Methods of procurement and types of contract

This article discusses the various methods of procurement and types of contract in the construction industry. It provides an overview of traditional and design-build methods, along with their advantages and disadvantages. The article also explores the different torts that can arise in construction projects and the remedies available. Additionally, it covers the provision of contractual delays and the golden principles of FIDIC contracts. Whether you're a student studying construction or a professional in the industry, this article offers valuable insights.

BUSINESS
PROCUREMENT AND
CONTRACTUAL
PRACTICE
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Table of Contents
INTRODUCTION...........................................................................................................................3
QUESTION 1..................................................................................................................................3
Methods of procurement and types of contract...........................................................................3
QUESTION 2..................................................................................................................................5
Law of torts..................................................................................................................................5
QUESTION 3..................................................................................................................................6
Provision of contractual delays....................................................................................................6
QUESTION 4..................................................................................................................................7
Golden principles of FIDIC.........................................................................................................7
Evaluate the three factors for the contracts..................................................................................8
QUESTION 5..................................................................................................................................8
Multi-tiered dispute resolution mechanisms................................................................................8
Principles of NEC contracts.........................................................................................................9
Contribution of Donoghue and Stevenson to the tort of negligence...........................................9
CONCLUSION..............................................................................................................................10
REFERENCES..............................................................................................................................11
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INTRODUCTION
Procurement is an important aspect of an organization which consists of sourcing and
acquiring products or services, typically for the business purpose. In fact, it is mostly related with
the industry because companies require soliciting services those are usually taken into account at
large level. However, there are plenty of routes through which the design as well as construction
of a building can be procured. The individual businesses tends to set procurement policies that
are govern as per the choice of suppliers, items and method those are going to be used to
communicate with the person (Morledge and Smith, 2013). Therefore, this particular project
intended to highlight specific information regarding use of appropriate procurement methods
along with the type of contract taken into account for the projects. Apart from this, evaluation of
various types of remedies occurs during the time of handling the project. Moreover, principle of
FIDIC as well as the factors associated with the contract is also been discussed effectively.
Further analysis has been based on the multi-tiered dispute resolution mechanism that are arises
within the projects.
QUESTION 1
Methods of procurement and types of contract
In every business project implementation under a given IPF (investment project financing) is
basically consists of procurement activities that are required to achieve the project objectives.
The Jim Akis Khan should be mindful that the pre-contract award processes tends to contribute
to the overall success of a contract. In fact, procurement involves contract management which is
a crucial element of a budget execution. Basically, procurement is a crucial terms which is used
to describe all activities that are going to be undertaken by the Jim Akis khan in seeking to bring
about the construction of his house. However, it is also referred to an essential methods that seek
to consider the pros and cons that are likely to affect the project so as to select an reliable
contractual approaches (Flynn and Davis, 2016). Therefore, it is important for any business
concern to make use of a reliable procurement option that can provide create chances of
protecting their investments for maximum period of time. Some of the key methods are
discussed below:
Traditional: It has been analysed that this particular methods is used since last so many
years in the construction sectors. In fact, the major aspect of this procurement method is that the
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design process is identical from the construction of house. It would also need full documentation
before the contractors could be invited to tender for the work. As a whole, traditional method
simply involves the steps, design & bid and builds process.
Justification: As this traditional method is quite easy or simple to understand by all
categories of customers just like Jim Akis. The major problem with this is the period of contract
that tends to be longer due to the design process. Therefore, this method could not be that much
effective for Jim construction work.
Design and build method: Under this procurement method, a contractor is held
responsible for undertaking both the design as well as the construction of the house in return for
a lump sum cost. However, to reach at an option of contractor, they are needed to develop a
design up to a certain level as well as prepare a tender amount which is submitted as proposal to
meet the satisfaction of the client (Ruparathna and Hewage, 2015). The best part of this
particular method is that the design and construction of house may move in parallel along with
the duration.
Justification: The design-build method tends to give Jim Akis khan a single point of
contract. However, Jim is committed to the cost of construction as he has take huge amount of
loan from the bank. The risk is also shifted to the contractors as it is important that design
liability insurance is been maintained to cover up the risk. On the other hand, the contract period
is short, the process of assessing the tender or selecting a contractors could be hardly due to the
fact that every tenderer are operating with their own design. Therefore, it has been suggested to
go with this particular method as it is taking very less time or risk till the completion of the
houses.
Construction law estimated to protect both builders as well as Jim as they enter into an
agreement to build a new house. Moreover, in case of any new construction it is imperative to
choose the right type of contract that can easily fulfil the needs and make sure that the contract
terms are fair to Jim Akis khan.
