Contract and Procurement Management

This document provides an overview of contract and procurement management, focusing on a case study of the Central Queensland University project. It discusses the role of construction management, the lifecycle of the project, and analyzes the best procurement route for the case study. The document also explores different types of contracts and provides insights on choosing the ideal contract type.

Contract and Procurement Management 1
CONTRACT AND PROCUREMENT MANAGEMENT
Name
Course
Professor
University
City (State)
Date

Contract and Procurement Management 2
Contract and Procurement management
Background
Due to the expected increase in student admissions to the various campuses of the
Central Queensland University, the university plans to expand its infrastructure capacity
especially in the Melbourne campus to meet the increased requirements of the students. The
management has further identified and purchased a piece of land located in Melbourne, where
it intends to construct a unique campus with elements such as a main lecture building which
will accommodate 300 students, computer and engineering laboratories, a motel with 50
rooms for accommodating staff and visitors as well as a conference hall with state of the art
facilities and with a holding capacity of 250 people. The project elements are projected to be
constructed concurrently within a specific time frame so that by the commencement of the
January 2020 academic year, the new campus should be ready for occupation and are
expected to be cost effective and of high quality. Since the university lacks the capacity for
overseeing a project of such magnitude, it has contracted PPMP20011 Company, which is a
highly experienced consultancy firm to undertake the project implementation.
PPMP20011 Company Profile
Introduction
The company was established in 1995 and registered as a construction consultancy
limited liability company (LLC) in Australia. PPMP20011 has built its reputation as a leading
provider of civil and construction consultancy services as well as manages turnkey solutions
for both government and big corporate organizations. Our reputation is based on our promise
to deliver cost effective, quality service and timely. The company has highly skilled staff in
all areas of civil construction and is committed to provision of innovative and technology
based construction solutions.

Contract and Procurement Management 3
Our partnerships with both clients and other service providers enable us to achieve
high levels of customer satisfaction through meeting their enabling them to meet their
objectives. Furthermore, we employ unique and flexible project management systems which
facilitate positive outcomes regardless of the scope of the project. Our core services include
construction management, project building like hospitals, schools, commercial, residential
and industrial projects, client representation in estimation, scheduling, quality assurance, cost
control and procurement. Most of our clients include corporate contractors, financial
institutions, construction consultants, facilities managers and investors and they prefer to
work with us because of our expertise in managing budgets, risk, performance, scheduling,
quality and integrated risk management.
The Central Queensland University Project
Construction Projects generally involve interrelated activities determined by the
elements of budget, specific scope and a work schedule in order for strategic goals to be
realized. Managing a project of the CQU’s scale require planned and controlled execution
through professional teams (Shadan, 2012 p.3). When the customer is not capable to commit
individual time and resources it is advisable to enter a contact with a professional consultant
for the smooth delivery of the project. Construction project management entails direction and
supervision of a project from its developmental stages to its completion and aims to ensure
client satisfaction in terms of functionality and budget. Clients seek services in construction
project management for the technical expertise and parameters such as budget and execution.
Characteristics of a Project
A project such as the one anticipated by the university is characterized by its scope,
budget and schedule ( Wilson, 2015 p.21). The CQU has allocated a specific amount of
money to be used for the construction of the four elements, namely the main lecture building,

