Analysis of Procurement Methods for Construction Projects - Report

This report provides a comprehensive analysis of three distinct procurement methods commonly employed in the construction industry: traditional procurement, Integrated Project Delivery (IPD), and Alliance contracting. The report begins by introducing the significance of the construction industry and the various procurement methods, providing a detailed description of each approach. It explores the advantages and disadvantages of each method, examining their implications for stakeholders such as clients, developers, consultants, builders, subcontractors, and end-users. A comparative chart is included to highlight the key differences between the three methods. The report concludes with recommendations regarding the suitability of each procurement method for different types of construction projects, offering insights to guide project owners and developers in selecting the most appropriate approach. The analysis is supported by relevant references, emphasizing the importance of informed decision-making in construction project management.

Running head: PROCUREMENT METHODS FOR CONSTRUCTION
PROCUREMENT METHODS FOR CONSTRUCTION
Student’s Name
University Name
Author note

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Executive summary
The purpose of this report is to describe and analyze the advantages and disadvantages of three
different procurement methods including, traditional procurement methods, Integrated Project
delivery and Alliance contracting for construction projects. The report will be describing the
benefits and problems for the stakeholders of the project develop. The report introduces with the
important of construction industry and the different types of procurement methods and describes
each method. Further, it compares and contrasts the procurements methods in a table. Lastly, it
recommends ways and suggests the type of projects suitable for different procurement methods
and concludes the report.

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Table of Contents
Introduction......................................................................................................................................3
Discussion........................................................................................................................................3
Different types of procurement methods.....................................................................................3
1. Traditional procurement methods........................................................................................4
2. Integrated Project delivery...................................................................................................5
3. Alliance contracting procurement method...........................................................................7
Comparison chart of three procurement methods (Love, Skitmore and Earl 2018)....................8
Recommendations............................................................................................................................9
Conclusion.....................................................................................................................................10
References......................................................................................................................................11

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Introduction
The projects for constructions are highly complex in nature and are dynamic. It involves
a group of stakeholders along with various discrete individual members such as investors,
professionals, contractors, manufacturers and others. It also involves large range of
infrastructural facilities such as was disposal, manufacturing, housing, power supply,
transportation, water, power and others which are needed for the construction purpose. The
construction industry has immense power to an exceptional ability to provide the daily needs for
the human beings, it creates employments and investment is generated. Further the construction
industry hugely contributes to the economic growth of the country (Bolpagni 2013). In additional
to that, the government utilizes the construction industry to assist in the economic recoveries
from recessions. Therefore, it is highly essential for the construction industry, to effectively
complete the projects on time, on the agreed quality and on the correct budget. The purpose of
this report is to describe the characteristics of different methods of procurement, its advantages
and benefits and its impact on the key stakeholders such as clients and developer. Further, it
compares and contrasts the different procurement methods for construction and provides
recommendations on the projects that the most suitable for different procurement methods.
Discussion
Different types of procurement methods
Procurement methods are known as the methods which are used by the construction
process for securing a project. It is considered to be a project through which component of

4PROCUREMENT METHODS FOR CONSTRUCTION
design and construction, the roles and responsibilities, procedure of activities, the cost of the
supplies and the labors are combined for completing a construction project.
1. Traditional procurement methods
The traditional procurement methods existed since 18th century. It mainly involves three
different sequential tasks that is design, bid and build. The client leads the projects; it is only the
responsibility of the contractor to build the project (Chan and Chan 2014). The work of
designing and managing the contracts are usually carried out by the engineer or the consultant.
The other activities such as the finance and the operation are controlled by the client. This
procurement method is the most commonly used methods for building works. This method is
considered to be low risk methods since the client themselves takes the financial risks for
construction (De Araújo et al. 2017). Significant variations can be made if required after
appointing the contractor. The traditional procurement methods are considered to be adversarial
because of the separation of design and the construction.
Advantages of traditional procurement methods
 The traditional procurement methods are considered to be competitive and fair. It
involves a highly transparent process (De Araújo et al. 2017).
 The procedures of construction can be used by both experiences and inexperienced
clients
 Significant changes and alterations can be made easily
 The design led of these procurement methods ensures quality.
Disadvantages of traditional procurement methods

