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Procurement in general refers to the process of obtaining a product or service. Specifically in the construction industry, it means the way in which the responsibilities for design and construction of a construction project are allocated, including the risks and responsibilities associated with the project.
There are several procurement options available, each with its own advantages and disadvantages. It is therefore vital to identify the client’s key requirements in order to identify which procurement routes would be best suited for a particular project.
The key client requirements to consider are:
In addition to those three major factors it is useful to consider the value, size and nature of the project as well as the experience and expertise of the project team.
The main procurement routes are:
The key element of the traditional procurement route is that the design function is kept separate from the construction of the project. The employer engages a professional team to design the works and a contractor to execute that design (see Figure 1)
Figure 1. Traditional procurement
The same professional team will administer the building contract on behalf of the employer.
The employer’s design team is usually responsible for all design of the project and the contractor carries out the development in accordance with the supplied design. There is a clear division of risk between the employer and the contractor, with the design team being responsible for design and the contractor being liable for construction. The architect will generally fulfil the role of project manager responsible for endeavouring to achieve the time, cost and quality requirements of the project.
The contractor will carry out the design of the project and submit a price for meeting the ‘employer’s requirements’ for the building. Normally the professional team produce the employer’s requirements and then either the contractor employs his own professional team (see figure 2.) or the employer’s professional team are novated to the contractor (see figure 3.)
Commonly the contractor is made responsible for all design and construction in the project, referred to as “single-point responsibility”.
Design and build is frequently used for budget and business developments (where the highest level of quality is not required) as it offers the benefits of cost and programme certainty. However, the employer will have less opportunity to control development once construction has begun.
Design and build contracting is occasionally referred to as “package” or “turnkey” contracting. This is slightly inaccurate as a true package or turnkey contract is generally considered to be one where the employer has little or no input into the design. This route should perhaps be avoided unless an employer is highly experienced.
The employer needs to fully understand the risks involved and ensure that these are allocated and documented accordingly. Whichever procurement route is chosen, strong teamwork will be required for the development to be designed and built to budget and schedule, and in accordance with performance objectives.
There is a tension between over-detailed specification (undermines the ability of contractor to propose economic solutions) and the need for quality control (risk that the contractor will cut corners and provide the minimum quality required to meet the brief).
Figure 2. Design and Build
Figure 3. Hybrid Design and Build
a) standard building types (eg industrial or warehouse use) and particularly where early return on capital investment outweighs considerations of design excellence and capital cost
b) buildings using proprietary systems where the manufacturer of the system might well become the main contractor eg repetitive housing or low cost hotels based on assembly of factory pods, and
c) building types in which some contractors have become specialist eg highly serviced laboratory buildings.
(a) where architectural quality is of overriding importance
(b) where an employer requires a building tailored to his special requirements
(c) where there are complex planning or environmental issues
(d) where complex refurbishment or conversion work (particularly of historic buildings) is required, as the exact scope of the building works cannot be defined until the structure has been opened up with frequent or unexpected variations often arising thereafter
(e) where the brief cannot be defined, or the building function is of great complexity, so that a protracted period of research and investigation is necessary at the outset and might continue once work has commenced.
In ‘two-stage design and build’, the contractor is initially appointed on a pre-construction services agreement to assist with the preparation of the employer’s design. The main contract is then re-tendered.
The work is divided into several ‘packages’, each of which will be a separate trade contract with the employer.
The employer will employ a construction manager to manage the various packages of work and directly engage trade contractors to carry out each trade contract package (see figure 4.).
A construction manager is tasked to ensure that the development is designed and completed. The construction manager is responsible for instructing and co-ordinating the professionals and the trade contractors.
This form of procurement is generally only used on projects where there is a shortage of time and it is important that the contractors commence work on site as soon as possible.
Figure 4. Construction management
Management contracting is a variation of construction management where a management contractor (rather than a construction manager) employs the trade contractors, with the professionals being retained by the employer.
The work is divided into several ‘packages’, each of which will be a works contract. The works contractors enter into contracts with the management contractor (see figure 5.) However the management contractor is not directly responsible for default by the works contractors.
The management contractor is paid a fee plus site set-up (organisation) costs. The management contractor is engaged early on to advising on programming, buildability, packaging of work etc.
Figure 5. Management Contracting
Advantages for CM and MC:
Disadvantages for CM and MC:
These are particularly common in international projects particularly in the engineering sector. Examples include EPC procurement, multi-contracting procurement bespoke or hybrid procurement.
For more information, please contact David Savage, Partner on email@example.com or +44 (0)1483 252615.