Detailed Report: Construction Procurement for Ajax Apartments

This report delves into the complexities of construction procurement, focusing on the Ajax Apartments project. It outlines the crucial steps involved in selecting architects and contractors, emphasizing the importance of track records, background checks, certifications, quality, and cooperation. The report explores various funding methods, including client and vendor financing, and provides guidance on negotiating payment terms. It highlights the significance of accurate cost estimation, covering direct and indirect costs, and presents different estimation methods like analogous and bottom-up estimating. The report emphasizes the need for strict budgets and timelines, and the importance of considering various factors to ensure project success. It provides a comprehensive overview of the procurement process, offering valuable insights for successful construction project management.

Abstract
Construction procurement is usually a complex process that involves several professionals.
Each of the parties is expected to play a significant role in the success of the project.
Selection of the right architect for the project is usually a multi-step process starts with the
establishment of the criteria for evaluation all the way to the contract. The project design will
be the responsibility of the project manager. The project manages will be expected to
communicate with the client regarding the project update in terms of the progress. Just like
any project of the construction, there will be a need for the accurate estimates for the process
to be successful. Ajax must consider these requirements for the apartment construction to be
successful.

Introduction
Just like any other engineering or construction work, the building of apartments requires
experienced professional whose duties are coordinated to realize a common goal. Although
the client will always be treated as the ‘boss" in such activities, he/she must be advised
accordingly on the procurement process1. Ajax seeking the advice of a professional in regard
to the construction work which is yet to be undertaken is an indication of compliance with the
ethical requirement that will not only ensure comfort within such structures but also
guarantee the safety of the occupants.
Methods of choosing architects and Contractors
Contractors
Choosing the right contractor should be considered as one of the priorities for Ajax since it
will affect the shape and the nature of the proposed commercial unit. In order to realize the
dream of a perfect commercial unit, Ajax Should considers the following points:
Track records
There will need to consider the track records of the shortlisted contractors. It is from the track
record that a proper idea about the contractor's experience will be obtained2. The past projects
will be evaluated so as to know the quality of the work that the contractor has done before.
Other factors may be considered in case the contractor is new in the field.
Check of the background
It will be considered appropriate to check the background of the contractor by sharing with its
former clients as well as getting their review. Getting in touch with the local authorities in
1 Barasa, H.W., 2014. Procurement practices affecting effective public projects implementation in Kenya: a case study of Kenya Civil
Aviation Authority. European Journal of Business and Management, 6(6), pp.49-67.
2 Chakravarthi, I., 2013. Medical equipment industry in India: Production, procurement, and utilization. Indian journal of public
health, 57(4), p.203.

order to find out the existence of any kind of complaints will be very important including
being embroiled in any legal confrontations. The credit reference of the contractor must be
known considering that poor or bad credit may translate into the construction delay.
Checking for the certification
The chosen contractor must have all the required licenses and certification it will be more
preferable for Ajax to consider contractors with the ISO qualification.
Quality
The contractor chosen will be trusted based on the quality of the material chosen for the
construction. This will go alongside the quality of the workmanship. It is important to note
that severe consequences usually characterize poor quality work.
Cooperative
A contractor who is very cooperative and is open to ideas through suggestion contribution
will be a very good asset. This basically implies that the selection of experienced contractors
by Ajax will assist in the generation of very valuable ideas based on the experience years.
This will be extremely beneficial to the commercial unit3.
Contractor’s insurance cover
This wills one of the most important criteria to consider in the contractor selection. Ajax must
ensure that the selected contractor is properly covered with liability as well as damage
insurance against the accidents at the sites together with the unforeseen events. This will go
alongside discussing the payment terms4. It would be preferable for Ajax to agree on the
payment of 25% as the deposit whiles other payments to be made as the project progresses.
3 Hufbauer, G. and Moran, T., 2017. 10 Government Procurement in US Trade Agreements. The Internationalization of Government
Procurement Regulation, p.288.
4 Lewis-Faupel, S., Neggers, Y., Olken, B.A. and Pande, R., 2016. Can electronic procurement improve infrastructure provision? Evidence
from public works in India and Indonesia. American Economic Journal: Economic Policy, 8(3), pp.258-83.