Contract and Procurement Management 4
computer and engineering laboratories, a motel and a conference hall and within a specified
time frame, precisely January 2020. The lifecycle of contract management involves a process
of efficient management of the contract to maximize the performance and minimize risk. The
project schedule involves the plan, do, check process which defines the time cycle that the
project will take from the beginning to the end and includes project initiation, planning,
design, construction, commissioning and handover. Scheduling also entails a breakdown of
work into manageable activities that aim at enabling the scope of every deliverable
achievable. Unlike schedules, the scope is determined by the specific requirements of each
element. For instance the bills of quantities (BQ) for an element such as the motel will be
very different from the estimates for the conference hall. The operational needs, level of
service and regulatory requirements must be considered. The specifications for the
engineering laboratory must be subjected to authorization and adherence to regulatory
standards unlike some other elements like the lecture building. The scope is prone to change
with the availability of new information throughout the project life cycle but refinement of
the scope is acceptable during the course of the project implementation, as opposed to slope
creep, which essentially changes the trajectory of the project through variation of BQs and
design modification hence alteration of the quality of deliverables.
Budgeting involves allocation of financial resources for a particular project. Funds are
always limited and a budget defines the funding requirements using the estimations at the
start of the project’s first phase and keeps refining with the definition of the scope. It must be
informed by the analysis of the project design and through the life cycle of the project and
often managers may want to draw the project budgets early in the life cycle of the project but
this may occasion significant variations in the funding. Therefore budgeting personnel ought
to factor in all aspects after all preliminary studies are completed.
The Lifecycle of the CQU Project

Contract and Procurement Management 5
The project idea is informed by strategic planning that involves the university’s need
to expand its facilities for improving quality of service provision and meet the growing
demand of the expected increase in student population. The projects elements planned are
time specific and intend to achieve strategic objectives within the defined lifecycle (Dixon et
al., 2018 p.204). The CQU’s authorization comes through their board resolution to hire
PPMP20011 consultants to implement the project. The following phase involves discussion
about the scope and the costs involved. A feasibility study will be conducted that will give
way to formulation of project designs, environmental impact assessment and evaluation of
available alternative plans and designs. There will be instances where the phases of the
project life cycle may overlap and it is in these cases where considerations of alternatives will
come to play (Eadie, 2013 p.147). The design phase for example will be involved with
analysis; definition and validation of the preferred option to enable the project team devise
the scope, budget and the schedules. Once these are achieved, the design phase will continue
to finalize the design details giving the elaborate features which shall be used as a baseline to
enable the contractor and other agencies develop construction drawings and specifications to
allow project building commencement. The construction phase will initiate a bidding and
award process aimed at integrating the input from the operations, civil works, technology
provisions, equipment supplies and monitoring and evaluation teams. The commissioning
phase is meant to certify and signify the completion of the project. In the course of project
delivery, there are several methods that are used to assign phased tasks to a single contractor.
This project will adopt the Design, Build, Operate, Maintain method (Miller, 2013 p.621) and
all the operations and maintenance of the contractual obligation will be assigned to
PPMP20011 Company.
The role of Construction Management

Contract and Procurement Management 6
As soon as the project designs are completed, the project manager, in this case the
CQU management chooses a contractor, who in this case is PPMP20011 Company through a
competitive bidding process. Methods of choosing a contractor include the “low-bid
selection” method, “best- value selection” and “qualification based selection” (Esmaeili et al.,
2013 p. 116). PPMP20011 Company was awarded the contract through the “best value
selection” given the scope, timelines and the budget presented by the university. The
functions of the Central Queensland University in this project shall be spread across the four
elements defined in the scope of the project but primarily includes specifying the project
goals and generation of the scope, schedules, budget allocation and choosing the project
implementers. The institution also has the mandate of liaison with the project contractor to
ensure effective acquisition of equipment and manpower resources.
The contractor is charged with coordination and management of the operations
including contract planning, estimations, designs, and construction works during the project
life cycle (Ranns & Ranns, 2016 p.99). All the times there must be constant, solid and
effective communication between the university management and the contractor . The
contractor also takes care of negotiating estimates and compiling the budget, arranges work
schedules and timetables, use the most suitable construction methods and strategies, update
the client on a regular basis for all work and budget related issues, discuss technical details of
the project with technical expertise, monitor and supervise the construction workers on site as
well as collaborate with construction specialists.
Analysis and Best Procurement Route for the Case Study
There are four procurement routes namely, traditional or conventional route, design
and construct, design and manage and management contract methods. The design and build
contracts are direct contracts which are normally competitive. The contractor packages the

