Business Procurement and Contractual Practice

Business procurement and
contractual practice
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Table of Contents
Question 1 .......................................................................................................................................3
As senior manager advise him procurement method and types of contracts ..............................3
Question 2........................................................................................................................................4
Discuss four types of civil tort in construction phase of project and remedies ..........................4
Question 3 .......................................................................................................................................5
Critically evaluate provision in three forms of contract and how they are handled....................5
Question 4 .......................................................................................................................................6
a) Discuss golden principles of FIDIC.........................................................................................6
b) Evaluate three factors for selection of types of contracts........................................................7
Question 5 .......................................................................................................................................8
a) Discuss principles of NEC contracts.......................................................................................8
b) Discuss contribution of Donoghue and Stevenson to tort of negligence.................................9
REFERENCES..............................................................................................................................10
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Question 1
As senior manager advise him procurement method and types of contracts
It is necessary to select a proper procurement method in construction project so that
accordingly its contract type can be identified (Ameyaw, Pärn and Darko, 2017). Also, there are
some factors such as cost, risk, quality of raw material, etc. in contract which depends on
procurement method. It enables in evaluating methods pros and cons and then selecting it. Thus,
in case of Khan there are several procurement and contracts types which is mentioned as :
Open tendering- it is a procurement in which all companies are allowed to bid for tender. There
is open competition in it. Each company bids on cost and then least cost bidding is selected.
Restricted tendering – In this only a specific number of companies are allowed to bid for tender.
Usually, in this a cost is fixed by service provider on basis of which bid is done. It is also known
as selective tendering or competitive procurement method
Request for proposal- This method allows procurement company to review the proposal sent by
service provider. Here, a proposal is delivered and on basis of it answer is sent. It is a long
procedure in which at first step no financial details are included.
Request for quotations – It is least complex method in which only limited suppliers are selected
and then quotations are collected. So, on basis of cost and quality supplier is selected (Aqeel and
Asim, 2019).
So, in case of Jim Akis Khan, open tendering procurement method will be suitable. It is
because as he is not having any knowledge about construction he can allow contractors to bid for
tender. It will be easy for him to select the lowest bid. Along with it, he can also get involve with
contractor to design building interior. This method is preferred as in other it will require Jim
Khan to make proposal and then proceed further. Furthermore, in open tender he can do planning
with supplier. Also, as it is large project so for each project cost can be fixed. Hence, it will not
vary.
Types of contract – Along with procurement method there are different types of contracts as well
in construction. It is important to select suitable contract type as per requirement of client. They
are defined as : (4 common types of construction contracts, 2016)
Fixed price- As name depicts it is a contract in which the entire price of construction project is
fixed. In this benefits as well as penalties are imposed. It is suitable only when scope and
schedule of project is fixed. The builder is having overall risk (Boeger, 2018).
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Cost plus- in this contract the cost of entire project is mentioned. It included direct and indirect
cost. It is suitable when scope is not fixed.
Unit price – This type of contract unit price are set during bidding. The price can be modified if
scope is changed.
Time and material contracts – Here, both owner and builder agree on daily rate of project
including direct and indirect costs. It is used in small projects.
Here, contract type suitable is unit price as unit price of each house will be fixed during
bidding. Besides, if Khan wants to build only 2 or 3 house then project scope will be changed.
Hence, accordingly unit price can be modified as well. However, setting of unit price will give
insight to Khan that how much each house will cost. Besides, in this risk will be to both owner
and builder (Flammer, 2018).
Question 2
Discuss four types of civil tort in construction phase of project and remedies
In construction project, usually owner faces many types of tort case which highly impact
on project cost. A tort is a when a person inflicts injury on another. In this case the injured party
can legally sue other for causing damage. Here, in tort injured party is known as plaintiff and
other is known as defendant. However, tort law identifies whether entity must be held legally
liable for causing injury to another. Besides this, it also include that what type of compensation
should be paid to injured party. However, there are 4 elements of tort. They are duty, breach of
duty, cause and injury (Types of tort, 2019). In construction projects civil tort is common that
occur during project. This results in delay and rise in cost of project (Flynn and Davis, 2016).