Architect Selections
Selection of the right architect for the project is usually a multi-step process starts with the
establishment of the criteria for evaluation all the way to the contract.
Establishment of the criteria for evaluation
This particular criterion will be used in the evaluation of both generation information on the
background of the architect, his experience and specific proposal.
The perspective of the architects will be identified while considering sources touching on the
project done in the area before. Architect’s contact will be obtained in regard to the
information available on the interview setups. It will be necessary to review the qualification
of the materials in use before developing a list5.
Ajax through its professional team will be required to conduct intensive interviews while
using evaluation criteria in guiding and developing preliminary ratings. In most cases, it has
been found out that just one architect may not completely satisfy all the criteria of evaluation.
Block apartment is regarded as one of the specialized design in the construction field which
cannot be handled by junior professionals. Such specific experience is not easy to come by.
Ajax must consider organizing a mentor program to the selected architect in order to improve
on his/her operation efficiency.
Funding
For most of the entrepreneurs, funding a project or getting money to be used in starting a
business is one of the aspects that are most challenging. This aspect is actually hard. Ajax
may consider one of the two great ways of project funding that are rarely discussed: clients
and vendors. Both clients and vendors can be a great and potential source of project funding.
5 Liebman, J.B. and Mahoney, N., 2017. Do expiring budgets lead to wasteful year-end spending? Evidence from federal
procurement. American Economic Review, 107(11), pp.3510-49.

This will only work effectively when there is a proper approach. Getting of the finances from
the clients is not usually easy although it is possible to get funding from the clients who are
very cooperative and ready to come in during the process of the project handling6.
In this particular case, the assumption made is that the company of Ajax is the client itself.
Financing of the project will include a request for the prepayment for the specific orders to be
handled. It is after the payments are made by the client that the business may get funds that
are required to make it run. The funds will, therefore, be used effectively to ensure that the
project is completed on time. The concerned parties will, therefore, be restricted to ensure
that the funds are used specifically for the projects objectives and anything else. In case Ajax
decides to fund the project through these mechanisms or arrangements, there must be proper
reasons for the project prepayment7. This option will only be considered under the following
conditions:
 The services offered are extremely unique
 The expected market potential or the business will be potentially good in terms of its
proceeds at the start.
For example, Ajax may decide to collect money from the tenants who intend to have retail
shops in terms of the goodwill payment and later use this money to fund the project. This
would mean that the retailers must have been convinced with their personal reasons that the
business will surely prosper in the area. In case the clients are not convinced that such
favorable conditions are not in existence then the products will definitely not meet the
threshold value for consideration hence prepayment will not be an option in this case. In such
6 Loader, K., 2015. SME suppliers and the challenge of public procurement: Evidence revealed by a UK government online feedback
facility. Journal of Purchasing and Supply Management, 21(2), pp.103-112.
7 Mahmood, S.A.I., 2013. Public procurement system and e-Government implementation in Bangladesh: The role of public
administration. Journal of Public Administration and Policy Research, 5(5), pp.117-123

cases, Ajax should consider approaching a competitor who is in apposition to provide similar
services and offer payment terms of 30-60 days8.
Using the option of client funding approach, the contractor will be expected to remain
responsive on several issues including the careful treatment of the prepayment made. This
means that the contractor must consider getting prepayment as a privilege that should not be
abused. The contractor will be expected to demand prepayment from Ajax under the
following condition:
 Take payment when they are 100% sure of making deliveries
 Use the availed funds specifically and exclusively in the product delivery/adequate
and satisfactory service to the client
 In case deliveries are not made, the money must be returned
 Alert the client on issues that may negatively impact delivery.
Alternatively, the PLC Company may consider negotiating terms of payment with the
suppliers. In this arrangement, the services and the products are delivered promptly but they
will wait for 30 to 60 days to have the vendor’s invoices paid9. This is commonly referred to
as “vendor credit.” Choosing this particular option would allow for the construction project to
continue even with the delayed payment. Should the company consider taking this route; the
cash flow will be improved. It will also allow for the effective use of money. Ajax must write
to the vendors asking for the credit in advance almost 30 days prior.
Selecting the best Method for Contractor Pricing
8 Naoum, S. and Egbu, C., 2015. A critical review of procurement method research in construction journals. Procedia Economics and
Finance, 21, pp.6-13.
9 Rickard, S.J. and Kono, D.Y., 2014. Think globally, buy locally: International agreements and government procurement. The Review of
International Organizations, 9(3), pp.333-352.

