Construction Procurement Strategies and Risks

This assignment delves into the complexities of construction procurement strategies. It analyzes various strategies, highlighting their advantages and disadvantages while emphasizing the importance of risk identification and mitigation. The influence of external factors like economic conditions, technology, and social norms on strategy selection is also discussed. Furthermore, the assignment considers internal factors such as client resources, project characteristics, and flexibility levels when choosing a suitable procurement approach.

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PROCUREMENT REPORT
STUDENT:
INSTITUTION:
DATE:

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Executive summary
The report describes the characteristics of the modern types of building procurement with an
elaborate highlight of their advantages and disadvantages to help the clients to make informed
decisions for their project. It starts b introducing the field of procurement, its current situation
and the regulations of this industry. The next part describes systems characteristics of design and
constructs strategy followed by the management procurement and the collaborative procurement
with their respective advantages and disadvantages. The conclusion gives a recap of the essay
stating out the factors that will influence the choice of the strategy which will be appropriate
depending on the needs and objectives of each individual client.

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Contents
Introduction....................................................................................................................................4
Procurement strategy....................................................................................................................4
Design and construct procurement..............................................................................................5
Management procurement system...............................................................................................7
Management contracting.............................................................................................................8
Construction management...........................................................................................................8
Design and manage......................................................................................................................9
Collaborative procurement system............................................................................................10
Conclusion....................................................................................................................................12
References.....................................................................................................................................13

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Positive and negative aspects of different procurement methods for construction projects
Introduction
The methods of procurement have not been modified considerably through the past 20 years.
Although, overruns of costs and time still remain prevalent through the whole industry. Disputes
have often arisen and in an action to lower these incidents of cost and time overruns,
procurement methods like alliancing and partnering have been recently advocated. However, not
all procurement methods for projects of particular types because the priorities and objectives of
clients often differ invariably. The choice of a procurement system arises from an effective
match between the objectives of the clients and their priorities. It is an essential requirement that
all the characteristics of several procurement methods. The methods of selection that are
available should be properly understood by the clients before selection. The report presents the
characteristics of the modern procurement systems discussing their advantages and
disadvantages. The methods are steered by the government guidelines and the Australian Local
Government Procurement Guide and the Western Australian Department of housing and works.
Procurement strategy
Constructing a new building is necessary when there is no other existing building. A situation
where a building already exists and seems that it will meet the needs of the client will only
necessitate adapting or renovating (Roberts, 2010). A project is implemented to deliver the
solutions to the particular needs of the client whether investment, improving efficiency or
expansion. A client can decide to opt for a new building to forego renting, purchasing an existing
structure from real estate and leasing.

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Design and construct procurement
In this system, the contractor will accept some or all responsibility for a design. The contract
states expressly the responsibility accepted to clearly outline the extent of liability. The contract
may state otherwise depending on the objectives and interests of the client and agreed upon by
both parties. Liability in the design and construct procurement system is absolute under which
the contractor will warrant fitness for the intended purposes (McDermott, 2016).
Some forms of this procurement method can limit the liability of the design of a contractor to
ordinary duty as a profession requiring the exercise of ordinary skill and care. When an
independent consultant is engaged by the main contractor do not have liabilities which is higher
than the normal. Liability acceptance in form of indemnification is more likely to be worthless if
not backed by an indemnity insurance cover. It is, therefore, necessary to crosscheck for a valid
cover before the appointment (Sourani, 2012). In most cases, contractors don't have in-house
designers, the identity of external designers who will be used must be established before
acceptance of the tender (Smith, 2013). The requirements of the client are simply a schedule of
accommodation and a site plan clearly demarcating their detailed specification. It is the choice of
the client to restrict the input of the client to take the supplied scheme. He/she will be left with
the task of developing details of the scheme and the production information. It is, however,
advisable for the client to rather specify the performance requirements and leaving the full
responsibility for design and choice to the contractor (Masterman, 2003).
The design and construct method gives certainty about the sum of the contract and also offers
benefits on cost. There is a close integration between this method and the relative freedom which
the contractor has to use their knowledge of the market and purchasing power. These abilities a
competitive price for the client. It is easy to attain a fast start on the site and the ability to