Lump sum or fixed price contract: It includes that buyer agreeing to pay a decent
amount and the contractor is liable to complete the project for that particular cost. By using this
type of contract, Jim Akis has certainty because he knows the actual cost that will be incurred,
unless changes are been made. Also, it concludes certain allowances that can help in mitigating
the risk to the builders, because if Jim goes over the payment the cost is bear by the buyer only.
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Cost plus contract: It involves the buyer paying the actual cost of the construction plus
an extra set percentage for the contractors. The Jim Akis takes on the risk here, because if it turns
out the project is more costly, the buyer would be the only one to pay for the cost of contraction
addition with the profit margin (Matthew, Patrick and Denise, 2013). However, it has been
clearly seen that Akis is not having experience in construction but happy to accept a reasonable
amount of risk associated with the project. Thus, this contract could be more suitable for him.
QUESTION 2
Law of torts
A tort tends to allocate specific responsibilities that provide remedies for unethical conduct
that sometime cause harm. In fact, it has been seen that liability in torts cannot exist without any
proof of legally recoverable damage or losses. For instance, a person committing a tort is
lawfully liable to the injured party who intend to offer with a remedy in legal terms. In
accordance with the construction work, tortuous liabilities could occur in a wide number of ways
(Lember, Kattel and Kalvet, 2014). This could be examining in the most common form of tort
law, negligence and breach of any statutory duty as well as nuisance. Here are some key torts
that are basically seen in the construction work.
Negligence: It happens to be the most crucial tort for several reasons, as it forms the cause
of action in the majority of cases brought in tort. Its scope is quite large as well as it would also
have a component in liability for previous torts. However, it is primarily concern with the
careless infliction of damage in the project. It must be essential to prove that the contractors had
no any intention of preparing out the design as well as specification as discussed (Snider and
Rendon, 2012). The major limitation of this particular act is that, it only applies to the residential
premises not on the commercial properties with the limitation tenure of 6 years after the
construction work was finished.
Nuisance: It is another important tort which is considered as unlawful interference with an
individual that are using land or some other right of the land. An individual could bring a certain
amount of claim in case the party has suffered foreseeable harm to that property larger than the
common people. However, it is quite actionable by an individual in possession of the specific
land or landowner in the damage has been occurred. For instance, in case the material has passes
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onto the other individual land as a serious consequences of some action for which the defendant
has entire right to take action against the owner.
Breach of statutory duty: It is primarily considered as a punishable offense under a
criminal act. Some acts do permit a civil right for any kind of damage just like the similar breach
of contract. In case it has been identified, but not remedy in terms of fine or penalty for their
breach is forced, it could be believed that a right of civil action accrues to the person that is liable
in this situation (Baker and et.al., 2013).
Trespass to land: Basically, it is a wrongful entry onto the property in the possession of
another party or remaining on land after the permission to be there has ceased. However, it is a
temporary intrusion that includes placing items forcefully onto the property. It is quite actionable
by an individual in possession of the specific property where there is any damage occurs.
Raylands V. Fletcher, 1868 [L.R. 3 H.L. 330]
Under this case, the defendants engaged autonomous contractors to build a reservoir on
their own land. The contractors has determine that disused mines during digging, but not able to
seal them accurately. They filled the reservoir with huge amount of water. As a result, it has
come out entirely with water flooded by the mineshafts into the plaintiff’s surface. The court in
this case, has held the defendant liable along with the decision made by the House of Lords.
Remedies:
It has been found that the owner of land has close to the escape and have right to recover
damages for it physical harm to the property itself. It was no longer clear that if a claimant could
recover for any kind of personal injury (Thai, 2017).
Defence: If the point of danger was effectively maintained for the benefits of either the
defendant or claimant then the defendant is not liable for their escape. The express of implied
consent is clear and no negligence has been seen by the defendant.
QUESTION 3
Provision of contractual delays
Construction delays are basically one of the most general disputes that are seen on projects.
Moreover, the procedure of establishing a delay claim could get complicated. Therefore, it is
vital to have proper understanding of ins and outs of delays claim that can assist construction
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business protect against inappropriate claims. However, compensable delays are basically
unforeseeable as well as not under the control of the contractors.
According to FIDIC, sub-clause 20.2 sets both a process for the warning and validation of
claims. The contractors would consider it has a claim for an extension of time or any other
payment, sub-clause 20.2.1 needs that notice must be deliver to the engineer with not more than
28 days after the activity has been performed (Caldwell and Howard, 2014).
