procurement arrangement options - trent global · 2017. 3. 16. · arrangement options procurement...

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Procurement

Arrangement Options

Anand ANTHONY 安杰褔<[email protected]> [M: 9693 0407]

CHARTERED BUILDING ENGINEER (UK), Adjudicator (Malaysia), Mediator (UK)

EXPERT in FORENSIC PLANNING (Delay/Disruption/Production/Acceleration)

EXPERT in COST ENGINEERING (Quantum of Costs/Loss/Expense/Damages)

EXPERT in PRODUCTION ANALYSIS (Productivity capacity, Optimum manpower)

Education

• Master of Laws (Commercial & Corporate) LL.M London

• Master of Science (International construction Management) M.Sc. NTU S’pore

• Bachelor of Laws LL.B (Hons) London

• Bachelor of Engineering B.Eng. (Civil) NU S’pore

Working Experience

• 27 years of leadership and management in the construction industry

• 19 years as Construction Contracts Consultant

• 19 years lecturing in the areas of law, management, business, finance & insurance

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Arrangement Options

Learning Outcomes

Principles and practice of procurement

Contracting philosophies and arrangements

Procurement options, their strengths and weaknesses

Challenging current knowledge and practice of

Procurement

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Procurement

Arrangement Options

The Procurement Routes

1. The Traditional Procurement Route

2. The Fast Track Procurement Route

3. The Fast Build Procurement Route

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Arrangement Options



Advantages:

Complete design done before tender

Drawings and abstracts to form Bill of Quantities for

Tender Document

Design changes easier to make and control

Better quality and cost control

Better operation considerations incorporated

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Arrangement Options



Disadvantages:

Design time taken too long; anything from 1 to 5 years common

Design seldom allows the builder opportunity to suggest ways of

improving the design

Design changes suggested by any tendering contractor will often

require that contractor to reveal this all other bidders

Little incentive for the contractor to lever the client value

When industry is experiencing over-supply, contractor’s

profitability from Variation Orders and claims

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Procurement

Arrangement Options



Advantages:

Client’s lead-in time to markets is reduced

The design and construction period is compressed

Exposure to inflationary periods is reduced

Design options can be kept open closer to the

point of commitment

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Arrangement Options



Disadvantages:

Quality and cost control may take lower priority than programme

Design changes can be disastrous, as there is little time to stop impacts

hitting other work packages

Design team is placed under pressure to design to programme rather

than their natural disciplinary practice; often resulting in poor designs

Litigation may increase as time-flexibility is reduced causing more

knock-on effects

Wrong decisions may be irreversible

Buildings are often designed to ease constructability rather than

operability

Requires good working relationships between the parties

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Procurement

Arrangement Options



Advantages:

Client’s lead-in time to markets is reduced drastically

The design and construction period is almost completely

overlapped

Exposure to inflationary periods is reduced drastically

Design options can be kept open closer to the point of

commitment; but must be known at the very onset

Suitable for ‘franchise’ works e.g. McDonalds outlets, petrol

kiosks etc.

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Procurement

Arrangement Options



Disadvantages:

Quality and cost control takes lower priority than programme

Design changes will be disastrous, as there is little time to stop impacts

hitting other work packages

Contractor’s/Builder’s Design team is placed under pressure to design to

programme rather than their natural disciplinary practice

Litigation may increase as time-flexibility is reduced causing more

knock-on effects

Wrong decisions will be irreversible

Buildings most often designed to ease constructability rather than

operability

Requires very good working relationships between the parties

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Procurement

Arrangement Options

Procurement Arrangement Options

1. The Traditional Method

Consultants appointed for design and cost control and a main

contractor is selected later to carry out the work

Client’s understand method well and know their financial

commitments when they accept the builder’s tender

Design usually ‘almost complete’ before tender

Specialist NSC info usually incorporated into design

Separation of design and construction gives rise to a “them

and us” attitude

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Arrangement Options


2. Traditional Method Variants

Traditional Sequential; Contractors bid on completed design

and cost documents

Traditional Accelerated; Contractor is appointed earlier on

the basis of partial information, by negotiation or in

competition

Standard Forms of Contract; JCT Standard Form of Building

Contract (1999 edition), General Conditions of Government

Contracts (GC Works Forms)

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3. Design and Build

Single Contractor appointed who is responsible for the design

and construction of the building; single point responsibility

Client’s know their financial commitments when they accept

the builder’s tender; provided no changes introduced

Client has direct contact with the Contractor

Nature of system promotes creation of an integrated design

and construction team

Nature of contract reduces changes (variations); also

produces time and cost savings

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4. Design and Build Variants

