically straightforward Design & Construction consultancies

  Technical: 80%, 70%, 60%

  Fee: 20%, 30%, 40%

  
• Multi-Criteria Contractor Selection: Example of criteria & marking scheme

  • Experience, Past performance - technical, Past performance - general obligations, Available Resources, Technical ability

  
• Multi-Criteria Contractor Selection: Example of marking scheme

  • Technical criteria: 0.2

  Bid price: 0.8