Furthermore, the clause 20.2.4 (i) need that claiming party to show a fully detailed claim
within a total period of 84 days, whereas 20.2.4 (ii) will be another period decided with the
engineer to become aware of the projects situation.
Bremer v. Handelsgesellschaft mbH v Vanden Avenne-Izegem PVBA [1]
In this situation, the house of lord stated that the notice provision for the condition
precedent is applicable for a specific time of delivery the notice. It was clearly mention that the
related right would be lost in the project in case the notice is not been given on time (Loosemore,
2016). Therefore, the courts will uphold such type of provision that is provided unclear and
unequivocal.
In accordance with the English law, a notice provision would be developed as a specific
circumstance precedent to a claim that has been provided. It states that precise time within the
notice is been served as well as make plain by express language the party has not right under the
clause 20.2.1. Therefore, the contractors should have the option to take special care that is
inflexibly adhering to the particular notification actions.
QUESTION 4
Golden principles of FIDIC
FIDIC has been more concern regarding the contract that is being heavily amended. In fact,
these amended could be undermining their brand position as a fair as well as balance
internationally recognised suites of contract that can be used in every specific jurisdiction. It has
always envisaged that their contact terms and condition will be considered as supplementary by a
project provision. Therefore, some common principles of FIDIC are mentioned below:
Rights, obligation and role of the parties
According to the FIDIC, the proper allocation of the specific provision consists of
retaining the requirements that employer must deliver to the contractors with a reasonable
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evidence for the project. It does not need a contractor to provide any evidence of their financial
budgets. It is entirely confidential even politically sensitive. FIDIC also inform that the
contractors need not be deprived of their rights to levy financial charges or even terminate in
respect with the FIDIC condition for non-payment (FIDIC principles, 2016). The rights are
considerably eroded in accordance to these matters. Moreover, it is highly general for contractors
to provide a collateral warranties that consists of right for the advantage of commercial lenders.
It also disapproves any specific constraint on the civil engineer roles in making purpose of
extension of time. FIDIC is quite liable to consider the failure of the employer. In order to fulfil
the duty to provide access and possession of all aspects of the property a specific amount of
compensation is being offered to the contractors.
Evaluate the three factors for the contracts
It has been analysed that there are certain key factors that are needed to be taken into
account in a contract. It will help in attaining overall success or execution of lump sum contract
on a project like experience and having a clear work plan in front of the contractors. However,
the growth of construction project can effectively evaluate by considering the below mentioned
factors:
Early involvement: It is important to involve all the key parties along with the construction
team in the project is vital. Putting maximum focus on the early involvement during pre-
construction tend to plan an active role in success of the project (Doloi and et.al., 2012).
Qualification-based selection: It happens to see that maximum number of Construction
Company’s look to select a contractor individually based on a low bid. They can select their
project team on the basis of their qualification instead of price.
Cost transparency: It is important to maintain transparency among the entire group that can
often develop a high degree of faith between them. Shared risk would reward their team in
overall success of the project.
QUESTION 5
Multi-tiered dispute resolution mechanisms
It has been examine that by including a multi-tiered dispute resolution clause in their
contract, parties agree to take action against their potential controversies by considering their
escalating process. However, the traditional role of engineer in national construction dispute
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tends to evaluate the technical issues that have evolved in the present dispute resolution plan.
Below mentioned is one dispute resolution techniques that can effectively used in the
construction contract (Dispute resolution mechanism, 2014).
Arbitration: It happens to be an effective method that can be used to resolve the disputes
outside the court premises. The parties refers their dispute to an arbitrator who is liable to
reviews the evidence as well as listen to the specific concern of the parties and then reach to a
decision. These clauses could be either mandatory or voluntary, whereas arbitrator’s decision
might be binding or non-binding. According to FIDIC, 1999, the dispute resolution tend to
provide a binding but not a final solution. As this decision might be delivered quickly and made
effect on the parties. In case of a commercial contract, both binding and non-binding forms of
dispute resolution are directly shared in a multi-tiered procedure. It tends to give parties a
specific timeframe for reaching onto an agreement by negotiation.
Principles of NEC contracts
NEC is basically considered as a family contract that tends to facilitate the implementation
of sound project management principles. It is effective for the procurement of a diverse range of
workers, supply and across the large project along with the minor work. Here mentioned are
some key principles of NEC;
Flexibility: It tends to promote easy choice of best suitable procurement path for the
project as well as one-to-one arrangements for the project integration (NEC principles, 2015).
Clarity: In order to promote smooth understanding of the project a well-organized
structure along with the flow charting is done to monitor the overall growth of the project.