Alongside, there are various types of tort which is specified as below:
Negligence- it is the most common tort in construction where careless infliction of harm or
damage is done. In this omission is made to do something in which a person guide on those
considerations that regulate human conduct. It does not only include this but also breach of duty
owned to group of person.
Nuisance – it is a type of tort in which there is unlawful interference with a person land. Here,
there may be some rights or connection with neighbour land as well. This results in nuisance.
Basically, there are three types of nuisance that is private, public and statutory. In private
individual bring a claim. Here, the person who has occupied land must show some proof of
substantial interference. This will restrict is not using land and damaging it. There are certain
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construction operation which create nuisance and inconvenience (Haapio and Barton, 2017). But
in this case they are not considered as intentionally to be carried out. Public nuisance is
considered as criminal offence and in which only government can pursue the person. It is
referred as act which impact on comfort and convenience of specific group of people. The
statutory nuisance is an act of environmental protection act 1990. here, act is related to water and
environment pollution. So, any construction site which is damaging the atmosphere prior to
notice of local authority.
Trespass to land – it is a tort of unlawful entry into the land of another person or remaining on
land even after it has been ceased. Trespass also consists of throwing of items or raw materials
onto land of another intentionally. It is also known as intentional tort in which legal action can be
taken against it.
Strict liability – in this the injury is caused by doing wrong and without any proof of negligence
or direct fault. This results in taking action to injured a person eventually. There are various
types of liability in this (Kansiime, Ntayi and Ahimbisibwe, 2017). The negligence misstatement
is one in which a person gives advise or any info which can be relied easily or it falls into duty of
care. This is known as negligence liability. Other than this, vicarious and occupiers liability is
also a form of liability.
So, these all the kinds of torts that can occur in construction project. In all these
contractor is liable for duty of care. However, owner can sue it on basis of tort and legal action
can be taken.
Question 3
Critically evaluate provision in three forms of contract and how they are handled
In construction project there may be delay in its completion due to certain circumstances
or events. Thus, it becomes difficult for builder to handle entire project. Thus, there are several
provisions mentioned in order to handle certain contract types. It includes ways on contractor can
claim for money and other implications of it. Thus, they are as below :
JCT SBC/Q 2016- in this certain provisions are mentioned. Under clause of 2.27 a notice of
delay has to be given by contractor to builder. The notice consists of all details of events that
occurred. Besides that, as per clause of 2.27.2 contractor has to submit all impact of event on
project and what measures are been taken for its prevention. Also, under clause of 2.29
contractor is entitled to be given some time in completion of project in case of relevant event.
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NEC4 ECC- there are several provision included in NEC4 contract regarding delay in project
due to event. In this first of all the contractor has to notify the event that has occurred within
specific time of 8 weeks. If he gets failed then issue can arise in it. Under clause 31 contractor
program is not accepted if he fails to respond in given time.
FIDIC red book 2017 – in this book there are different procedure mentioned through which
claim can be settled between contractor and party. Here, in clause 20 the various procedure are :
here, first category allows party to claim for additional time to make payment. In second one it is
mentioned the claims that do not fall into first are included. In addition a notice of 28 days is
given in case of any happening of event.
Therefore, it is identified that in different types of contracts provision applied vary. It also
depend on type of event that occurred. Besides that, there has to be change
Question 4
a) Discuss golden principles of FIDIC
FIDIC state that all contract needs to be comply with requirements of specific project,
laws and regulation and contract law. The GP are significant principles in FIDIC which has to be
adhered in specifying particular conditions (Loosemore and Reid, 2019). These principles are
inviolable. They are described as
First GP is that roles, duties, rights of parties has to be generally implied in general conditions.
Apart from it, they must be as per requirements of project.
Another GP is any amendments of contract has to be clearly specified. Also, it needs to
unambiguous.