Just like any project of the construction, there will be a need for the accurate estimates for the
process to be successful. Alongside strict budgets and timelines, the project client should
consider having estimates will ensure that milestones are hit on time as well as being within
the range of the budget. Although there are usually very many variables of the projects that
are unknown, the ability to forecast the cost needed as well as the resources will finally set up
good grounds for success10. One of the important factors that Ajax must consider is the
understanding of different categories as well as costs that will be involved. The costs are
classified as direct and indirect. The direct costs will include the payments made for
equipment fuel, wages among others while the indirect payment will include the specific
payments made to the utilities, securities among others. There are several methods that may
be used in the estimation of the price of the contractor including:
Analogous Estimating
This kind of estimation is also called top-down estimate. This kind of estimation process will
involve analyzing the data of the project so as to properly develop the estimate for the
expected projects. The basis of this method will be reliance on the archive of the similar
projects that had been done before. Ajax should only consider this method if there is a similar
project that had been admired before. As a performance-based approach, the deliveries will
be the same as the project under comparison. It will be cost effective since the trend or
pattern of expenditure is predictable11.
Bottom-Up estimating
10 Sargiacomo, M., Ianni, L., D’Andreamatteo, A. and Servalli, S., 2015. Accounting and the fight against corruption in Italian government
procurement: A longitudinal critical analysis (1992–2014). Critical Perspectives on Accounting, 28, pp.89-96.
11 Sikka, P. and Lehman, G., 2015. The supply-side of corruption and limits to preventing corruption within government procurement and
constructing ethical subjects. Critical Perspectives on Accounting, 28, pp.62-70.

This is also referred to as analytical estimating. This particular method involves the division
of the project deliverables in a series of the packages of work that translates into a series of
tasks. The basis of this method is to ensure the estimation of the total costs that are needed for
the completion of the total cost through summing up the cost of completing every individual
task. This technique is considered to be one of the most accurate despite the fact that it
consumes a lot of time. For accuracy purposes, the client may consider using it. Although
there is uncertainty in the market as indicated before by Ajax, breakdown of the project will
allow issues to be addressed on the priority basis.
Parametric estimating
In case the company chooses to work with this method of the cost estimate, the project will
be divided into the units of work before the cost of every unit can be determined. The number
of the units will be multiples by the cost per unit so as to obtain the entire cost of the project.
This particular method, however, is recommended for those projects that are repetitive in
nature. It may not be necessary for consideration by Ajax.
Having considered the above options, Ajax should employ the use of analogous estimation
because of its overwhelming advantages.
Supply Chain Integration
Considering the requirements for the construction of the apartment, the requirements can be
summarised as shown below

Ajax should consider measurement of time so as to assist in the detection and analysis of the
time buffers as part of the process of the supply chain which will include sand excavation as
well as delivery, fabrication and element delivery and finally site installation.
It will be important for the client to show the outcome of the analysis of time that is used
along the process so as to get the insight in the build-up of time, location of the time buffers
and finally the magnitude12. The method to be used should include decomposition of the
major operation lines in sub-processes and measurements of the activities time allocation.
The time used for every activity should be categorized including non-value adding, wasted,
value adding, quantifying and locating time buffer. It will be realized towards the end of the
project that; towards the commencement period as well as the end of other sub-processes
delays occurred which will result in remarkable time buffer as well as inventory. The key
problem of the time buffer will, therefore, include separate planning. It is only by addressing
the issue of proper planning that the project will be delivered on time.
Responsibility allocation for the design
The project design is one of the initial steps that every successful project must embrace. It
involves the strategic organization of ideas, processes, and materials for the purpose of
achieving the project goal. In order for Ajax to realize the dream of proper apartment
construction, the responsibility of this process should be allocated to the project manager.
The project manager will be expected to rely on good design in order to avoid failure as well
as provide parameters to be used in the maintenance of the crucial aspects like the budget and
the schedule. This should involve the creation of the project plan which will center on the
client's needs. The will this be used in the management of the project with its copy being
shared with the client.
12 Simcoe, T. and Toffel, M.W., 2014. Government green procurement spillovers: Evidence from municipal building policies in
California. Journal of Environmental Economics and Management, 68(3), pp.411-434.