Contract and Procurement Management 7
deal for the client and develops the project for the client. It is at times called the turnkey
contract type. It involves the concept of build Own operate transfer where the contractor
handles all the procurement and construction management of the project and only hands over
the complete project to the client once it has been commissioned. Design and manage a
contractor works as a consultant. Traditional or lump sum contracting involves both the
contractor and the owner where the project owner has a part to play in the execution of the
contract. Each of the parties handles some parts of the works elements. It is sequential in
nature. Management contracting or the fee management contracts are prime cost contracts
and involves components of construction management through management contracting.
In the traditional route the client typically develops the design scheme which details
the drawings and specifications of the project either internally or through a consultant without
the input of a contractor. He then seeks the expression of interest from contractors through a
prequalification process. Once the contractor is awarded the contract it is price based to
provide continuity, the consultant who designs the project is involved in the management to
offer continuity. The advantages of this method includes the fact that competition of the
bidding contractors achieves the minimum cost due to use of the lowest bidder. The price is
the main determinant after other criteria has been met. The client gets what he wants because
the designs belong to him and therefore there is no financial outcome. However the method
has the disadvantage of getting the wrong deliverables if the client gives wrong
specifications. Since there is no contractor input in the design phase, the cost of the contract
may be inflated once on the ground. Traditional contracts take long to execute.
In design and build contracts the client engages an organization with construction and
management capacities to design and construct the projects on their behalf (Turner & Turner,
2014 p.381). The contracting organization is usually the one that takes up the procurement
functions for the project. Contractors self certify for both design and construction works and

Contract and Procurement Management 8
the client’s role are reduced to audit. Project time is shorter therefore the client is able to get a
return on his investment sooner. The contractor has a much stronger input into the design of
the project and administrative costs are drastically reduced through the single point of
contract. There are little engagements with the client hence no space for arguments on who to
take responsibility for performance. Risk is transferred to the contractor giving the client
greater price certainty. The client on their part must give the contractor clear requirements
specifications on the scope of the project. Any changes to the contractual specifications after
singing of the contract will result in more costs to the project. Therefore it is advisable for the
client to have minimal interaction with the contractor during the project execution cycle. The
contractor takes the fit for purpose liability to ensure a professional job is done.
Contractor designed price based contracts are ideal in the following situations; first
the client wants a high price certainty, second the project timeframe is limited and lastly the
contractor is entrusted to manage and build the project. The downside to this is when the
client initiates changes within the lifecycle of the project. Usually a preferred contractor is
chosen through a process which is based on quality and price as well as a consideration for
design. Changes that may cause price variances are agreed upon during the design stage.
Management contracts are those contracts in which the client hires a contractor as a
management consultant for a fee. In this case contractor’s role is limited and the physical
components of the contract are price based lump sum. There is a lot of bureaucracy in the
management because of different levels of role duplication and to avoid this it requires a
trusted contractor to hire, as well as a clear description of roles besides agreeing on the
degree of checks and balances. Management overheads inflate the benefits of the project
unless it is huge in scope. Management contracts are either construction management based
or management contracting based. There is lack of ambiguity between the professional aspect
of management and the contractual position of the construction manager. The client has a role

Contract and Procurement Management 9
to play in this type of contract and as a benefit of this payments are processed faster. Direct
communication with the client enables specialized inputs from contractors on arrange of
works items. This type of contract allows variations to be introduced within the contractual
framework. Management contracting is suitable where the project involves several specialist
contractors and in situations where the client doesn’t have sufficient resources to manage the
project by themselves.
The Ideal Contract Type
There are four types of contracting the client can choose from including fixed
contracts, cost reimbursable or cost plus, time and material and labor hour contracts. Fixed
price contracts are preferred by government and corporate organizations because they push
risk liability to the contractor. The contract price is not adjustable and the contractor controls
costs giving the client minimum administrative burden. The fixed fee contract type gives a
price that is not adjustable during the contract period. Maximum risk is placed on the
contractor while giving him all the incentives of controlling costs and performing works. It
relieves the administrative burden from the client. Since the requirements are clearly defined,
the other forms of contracting cannot be applied here clearly.
Since the institution has a budget cap and the project is to be completed within a
defined time frame specifically by end of 2019, the most ideal type of contract to have is a
fixed price contract.
Justification
The fixed price type of contract is most ideal in this situation because the scope is
properly defined. The risk on the time constraint in transferred to the contractor. Quality of
the contract is charged on the contractor because the client does not have the required