In contract all time period must be mentioned with reasons.
No changes should alter original balance of risk allocated in general conditions.
If there is no conflict arise in regard to law that govern the contract then dispute must referred as
dispute avoidance or dispute adjudication board. This will allow in taking interim binding
decision and after that it can be treated as arbitration. It must be intended to operate as condition
precedent
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There has been mentioned how FIDIC might police compliance with the GPs in practice.
On their own, they are doing not have any contractual effect and are non-binding. It is also
argued whether it' is FIDIC’s role to manage parties’ use of the FIDIC general conditions. The
language utilized in the press releases for the launch of the GPs is interesting. It’s framed in
terms of securing the integrity of FIDIC contracts and therefore the FIDIC brand and ensuring
that clients are not given wrong info (Loosemore, Alkilani and Mathenge, 2019).
The FIDIC contract is a contract that support the FIDIC conditions, using them as
foundation. As many involved in international construction and engineering projects will know,
the principles of the contract and how it is managed
If a typical form must be amended to satisfy the competing interests of the parties
involved there in transaction which fundamentally alters the originally intended risk/reward
balance, is that standard form the acceptable starting point.
One impact of the GP is shift by previous users of the FIDIC forms towards bespoke
contracts that give the parties more flexibility to deal with the actual requirements of the project
and therefore the interests of the varied project participants. Alternatively, as long as parties are
liberal to agree the terms on which they contract they are kept simple (Nguyen and Hadikusumo,
2017).
b) Evaluate three factors for selection of types of contracts
It is essential to select the type of contract so that accordingly procurement method is
selected. Alongside contract is selected on basis of requirements of client. However, there are
several other factors as well which needs to be considered in it. This is because it gives insight
about which type of contract will be suitable. In addition, any change in needs will also affect of
contract type. Moreover, each factor is having its own pros and cons. Hence, it becomes
necessary to evaluate factor in order to select type of contract especially in construction. The
factors are as follows : (Factors in selecting contract types, 2017)
Price analysis- it is a crucial factor which is considered in selecting contract type. In this the
price of each contract is analysed. Moreover, the degree to which price realistic pricing standards
are set and done is evaluated.
Cost analysis- the factor is considered when there is no pricing analysis done. Here, cost
estimation of each contract is done. In this cost estimate of contractor and owner is negotiated.
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Alongside, if there occur any uncertainty then the impact on cost is analysed. This gives an
insight on cost variation and overall contract (Thai, 2017).
Type and complexity of requirement- this factor is considered on basis of complexity and type of
project. Here, uncertainties are determined of changes that can occur during contract. Thus, it
becomes difficult to estimate cost in advance. Moreover, on basis of client requirement contract
type is selected. Besides that, it is evaluated that how much project complexity is and what type
of contract will be suitable in it.
Question 5
a) Discuss principles of NEC contracts
NEC are type of family contracts that are specially designed to be clear, flexible and
integrated professional project management. It is known as new engineering contracts which also
include a management procedure (NEC contract, 2018). Usually, there are 3 principles followed
in NEC which are described as below :
Clarity – this is the first principle which state that all NEC contracts are written in plain English
so it is easy for all to understand it. Moreover, in this information and details are written using
short sentences and in bullet points (Wong, San Chan and Wadu, 2016).
Flexibility- it is second principle in which there are many things mentioned. They are
These contracts are for both project and professional services. It includes all those processes and
languages that are similar.
The contracts are categorised as long and short which is having different levels of complexity.
These both short and long contracts consists of various types of payment options such as lump
sum, and reimbursable option as well. Furthermore, it also have a remeasurement option.
In long contract there are any secondary options as well. It depends on employer requirement to
chose that options.
The project contract allows in any amount of design by supplier
in NEC 4 it now contains a contract for design build and operate.
Good management – in this as well there are many components included which is as follows
the contract defined clear roles and action
It also define time frame of each action clearly.
In this any effect on time and money is already assessed in advance if there occurs any change.