Responsibility allocation for construction work allocation at the site
In order to ensure that the processes run smoothly, there will be a need for the construction
project coordinator whose responsibility will include looking after the projects of the building
from the start of the project to the end13. The coordinator will be charged with the
responsibility of ensuring that the building plan as given by the architect and approved by the
client is built within a specific time frame and budget.
Conclusion and Recommendation
All the projects usually experience financial constraints. Also, the success of the project will
depend on the commitment of the contractor. Pricing of the contractor's payments should,
therefore, take an approach of analogous estimation. The basis of this method will be reliance
on the archive of the similar projects that had been done before. Ajax should only consider
this method if there is a similar project that had been admired before. As a performance-based
approach, the deliveries will be the same as the project under comparison. It will be cost
effective since the trend or pattern of expenditure is predictable.
In order to ensure cash flow in the project, Ajax should consider using the supplier funding
approach. This will ensure that the materials are supplied are in the required quantity, quality
and within the specified time.The chances of the project stalling and contractor abandoning
the site will be minimized.
While selecting the architect and the contractor, the track records must be traced to determine
the anticipated quality of work. This will include evaluation of the qualification against the
standards laid down by the certification bodies including the ISO standards. Ajax should
consider the quality of the work at the expense of the cost. This will not only reduce the
maintenance costs but make the building safe for use. The materials will, therefore, be
13 Snider, K.F., Halpern, B.H., Rendon, R.G. and Kidalov, M.V., 2013. Corporate social responsibility and public procurement: How
supplying government affect managerial orientations. Journal of Purchasing and Supply Management, 19(2), pp.63-72.

acquired at whatever cost and experienced contractor and architect should be hired at their
charging fee.
The allocation of the responsibility of construction work must be done by experienced and
competent individuals. The competence of individuals may be confirmed through intensive
interviews. This should go alongside the establishment of the proper planning that will ensure
that the project runs smoothly. The coordinator will be charged with the responsibility of
ensuring that the building plan as given by the architect and approved by the client is built
within a specific time frame and budget14.
The project design will be the responsibility of the project manager. The project manages will
be expected to communicate with the client regarding the project update in terms of the
progress.The project manager will be expected to rely on good design in order to avoid
failure as well as provide parameters to be used in the maintenance of the crucial aspects like
the budget and the schedule. The two professionals will be expected to complement each
other in the activities during the entire period of the project. It will be his role to ensure that
quality health and safety standards are adhered to and therefore commence should not be
compromised during recruiting
The supply chain integration is expected to be a lineally described process that will indicate
the project variables. The contractor should consider communicating every stage of this kind
of work to the client with the utmost due diligence. It's only through this mechanism that
Ajax will ensure the proper and timely delivered process
References
14 Wamae, J.W., 2014. Role of the procurement function in enhancing performance in
devolved government: A case of Machakos County. International Journal of Social Sciences
and Entrepreneurship, 1(11), pp.168-190.

Barasa, H.W., 2014. Procurement practices affecting effective public projects implementation
in Kenya: a case study of Kenya Civil Aviation Authority. European Journal of Business and
Management, 6(6), pp.49-67.
Chakravarthi, I., 2013. Medical equipment industry in India: Production, procurement, and
utilization. Indian journal of public health, 57(4), p.203.
Hufbauer, G. and Moran, T., 2017. 10 Government Procurement in US Trade
Agreements. The Internationalization of Government Procurement Regulation, p.288.
Lewis-Faupel, S., Neggers, Y., Olken, B.A. and Pande, R., 2016. Can electronic procurement
improve infrastructure provision? Evidence from public works in India and
Indonesia. American Economic Journal: Economic Policy, 8(3), pp.258-83.
Liebman, J.B. and Mahoney, N., 2017. Do expiring budgets lead to wasteful year-end
spending? Evidence from federal procurement. American Economic Review, 107(11),
pp.3510-49.
Loader, K., 2015. SME suppliers and the challenge of public procurement: Evidence revealed
by a UK government online feedback facility. Journal of Purchasing and Supply
Management, 21(2), pp.103-112.
Mahmood, S.A.I., 2013. Public procurement system and e-Government implementation in
Bangladesh: The role of public administration. Journal of Public Administration and Policy
Research, 5(5), pp.117-123.
Naoum, S. and Egbu, C., 2015. A critical review of procurement method research in
construction journals. Procedia Economics and Finance, 21, pp.6-13.
Rickard, S.J. and Kono, D.Y., 2014. Think globally, buy locally: International agreements
and government procurement. The Review of International Organizations, 9(3), pp.333-352.