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 It involves a sequential process; therefore, the overall project duration is longer as
compared to the other procurement methods (De Araújo et al. 2017).
 The contractor has no input into the design and planning process of the project
 The overall strategy of the project lies on price competition; this can lead to adversarial
relations (Jin Lin et al. 2014).
 This procurement method involves dual point of responsibility as it includes design team
as well as a contractor for the construction purpose.
Benefits and problems for stakeholders
In traditional procurement methods, the construction cost are not certain at the initial stage of the
project development, this might be a problems to the client to set a budget. The owner retains
control over the design and the process of construction which might be a problem to the builders
and the sub contractors (Lam, Chan and Chan 2014). Further, the client is at the risk in case of
non performance by the contractor. The design and construction process are sequential which
might delay the completion of the project (London and Kenley 2011). However, the quality of
the construction is ensured.
2. Integrated Project delivery
The Integrated Project delivery (IPD) is considered to be a new approach of procurement method
in the construction industry (El Asmar, Hanna and Loh 2013). It is an approach which integrates
people, structure, systems, and practices into a particular process which integrates the talent,
skills and insights of all the participants in the project designing and optimizing it. This type of

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procurement method helps to enhance the values of the owners, maximize its efficiency and
reduce the waste in each phase of the project including the design, construction and fabrication.
The entire method of contract consists of mainly three parties that is the owner, the designer and
the general contractor or the builder. However, the contract might include more than three
parties, for example the concrete contractor, the mechanical contractor, electrical engineer,
structural engineer and others (Mesa, Molenaar and Alarcón 2016). The cost of the entire project
is audited separately that is direct and indirect labor burden, office overheads and others.
Advantages of Integrated Project delivery
 It has financial benefits as the financial performance is completely based on the overall
results of the project rather than individual performance.
 It is most suitable for complex types of projects (El Asmar, Hanna and Loh 2013).
 The traditional silos can be excluded as it involves collaboration
Disadvantages of Integrated Project delivery
 Huge amount of investment is required in the initial stage of the project.
 There is a risk of diminishing returns on investments if the project is delayed (Mesa,
Molenaar and Alarcón 2016).
 This type of procurement method requires adequate time and complexity.
Benefits to the stakeholders
This particular procurement method is beneficial for the developers as it ensures increased
transparency (El Asmar, Hanna and Loh 2013). It allows active collaboration with all the
participants in the projects. Each participant or the stakeholders are kept up to date about the

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state of the project as there are frequent meetings to share ideas and experiences. It is an
integrated approach therefore; it is time savings which is beneficial for the clients or the owner.
However, this method requires high level of trust and confidence among the architects,
contractors, owners and the engineers (Mesa, Molenaar and Alarcón 2016).
3. Alliance contracting procurement method
Alliance contracting procurement method involves pure form of alliance and early contractor
involvement (ECI). This form of method involves parties like the government infrastructure
agency, non owner participants, constructor, technical specialists and civil engineer (Jefferies,
John Brewer and Gajendran 2014). This method is a shift from the traditional methods of
procurement and emphasize on collaborative approach and risk allocations.
Advantages of Alliance contracting procurement method (Jefferies, John Brewer and
Gajendran 2014)
 Greater group flexibility is also considered to be one the greatest advantage for this
method.
 Ensures delivery on time and on budget, this enables cost and time efficiency.
 It helps to introduce new and innovative solutions due to collaborative ideas from the
alliances.
 It helps to provide a competitive edge to the practitioners

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 This methods ensures higher productivity rates, loyalty and job satisfaction
Disadvantages of Alliance contracting procurement method (Gransberg, Scheepbouwer and
Loulakis 2015)
 It limits the visibility of a particular individual
 There might be a risk of conflicts of interest
 It requires high level of trust and compromise
 The imbalance of power can increase the tension
Benefits and problems to the stakeholders
The alliance method is highly beneficial for the owner as is ensures a quick start on the projects.
It offers high level of flexibility and addresses the interest of all the participants involved in the
project completion (Jefferies, John Brewer and Gajendran 2014). It is highly responsive to
change, moreover is can be easily adapt difficulties and challenges. All the stakeholders are
involved in the project completion including the direct and the indirect participants. It safeguards
the interest of all the stakeholders involved, thereby improving the project outcomes. However,
the investment cost is high as compared to the other methods of procurement; therefore there
must be a consistent cash flow (Gransberg, Scheepbouwer and Loulakis 2015)
.