Direct; A Designer-Contractor appointed after some appraisal

and the price is negotiated

Competitive; “Client’s requirements” documents are

prepared by the client and his advisers to enable several

Contractors to offer designs and prices in competition

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5. Develop and Construct

Consultants are initially appointed to provide a partial design

for the building

Several Contractors then offer to complete the design and its

construction in competitive tender, either with their own

designers or taking on the clients’ consultants

Standard Forms of Contract; JCT Standard Form of Building

Contract, with Contractor’s Design (1999 edition), BPF/ACA

system and agreement, 1983/1984

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6. Management Method

Design and cost consultants and an organisation to manage

the construction are appointed for a fee

Construction work is tendered for and carried out by

specialist firms

“Them and us” attitudes are reduced and lines of

communication are improved

Once Construction Manager or Managing Contractor is

appointed, the client enters into contracts with numerous

specialist contractors rather than with a main contractor

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7. Management Method Variants

Management Contracting

Appointed management organisation takes a contractual risk in

guaranteeing to deliver the project on time and to a maximum

price

Construction work is split into packages and trade specialists

compete for the work. They are then taken on directly by the

management organisation as sub-contractors to carry out the

work

Standard Forms of Contract; JCT Standard Form of

Management Contract, 1998 edition (MC98)

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7. Management Method Variants (cont’d)

Construction Management

Management Service is provided by a fee based professional and

all trade contracts are direct with the client.

Client retains all time and cost risks

Standard Forms of Contract; The American Institute of

Architects conditions of engagement, The Association of

General Contractors conditions of engagement

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Procurement

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8. Design and Manage Method

Combines characteristics of Design & Build and management

Client appoints a single firm to design and deliver the

project, but specialist contractors tender for the

construction work

Client engages a Project Manager who acts in an independent

capacity

Design and Construction functions are separated so that

those involved can act as partners on equal terms; avoiding

the “them and us” confrontation

Reduction of overall project period provides consequential

cost reductions

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9. Design and Manage Variants

Contractor Project Manager; The project design and

management firm guarantees cost and time and takes on

trade, and sometimes design specialists as subcontractors

Consultant Project Manager; The Project Manager acts as

the client’s agent to manage the design and construction

process. All design and trade contracts are direct with the

client.

Standard Forms of Contract; Each design and management

organisation offers its own form of contract

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Steps to Successful Building Procurement

NEDO identified seven(7) steps: -

1. Selecting an in-house project executive

2. Appointment of a principle adviser

3. Care in deciding the client’s requirements

4. Timing the project realistically

5. Selecting the procurement path

6. Choosing the organisations to work for the client

7. Designating a site or building for remodelling

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1. Selecting an in-house project executive

The in-house executive should undertake the

following: -

Be available full time for the project

Be the single point of contact for the organisation

Understand and organise the internal decision

making processes required for the project

Have the power to speak and act for the

organisation

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2. Appointment of a principle adviser

The role of the principle adviser will be to: -

Complement the skills available within the client

organisation

Supply impartial advice on the need (or not) to

build and how to go about it

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3. Care in deciding the client’s requirements

The assessment should consider the following criteria:

Timing (programme)

Variation (2 principle sources)

Complexity

Product (quality)

Price (cost)

Competition

Responsibility

Risk avoidance

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4. Timing the project realistically

Clients need to consider the following actions to ensure

speed in building: Organise their decision making process

Compare value of time saving to extra cost

Clarity and firmness of design brief essential

Choose contractors and designers with care

Establish good relationships and avoid punitive contracts

Payment patterns should create incentives. Bonuses and cost

target rather than penalties for delay

Take a strong interest in the progress of the project

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Arrangement Options


5. Selecting the procurement path

The NEDO selection charts suggests the following steps: -

Rank the criteria in order of importance and give

reasons for your selection

Add weighting to reflect extent criteria is satisfied,

giving reasons

Multiply the weightings by the criteria rankings and

add up the scores. The highest score should indicate

that that procurement path is the most appropriate

for the project

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6. Choosing organisations to work for the client

The following points are critical concerning the selection of

people and organisations for the project:

Employing people with the essential skills

Get people with real interest in the project objectives, with

flexibility of approach and a co-operative nature

Mutual trust is essential

Unamended standard forms of contract are the best way of

encouraging a collaborative environment in which to work

Establish good relationships and avoid punitive contracts

Selection of people and organisation based on

accomplishments and attitude

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Arrangement Options


7. Designating a site or building for renovation

The “proposed site” will have direct impact on to the choice of

procurement path

Avoid pre-determining a site or building

Get professionals to appraise the “proposed” site or building

Commit only after a feasibility study has been completed

Unamended standard forms of contract are the best way of

encouraging a collaborative environment in which to work

Role of Principle Adviser here is crucial

procurement arrangement options - trent global · 2017. 3. 16. · arrangement options procurement...

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