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Contract management in construction projects, both local and international projects. A writeup explaining the aforementioned.
A GUIDE TO CONSTRUCTION PROCUREMENT STRATEGIES SARAH FOX 500 Words Ltd (201 5) Page 2 © 500 Words Ltd , 2014 Construction Procurement Strateg y A guide to help you understand the right procurement strateg y for your project Procurement means the framework in which development projects are designed, financed, constructed, used, transferred and residual disputes resolved. The three main procurement strategies 1 (in order of use) are traditional, design -build and management -based. Each procuremen t route has some of these elements, like layers in these circles: Detailed documentation setting out the requirements of the key stakeholders; A variety of competing definitions of success, both for the project and for the varied members of the project tea m; Competitive selective tendering for contractors, and sometimes consultants; Significant number of parties; 2 Risk management activities; 3 Numerous agreements setting out the respective roles and responsibilities of the project team members; A variety of paymasters from whom cash must flow efficiently; Balancing of time, cost and quality aspects, though possibly not as consciously as the employer might like; Transfers of risk for certain elements of the project from the employer -developer to those best abl e to minimise or manage the risk events; Provision of design services; Control and monitoring by stakeholders, related to their interests; Creation of project teams, comprising multi -disciplinary, flexible and temporary workforces; Management of the varied processes, communication, changes and events arising; Commissioning of facilities to be built, owned, operated and/or transferred; Maintenance of the facility. Traditional : involves the contractor undertaking to build in accordance with designs provided b y the employer (and his design team). 4 Design and build : the contractor both designs (completes the design) and builds according to the employer’s brief and specification. 5 This allows the contractor to use its experience to reduce the cost of the construc tion, without affecting the value to the client. This is sometimes referred to as ‘turnkey’ when the contractor also purchases the site and/or operates the facility. Management based : instead of a contractor, there is a manager 6 who offers co -ordination and management skills; the actual work of construction is carried out by subcontractors and specialists. “Which procurement method is likely to prove the most appropriate in a given situation will depend upon the nature and scope of the work proposed, how the risks are to be apportioned, how and where responsibility for design is to be placed, how the work is to be coordinated, and on what price basis the contract is to be awarded.” 7 Page 3 © 500 Words Ltd , 2014 Traditional Procurement Traditional procuremen t, according to the NBS Survey 201 2 (and confirmed in the 2013 Survey) , still dominates the industry, with roughly 70% of projects being undertaken traditionally. 8 In this approach, the client directly appoints and manages consultants who carry out service s relating to design, cost control and contract administration. The client also directly appoints the main contract who is responsible for carrying out the works, and all workmanship and materials (whether or not the contractor subcontracts elements of the works to others). In this procurement strategy: a full set of documents setting out the works to be completed must be prepared before the invitations to tender (ITT) are sent out; design is carried out by the consultants although some elements of design can fall on the contractor (e.g. u sing a D esigned Portion in JCT 2011 SBC ); the client retains direct control over the design, and by so doing the standards for quality; where the contractor was provided with full design information in the ITT, there is considerable cost certainty for the employer, subject to changes after commencement; the provision of information and instructions between the employer and his team and the contractor is critical to avoid allegations of delay . Design And Build Design and b uild is used on roughly 25% of projects, according to the NBS Survey (2012) 9 so it is significantly below the use of a traditional procurement strategy, but nearly ten times more common than any one of the alternative management -based procurement strategie s.10 Design and build comes in many different guises. The extent of the ‘design’ carried out by the employer’s team determines the level of design responsibility which the contractor will undertake : “Design has been defined as devising an arrangement, the n specifying the components needed to realise that arrangement, and lastly detailing a method of joining or erecting those components. Design can mean the overall concept or form of the building, it can relate to the component parts including specialist in stallations, or can be the result of meeting specified criteria for durability, performance etc. ”11 A design and build contractor can proceed from outline plans, concept design or detailed specifications. So the contractor may tender on the basis of comple te design and construction responsibilities 12 or for developing the information provided in the =TT by the client’s design team. This can (and should) affect the contractor’s design obligations in the main contract – although not the standard of care. In t his procurement strategy: the contractor’s liability for design may be limited by the terms of the contract, thus negating or diminishing the concept of the contractor being the single point of liability for design and construction; the client lacks direc t control over detailed aspects of the design, and so quality; the client takes the benefit of the contractor’s expertise in buildability; the contractor takes more responsibility for completion to time; the client requires an independent contract administrator to protect his interests during the carrying out of the works, has no cost consultant to assist with valuation. Page 4 © 500 Words Ltd , 2014 A Potted History of Design and Build “What has become known as the traditional method of constructing building projects requires the separation of the works of the designer from those of the constructor. They each do their work in isolation from each other and have separate legal responsibilities towards the client. During the latter half of the last century numerous attempts have b een made to find alternative procurement solutions, which to many is a failure of the traditional method of project development…Design and build is not a modern -day concept. In centuries past it was the only procurement arrangement that was available. Its roots originate in the ancient master builder concept, where responsibility for both design and construction resided in a single individual. Design and build can be traced to ancient Mesopotamia, where the Code of Hammurabi (1800BC) fixed absolute account ability upon master builders for both the design and construction of projects. In classical Greece, great temples, public buildings and civil works were designed and built by master builders… [e.g.] the Parthenon and the Theatre of Dionysus… During the Re naissance, architecture and construction evolved as separate professions and the presence of master builders disappeared…project c
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