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formulate a closer integration will result in effective programming. However, preparing a
suitable combination of requirements and comparing of schemes of competing tenders will
consume a great deal of time. After signing the contract, further changes by the client will be
implemented (Mohsini, 2013).
Advantages
 There is a reduced need for committing resources and time to contract separate designers
and contractors because the client deals with a single firm.
 A certainty of price is attained before commencement.
 The use of a guaranteed maximum price with the option for savings encourages
innovation to reduce time and cost.
 The time for the project is reduced by overlapping design and construction.
 The input of the contractor in design improves constructability.
client
Design consultant
Sub-contractorcontractor Design consultant
client
Sub-contractor
contractor

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Disadvantages
 The building constructed is functional rather than being prestigious.
 The building is not complex and has reduced technical innovation.
 There is a high possibility of changing scope design.
 A single firm is required for both design and construction.
 Overlapping the design and construction processes are meant to accelerate the project.
Management procurement system
Management procurement covers contracting, construction, design and management.
Management contracting gives the contractor direct links to contract with the work contractors
and is responsible for all the works. Construction management involves payment of a
professional fee to manage a program, develop it, coordinate design and construction and
improve the constructability of the project by facilitating collaboration (Tookey, 2011).
client
Project manager
Contractors and
suppliers
architect Design consultant Quantity surveyor Construction
manager

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Management contracting
The client will employ a professional team which is independent together with a management
contractor who will act as advisers at the preconstruction stages and executors of works when
construction kicks off by the use of direct works contracts (Masterman, 2003). There is an
enabled possibility of making an early on-site leading to achievement of early completion.
Flexibility is increased and the client can change design during progress because matters of
details and the drawings may be adjusted and completed while work is proceeding. The success
of this type of contracting requires trust and collaboration between the client, the contractors, and
consultants. Appointment of the contractor should be done before the outline of the design stage.
His role is to advise on design, tendering, delivery and construction. The contractor submits
written documentation of fees and will be employed after an interview with the design team and
the client (Georghiou, 2007). The fee should include total service as a percentage of total cost.
The service covering preconstruction should not proceed to the site. Work is undertaken on basis
of cost plan, project drawing, and specification. Certainty about program and costs forcing the
client to accept almost all the risks. The works packages will be facilitated by competitive
tenders with bills of quantities as lump sum contracts.
Construction management
A contractor will be carefully selected after payment of management fee. Work contracts are
direct between the works contractor and the client. The client, therefore, has a greater control and
similarly accepts a great deal of risk. The role of the management contractor is to act as an agent
and not to project completion within time and costs (Greer, 2002). The construction management
has the following advantages as listed below.
 Reduced contract variations.

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 It allows overlapping of design and construction.
 Accountability.
 Nominated trade contractors are not necessary.
 Developed documentation.
 Management expertise is involved in management at an early time.
 The split of construction activities and work packaging enhances completion of large
projects.
 The confrontation between the construction supervision team and the design team is
reduced.
Design and manage
The contractor accepts responsibility for works contractors and the design team after being paid a
fee. The contractor manages the organization and creates project design. He manages works and
delivers the project for a fee by employing sub-contractors to for designing and construction. The
consultant for project designing and management is the agent to the client who also obtains sub-
contracts from works contractors through tenders, who will enter into direct contracts with the
client (Dulaimi, 2001).
Advantages of management procurement
 There is flexibility allowing for changes in design.
 The contractor will assume the risk and the responsibility of design and construction.
 The responsibilities, risks, and roles of each party are clear.
 The input of the constructor into design improves constructability.
 Competitive prices that are current are associated with work packages.
 Overlapping of construction and design saves on time.

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 There are an improved collaboration and coordination between constructors and
designers as a result of dealing with one firm.
Disadvantages
 Certainty of price is poor.
 The certainty of price will be attained only after letting the final works.
 The client must be proactive and informed.
 A close control of information and time is required.
 Necessary resources must be committed so that design can be complete.
 The client does not have a direct control over design.
Collaborative procurement system
Also called the relational system, this type of procurement develops and gains strength from the
investigation and perception showing that the industry is fragmented, incapable, adversarial and
ineffective (Dainty, 2007). One firm will, therefore, practice by teamwork and partnering. The
principles in collaborative procurement should be established at an early stage of the project with
the help of independent advisers. The appropriate procedures should be set up and documented.
These activities are done to assist selecting procurement route, contracting and formation of
tender documents (Goulding, et al. 2012). The implementation of the practice should be
discussed in a detailed manner in the pre-contract meetings, start-up meetings of the consultant
teams, the special contractor. The construction strategies of the government public projects to
adopt design and pre-contract type procurement routes and initiatives of private finance since
they are more collaborative. The traditional non-collaborative systems are considered to be
adversarial (Bröchner, 2005).