Contract and Procurement Management 10
expertise to oversee the execution of the contract. The cost is predetermined and in this case
any change of pricing will affect the overall performance of the contract. A change of orders
in this contract will not suffice because the requirements and design specifications are
defined at the design stage and it may result in a budget explosion and or change of the scope.
Among the four procurement options including the traditional, design and build,
management contracting and public private partnership methods, the most method to suite the
need of CQU is design and build because it gives the client a single point of contact (Whyte,
2014 p.157). It also shortens the contract duration through minimal time used during bid
processes and due to the fact that both design and construction can run concurrently hence
reducing the project duration. Furthermore the method allows the client to work directly with
the contractor and valuation is in the hands of the contractor.
Risks
The buyer and seller agree on a determined project cost and the biggest risk is
apportioned to the seller or contractor because of the risk of non performance or that of
increased project costs. On a descending risk analysis the fixed fee contracting has the lowest
risk to the buyer while it is high on the seller because the requirements are already reliably
determined. The types of risks that are likely to impact on the project include budget risks
which are deviations and variations on the original budget, event risks which constitute
internal and external forces that may impact on the output of the project team beyond its
scheduled period and scope of work like weather changes, another risk type constitutes scope
risks where there are notable changes to the scope owing to external factors such as the
community interference (Greiman, 2013 p.269). A sudden change of the original scope will
increase the risk for both the buyer and the seller and it is therefore safe to stick to the
original scope.

Contract and Procurement Management 11
After identifying the risks, the project team should rank them according to their
probability of occurrence together with their cost implication which should enable them to
generate a risk management plan to enable mitigation measures to be implemented.
Budget Estimates for the Sub-projects
The Main Lecture Building The contractor will build a new lecture building with classrooms
that can accommodate 300 students. It shall be a three storey structure fully furnished and
equipped with modern learning environment facilities. International Health and Safety
standards must be adhered to. It is estimated to cost USD. $ 190,520,000.00
The Conference Hall The CQU proposed the construction of an ultra modern conference
hall. The convention centre will conform to international standards of conference facilities
and should have a capacity of 250 people. It is estimated to cost USD. $ 411,620,000.00
The Motel Visiting students as well as staff will have accommodation at the motel which will
have a capacity of 50 rooms. The facility will provide all hospitality services available in a
five star hotel. It is estimated to cost USD. $ 190,520,000.00
The Computer and Engineering Laboratories The two facilities must be a hallmark of
innovation and technology. The computer laboratory will be an information technology hub
complete with modern technology equipment for both computer software and hardware
engineering. It will conform to international standards while the engineering laboratory will
be an essential component of CQU’s leading role in nurturing globally recognized
engineering professionals. It will be installed with engineering equipment for practical
learning in the course. It is estimated to cost USD. $ 135,520,000.00.
The total cost of the project will be USD. $ 928,180,000.00

