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Business Procurement and Contractual Practice Discussion 2022

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Added on  2022-08-28

Business Procurement and Contractual Practice Discussion 2022

   Added on 2022-08-28

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Business Procurement and Contractual Practice Discussion 2022_1
Construction contracts are a mutually or legally binding arrangement between two
parties, based on documents established policies and conditions. According to section 104 of the
Housing Grants, Construction and Regeneration Act of 1996 (HGCRA 1996), a construction
contract is an arrangement with an individual to execute, organize, or carry out construction
operation. One or more owners and one or more contractors belong to the two parties concerned.
The nature of building contracts are complex and belong to the few forms of contracts that need
to be written. The developer has the power to determine what form of contract can be used to
create a particular construction and in a contractual arrangement define legal requirements1. A
building contract is a crucial document that defines both the contractor and the owner’s scope of
operation, risks, obligations and legal rights. Construction contracts include agreements on
architecture, design or analysis and building-related consultancy agreements. Contracts between
the parties to execute each project individually are usually concluded. However, standard
contracts were implemented to increase the efficiency of the industry2. This paper mainly focuses
on the discussion of the procurement contract, civil wrong related to construction projects, and
various forms of contracts for handling delay. While discussing the same it also sheds light on
the discussion relating to golden principles of FIDIC, principles of NEC contracts, and the
contribution of the Donoghue and Stevenson to the civil wrong of negligence.
1 Thomas, Reginald William, and Mark Wright. Construction contract claims. (Macmillan International Higher
Education, 2016)
2 Levin, Paul, ed. "Construction contract claims, changes, and dispute resolution." American Society of Civil
Engineers, 2016.
Business Procurement and Contractual Practice Discussion 2022_2
Before starting the discussion on the most appropriate procurement method, it is
important to discuss the management and types of the procurement contract. Contract
management is the method of handling contract that is undertaken as part of the legal paperwork
for forming working arrangements with clients, suppliers or even partners. Contract management
requires negotiation of the terms and state of affairs in contracts. This also certifies that the terms
and conditions are complied with and records and decides to any modifications by all parties to
the agreement. Therefore, it is considered to be a procedure of handling, implementing, and
examining the supervision of a contract competently3. In this given scenario the issue to be
discussed is the most appropriate procurement method and types of contracts to be adopted in
this project.
A project can only become successful if the procurement method will be selected
effectively. There are several factors need to be considered before selecting a suitable
procurement method. The factors include client understanding, customer goals evaluation,
project constraints defining including risks and how the design and development are coordinated.
Adriaanse (2016) said that these goals and priorities will emerge from the procurement method
that is important to the overall alignment of objectives and customer expectations for each
project. As a guide for choosing the correct procurement method, there are a variety of
procurement assessment criteria, such as time, quality, risk, complexity, cost and flexibility.
Possibly the most common procurement method in the UK is the traditional system which
is often referred to as a method of ‘design-bid-build’. The traditional route divides the obligation
3 Naoum, Shamil, and Charles Egbu. "Critical review of procurement method research in construction
journals." (2015) Procedia Economics and Finance 21.1: 6-13.
Business Procurement and Contractual Practice Discussion 2022_3
of the project design from construction during a ‘tendering’ phase. In these methods, the design
and cost control consultants along with the contract management consultants are appointed first.
Once the design has been completed, this tendering stage starts by naming a contractor with two
stages of tenders or negotiations. The contracting firm then works directly with the customer and
is responsible for the project design and execution. This method usually involves a lump sum
fixed price to complete the proposed project. The cost depends upon the design of the proposed
project. Generally, this method takes some time to complete because almost in all the cases it has
been observed that the design is tough. The traditional method is considered to be the slowest
procedure. However, it is a fact this method ensures the quality and the standards are met always
by the constructors4.
In this given scenario, Jim Akis Khan wanted to develop a four-unit building into his land
which is situated as South East London. He intends to rent the three units of the house and live in
one. He is a busy person and does not have too much experience regarding construction but at
the same time, not a novice one. He is also ready to bear a reasonable amount of risk but also
wants a reasonable amount of involvement in the project. He takes interior decoration very
seriously and for this reason, he has secured a loan from the bank which he wants to repay by
renting the house. He does not say that he has an urgency to complete the house and also he is
ready to invest money but need a good quality building with good interior decoration. Thus,
being a senior Commercial Manager and legal Advisor my suggestion regarding the most
appropriate procurement method to him is the traditional procurement method.
On the other hand, contracts are used for commercial transactions and alliances in the
world of industry. The types of contracts used for company commitment typically differ
4 Chen, Qing, et al. "Choosing appropriate contract methods for design-build projects." (2016) Journal of
Management in Engineering 32.1: 04015029
Business Procurement and Contractual Practice Discussion 2022_4

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