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Alliancing describes an approach to the management which encourages trust and openness
between the parties involved.
Success requires the parties to be dependent on one another necessitating a change in attitude,
culture, and procedures in the procurement process. It is mostly applicable to projects which are
large, long-term and have a high risk (Maltz, 2002). Strategic partnering involves a multiple-
project relationship whereas the project partnering refers to a specific project. The system has
clear established routes of authority and communication with pre-formed conventions for
preparation and distribution of information. Putting of the contractor and consultant team into a
common target for cost creates joint pain and joint gain thereby creating a financial motivation
(Angappa, 2008). It involves co-location of team members and an initiative for the reward of the
clients’ teams with assessment done on basis of the normal activities. The recognition and
reward system keeps the individuals in the team motivated. Communication is enhanced through
regular team meetings and workshops to develop teamwork. Warning procedures are based at the
start of a problem and resolution is based on the solution. Continuous benchmarking, assessment,
target marking, adaptation, and feedback ensure continued improvement of the building project
(Manley, 2004).
Advantages
 The collaboration will encourage high-quality procurement system to be established and
developed.
 Brainstorming will enable the development of creative solutions at an early stage which
also reduces the costs.
 Consistent teamwork establishes relations and will produce better results.

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 Collaboration integrates the process of design and construction.
 The risks and rewards are shared.
 It helps in the adoption of efficient processes and procedures.
 Emphasis is put on the elimination of duplication which wastes time and resources.
 It forms a pool of resources that is secure.
Disadvantages
 Reduced responsiveness to change.
 Obligations are taken up by the client.
 There is limited flexibility to take up better upcoming solutions.
Conclusion
The client has an open freedom to choose a system that best satisfies his objectives and should
seek the services of an independent advisor. A consideration which should be put in practice is
the identification of all prevalent risks and formulate an early solution to overcome. The factors
that influence the selection of a strategy to selected involve the external factors of economy,
commerce, technology, and the social and legal frameworks. The resources that the client has,
the characteristics of the project and the level of flexibility are significant considerations. Other
considerations will include cost issues and timing.

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References
Angappa, G., 2008. Concurrent engineering: a strategy for procuring construction projects.
International Journal of Project Management, 16(6), pp. 375-383.
Bröchner, J., 2005. Managing information flow in construction supply chains. Construction
Innovation, 5(1), pp. 71-82.
Dainty, A., 2007. Perspectives of UK housebuilders on the use of offsite modern methods of
construction. Construction Management and Economics, 25(2), pp. 183-194.
Dulaimi, M., 2001. Empowering innovative improvements through creative construction
procurement. Engineering Construction and Architectural Management, 8(5), pp. 325-334.
Georghiou, L., 2007. Public procurement and innovation—Resurrecting the demand side.
Research Policy, 36(4), pp. 949-963.
Greer, J., 2002. Partnerships and public procurement: building social capital through supply
relations. Public Administration, 80(3), pp. 503-522.
Jack Goulding, Girma Zawdie, 2012. Construction innovation and process improvement. 7 ed.
New Jersey: John Wiley & Sons.
Maltz, A., 2002. Becoming an" interesting" customer: Procurement strategies for buyers without
leverage. International Journal of Logistics, 5(2), pp. 177-195.
Manley, K., 2004. Key influences on construction innovation. Construction Innovation, 4(3), pp.
143-154.

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Masterman, J., 2003. An introduction to building procurement systems. , .. 5 ed. New York:
Routledge.
McDermott, P., 2016. Strategic and emergent issues in construction procurement. Procurement
systems, 4(1), pp. 3-26.
Mohsini, R., 2013. Knowledge-based design of the project-procurement process. Journal of
computing in civil engineering, 7(1), pp. 107-122.
Roberts, J., 2010. The economics of modern manufacturing: Technology, strategy, and
organization. The American Economic Review, 21(4), pp. 511-528.
Smith, A., 2013. Building procurement. 2 ed. New Jersey: John Wiley & Son.
Sourani, A., 2012. Barriers to addressing sustainable construction in public procurement
strategies. Building procurement, 2(17), pp. 93-107.
Tookey, J., 2011. Construction procurement routes: re‐defining the contours of construction
procurement. Engineering Construction and Architectural Management, 8(1), pp. 20-30.