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Comparison chart of three procurement methods (Love, Skitmore and Earl 2018)
Traditional
procurement method
Integrated Project
delivery
Alliance contracting
1 The designing and the
construction method
is done in sequential
order
Integrated Project
delivery integrates
people, process,
practice and structure.
There is high level of
synergy among the
partner’s involved
(direct and indirect
partners). It includes
pure alliance.
2 The client or the
developer selects
designer and
contractor to execute
the construction work
Consists mainly of tri-
party agreement that
is owner, designer and
contractor.
Brings together
different
organizations
including government
agency, non owner
participants (Engineer
and constructor) and
client.
3 Two contracts are
made separately
There is only one
single contact
Early involvement of
constructor
4 The design company
provides complete
It shares a common
theme, collaboration.
Hybrid model of
traditional contracting

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design of the
construction work and
the contractor
executes the
construction project.
It ensures an open
communication which
improves the
construction methods.
and collaborative
approach. It is an
innovative approach
and ensures continuity
of service.
Recommendations
The selection of right procurement methods is considered to be most crucial for the
successful completion of the project. There are important elements which are needed to be
considered in selecting the most appropriate method for particular project. The elements include
objective of the project, the time and the durations, delay allowance, cost of the project,
sustainability and quality of the project (Jin Lin et al. 2014). The traditional methods method is
considered to be the most common method where the design and the budget are more suitable for
the construction project (Lam, Chan and Chan 2014). This method can be used by both
experienced and non experienced clients. The most common form of traditional contracts
includes joint contracts tribunal, building contracts and works building contracts (Ruparathna
and Hewage 2015). This procurement method is considered when the clients want to choose the
lowest tender. According to Mesa, Molenaar and Alarcón (2016), Integrated Project delivery is
mostly suitable for complex projects, large projects and repetitive projects as it focuses on team
work, proper planning and innovation. Large projects are beneficial as it ensures strong team
alliance. However, it requires high budget for the project (El Asmar, Hanna and Loh 2013).
Alliance contracting mainly fits complex engineering projects
(Jefferies, John Brewer and Gajendran 2014)

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. This method can be implemented for large construction project. However, it requires high level
of cooperation and complete trust among the stakeholders
(Gransberg, Scheepbouwer and Loulakis 2015).
.
Conclusion
Therefore, from the above analysis it can be concluded that there are different
procurement methods for construction purposes. The report has identified the characteristics of
different procurement methods traditional procurement methods, integrated project delivery and
Alliance contracting. The report has discussed on the advantages and disadvantages of each
methods of procurement. The benefits and problems of the stakeholders have been discussed in
the report of implementing different procurement methods. Further, the report has compared and
contrasted the three different procurement methods and lastly, it provides recommendations and
suggestions on the projects that are suitable for different procurement methods.

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References
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approach for the construction industry.
Chan, A.P. and Chan, A.P., 2014. Key performance indicators for measuring construction
success. Benchmarking: an international journal, 11(2), pp.203-221.
De Araújo, M.C.B., Alencar, L.H. and de Miranda Mota, C.M., 2017. Project procurement
management: A structured literature review. International Journal of Project
Management, 35(3), pp.353-377.
El Asmar, M., Hanna, A.S. and Loh, W.Y., 2013. Quantifying performance for the integrated
project delivery system as compared to established delivery systems. Journal of Construction
Engineering and Management, 139(11), p.04013012.
Gransberg, D., Scheepbouwer, E. and Loulakis, M.C., 2015. Alliance Contracting—Evolving
Alternative Project Delivery (No. Project 20-05, Topic 45-16).
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