However, it tends to avoid technical aspects involve in the contract.
Stimulus to project management: This principle provides a wide range of contractual
mechanisms in order promote a collaborative project administration. Thus, it has increase
estimation of time, cost as well as other aspects involve in the project.
Contribution of Donoghue and Stevenson to the tort of negligence
Donoghue v Stevenson [1932] UKHL 100
According to this case, a gingerbeer producer has involved into selling drinks to retailers.
It has been seen that the bottlers that had been bought for her was opaque. At the time, the glass
was topped up; the entire snail fell from the bottle. It has been quite shocking of the snail jointly
with the concern of things that was actually drunk by her. The tort of negligence was established
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in this particular case. The court has decided that plenty of people have a legal duty of care that
could be owned by the producers to a client although no contractual duty is existed. The all three
judges were supported this particular concern as it was neighbour principle which was imposed
as a universal duty to take care of the parties (Tort of negligence, 2015).
However, having decided that a legal duty of concern owed, the house of lord transfer
this case back to the Scottish court of session to be tried on the matter of case by means of duty
care concept. As the trail tends does not happen because Stevenson died, thus Mrs Donoghue
was liable to paid a sum of money as a court settlement. The total value paid is disputed, but it
was believed to be around £ 200. Therefore, the ruling under this case was established in civil
law tort of negligence as well as obliged business to be experiential as a duty of care towards the
client.
CONCLUSION
From the above project report, it has been concluded that procurement in business the
utmost important aspects for an organization or any specific individual. It will provide crucial
information regarding the methods, type of contracts that could be applied to determine the
concern of the liable parties. However, the analysed has delivered positive solution to the Jim
Akis Khan that can be beneficial for the future planning and settlement. Furthermore, they need
to follow specific torts and dispute resolution mechanism clause at the time of entering into the
contract. Therefore, it is valuable to have specific knowledge and understanding of the key legal
terms within the construction work so that further implication can easily be avoided.
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REFERENCES
Books and Journals:
Baker, E., and et.al., 2013. FIDIC contracts: law and practice. CRC Press.
Caldwell, N. and Howard, M., 2014. Contracting for complex performance in markets of few
buyers and sellers: The case of military procurement. International Journal of
Operations & Production Management. 34(2). pp.270-294.
Doloi, H., and et.al., 2012. Analysing factors affecting delays in Indian construction
projects. International journal of project management. 30(4). pp.479-489.
Flynn, A. and Davis, P., 2016. The policy–practice divide and SME-friendly public
procurement. Environment and Planning C: Government and Policy. 34(3). pp.559-578.
Lember, V., Kattel, R. and Kalvet, T., 2014. Public procurement and innovation: Theory and
practice. In Public procurement, innovation and policy (pp. 13-34). Springer, Berlin,
Heidelberg.
Loosemore, M., 2016. Social procurement in UK construction projects. International journal of
project management. 34(2). pp.133-144.
Matthew, K., Patrick, K. and Denise, K., 2013. The effects of fraudulent procurement practices
on public procurement performance. International Journal of Business and Behavioural
Sciences. 3(1). pp.17-27.
Morledge, R. and Smith, A.J., 2013. Building procurement. John Wiley & Sons.
Ruparathna, R. and Hewage, K., 2015. Review of contemporary construction procurement
practices. Journal of management in engineering. 31(3). p.04014038.
Snider, K.F. and Rendon, R.G., 2012. Public procurement: Public administration and public
service perspectives. Journal of Public Affairs Education. 18(2). pp.327-348.
Thai, K.V., 2017. International public procurement: concepts and practices. In International
handbook of public procurement (pp. 33-56). Routledge.
Online
NEC principles, 2015.[Online]. Available through: <
http://www.civil.hku.hk/cicid/3_events/20190625/presentations/Updating_from_NEC3_
to_NEC4_Dennie_Li.pdf>.
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Dispute resolution mechanism, 2014.[Online]. Available through: <
https://globalarbitrationreview.com/chapter/1142626/multi-tier-dispute-resolution-clauses-as-
jurisdictional-conditions-precedent-to-arbitration>.
FIDIC principles, 2016.[Online]. Available through: < https://fidic.org/>.
Tort of negligence, 2015.[Online]. Available through: <
https://www.uni-trier.de/fileadmin/fb5/FFA/KURSUNTERLAGEN/AngloAmerikanisc
hes_Recht/Law_of_Torts/Siry-SS
2012/Donoghue_v_Stevenson__1932__UKHL_100__26_May_1932_.pdf>.
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