Contract and Procurement Management 12
BUDGET FOR CENTRAL QUEENLAND UNIVERSITY PROJECT
(Amount Quoted in 10,000' US Dollars)
ELEMENT
PROJECT ITEM
MAIN
LECTURE
BUILDING
COMPUTER
AND
ENGINEERING
LABORATIRIES MOTEL
CONFERENC
E HALL TOTAL
Project Initiation
$
200.00
$
200.00
$
200.00 $ 200.00
$
800.00
Planning and
Funding
$
1,000.00
$
2,500.00
$
1,000.00 $ 500.00
$
5,000.00
Environmental
Impact Asessment
$
10.00
$
10.00
$
10.00 $ 10.00
$
40.00
Design
$
500.00
$
1,000.00
$
500.00 $ 500.00
$
2,500.00
Regulatory
Permits
$
10.00
$
20.00
$
10.00 $ 10.00
$
50.00
Real Property
Acquisition - - - - -
Bidding & Award - - - - -
Comisssioning
$
2.00
$
2.00
$
2.00 $ 2.00
$
8.00
Operations
$
10.00
$
10.00
$
10.00 $ 10.00
$
40.00
Construction
$
17,320.00
$
37,420.00
$
17,320.00 $ 12,320.00
$
8,438.00
Grand Totals
$
19,052.00 $ 41,162.00
$
19,052.00 $ 13,552.00
$
92,818.00
Procurement Concessions
A concession is an agreement which grants rights to a contractor to gain access to a
facility to provide a service, just e like in this case the university has entered a concession
with the PPMP20011 Company to perform construction works on its behalf. The concession
entered in this case transfers all the operating risk to the contractor including demand and
supply of risk and exposures prevalent in the market at the time of the contract (Bovis, 2016
p.562). Determination of whether a concession amount takes count of all indicative factors is

Contract and Procurement Management 13
done on a case by case approach. Chances of the concessionaire exploiting the concession
cannot suffice since there is no economic risk unless there is evidence of the same.
Conclusion
Public procurement mirrors the expectations of the public for high standards of
management aimed at improving performance with or without influence from political and
stakeholder interests. There is no clear cut model of best practices in the management of
public procurement. Disparities exists from one jurisdiction to the next on procurement
policies and in others, regulation structures are not visible due to the differences in
understanding and interpretation of procurement management. Contractual risks cannot be
quantified as risk determination is based on skewed experiences that are attributed to a
number of factors.

Contract and Procurement Management 14
Reference List
Bovis, C. ed., 2016. Research handbook on EU public procurement law. Edward Elgar
Publishing.
Brewer, J.L. and Dittman, K.C., 2013. Methods of IT project management. Purdue University
Press.
Clough, R.H., Sears, G.A., Sears, S.K., Segner, R.O. and Rounds, J.L., 2015. Construction
contracting: A practical guide to company management. John Wiley & Sons.
Dixon, T., Connaughton, J. and Green, S. eds., 2018. Sustainable futures in the built
environment to 2050: a foresight approach to construction and development. John
Wiley & Sons.
Eadie, R., Browne, M., Odeyinka, H., McKeown, C. and McNiff, S., 2013. BIM
implementation throughout the UK construction project lifecycle: An
analysis. Automation in construction, 36, pp.145-151.
Esmaeili, B., Franz, B., Molenaar, K., Leicht, R. and Messner, J., 2013, January. A review of
critical success factors and performance metrics on construction projects.
In Proceedings of the 4th Construction Specialty Conference
Greiman, V.A., 2013. Megaproject management: Lessons on risk and project management
from the Big Dig. John Wiley & Sons.
Heldman, K., 2018. PMP: project management professional exam study guide. John Wiley &
Sons.
Miller, J.B., 2013. Principles of public and private infrastructure delivery (Vol. 101).
Springer Science & Business Media.

Contract and Procurement Management 15
Mogos, R.I., Bodea, C.N., Stancu, S., Purnus, A. and Dascalu, M.I., 2018. Educating Project
Managers to Deal With Project Risks: Improvement of the Educational Programmes
Design by Using Curriculum Management Systems. In Global Business Expansion:
Concepts, Methodologies, Tools, and Applications (pp. 1606-1632). IGI Global.
Powell, G., 2016. Construction Contract Preparation and Management: From Concept to
Completion. Macmillan International Higher Education.
Ranns, R.H.B. and Ranns, E.J., 2016. Practical construction management. Routledge.
Shadan, K., 2012. Construction Project Management Handbook: March 2012 (No. FTA
Report No. 0015).
Turner, D.F. and Turner, A., 2014. Building contract claims and disputes. Routledge.
WILSON, R. (2015). Mastering project time management, cost, control, and quality
management: proven methods for controlling the three elements that define project
deliverables. http://proquest.safaribooksonline.com/?fpi=9780133840339.
Whyte, A., 2014. Integrated design and cost management for civil engineers. Crc Press.