The contract requires effective and proper management
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In this contract is designed as process that is in flow chart. Also, they can be easily managed in
cloud systems (Yan, Ma and Ge, 2018).
As contracts are made for both project and profession management thus it provide an effective
and proper control to client. In addition, client gets easily aware about completion of project and
how much amount has to be paid.
b) Discuss contribution of Donoghue and Stevenson to tort of negligence
It has been evaluated that in doctrine of negligence Donoghue and Stevenson highly
contributed in it. They helped in shaping the law of tort. Here, a case happened when donoghue
bought a beer from cafe. So, after drinking half of bottle, a snail floated out. It resulted in causing
shock to her and leading to gastro enteritis. As she can not claim due to lack of contract of
warranty. But at that time, law of negligence was not so effective and did not include many thins
in absence of any contractual relation. But instead of all these, Donoghue took it to House of
Lords. Thus, a decision was taken that first negligence is distinct and tort. Also, it does not
require any contractual relationship in order to establish a duty and last companies owns a duty
to customers to whom products are been sold (Ameyaw, Pärn and Darko, 2017).
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REFERENCES
Books and journals
Ameyaw, E.E., Pärn, E. and Darko, A., 2017. Corrupt practices in the construction industry:
Survey of Ghanaian experience. Journal of Management in Engineering, 33(6),
p.05017006.
Aqeel, A. and Asim, M., 2019. Factors Influencing E-Procurement Practice in Pakistan. Business
Management and Strategy, 10(2), pp.1-26.
Boeger, N., 2018. Public procurement and business for value: Looking for alignment in law and
practice. Forthcoming, A. Sanchez-Graells (ed.),'Smart Public Procurement and Labour
Standards: Pushing the discussion after Regiopost', Hart Publishing.
Flammer, C., 2018. Competing for government procurement contracts: The role of corporate
social responsibility. Strategic Management Journal, 39(5), pp.1299-1324.
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.
Haapio, H. and Barton, T.D., 2017. Business-friendly contracting: how simplification and
visualization can help bring it to practice. In Liquid Legal (pp. 371-396). Springer, Cham.
Kansiime, D., Ntayi, J.M. and Ahimbisibwe, A., 2017. Contractual governance mechanisms,
dynamic capabilities, transactional specific relationships and supplier performance in
Uganda. In Global Public Procurement Theories and Practices (pp. 139-155). Springer,
Cham.
Loosemore, M. and Reid, S., 2019. The social procurement practices of tier-one construction
contractors in Australia. Construction management and economics, 37(4), pp.183-200.
Loosemore, M., Alkilani, S. and Mathenge, R., 2019. The risks of and barriers to social
procurement in construction: a supply chain perspective. Construction Management and
Economics, pp.1-18.
Nguyen, H.T. and Hadikusumo, B., 2017. Impacts of human resource development on
engineering, procurement, and construction project success. Built Environment Project
and Asset Management.
Thai, K.V. ed., 2017. Global Public Procurement Theories and Practices. Springer.
Wong, J.K.W., San Chan, J.K. and Wadu, M.J., 2016. Facilitating effective green procurement in
construction projects: An empirical study of the enablers. Journal of cleaner
production, 135, pp.859-871.
Yan, F., Ma, Y. and Ge, X., 2018. Transportation Service Procurement Bid Construction
Problem from Less Than Truckload Perspective. Mathematical Problems in
Engineering, 2018.
Online
Factors in selecting contract types, 2017. [online] Available through :
<https://www.law.cornell.edu/cfr/text/48/16.104 >
4 common types of construction contracts, 2016, [online] Available through :
<https://www.thebalancesmb.com/common-types-of-construction-contracts-844483 >
NEC contract, 2018. [online] Available through : <https://journal.iaccm.com/contracting-
excellence-journal/nec-contracts-are-they-right-for-you >
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Types of tort, 2019, [online] Available through : <https://www.injurylawcolorado.com/legal-
library/tort-law-types.html >
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