Procurement and Post-Contract Commercial Management Report

This report presents a proposal for the procurement and post-contract commercial management of a hotel construction project in Australia. It outlines the procurement processes, including planning, conducting, administering, and closing. The report examines the impact of different subcontractors (electricians, plumbers, roofers, framers, painters, and cabinet makers) on project costs and emphasizes the role of a professional cost manager in mitigating these costs. It also details the importance of a cost control system, addressing initial and future costs, and the significance of value engineering. The report highlights strategies such as contract clauses, prequalification, scheduling, and value alternates to manage and minimize construction costs. The client, a civil engineer at Samco Construction Company, seeks optimal procurement strategies to ensure cost-effectiveness and successful project delivery.

Procurement and Post-Contract Management 1
PROPOSAL REPORT ON THE PROCUREMENT AND POST-CONTRACT
COMMERCIAL MANAGEMENT
A Report Paper on Procurement By
Student’s Name
Name of the Professor
Institutional Affiliation
City/State
Year/Month/Day

Procurement and Post-Contract Management 2
INTRODUCTION
This proposal paper focuses on the company that has just been shortlisted to give QS
services that are professional in nature for a project by a client who has just arrived in the
state. There is need to give a proposal to this client by giving the procurement and post-
contract commercial management of the project belonging to the client both in overseas and
within the country. The client is a civil engineer by profession and is currently working in a
Samco Construction Company which is involved in the construction of buildings and other
related structures globally, the client would wish to procure a project in the construction of a
hotel in Australia. Currently, I am working under Bidco Construction Company which is also
a construction company located in Australia.
The objectives of this research proposal are to find out how the project in which the
client is interested in can be procured optimally by incorporating the how different categories
of subcontractors that will be used would impact on the price and how the role and
experience of the professional cost manager can affect such an advice. The primary necessity
of the client would focus on the cost control system such as the importance of future and
initial costs and benefits involved with the entire life of a construction and also the
approaches recommended to value engineering and value management (Ashworth, 2015).
The aspect of scientific management of decision-making in risk management and risk
analysis should also be considered as applied to the entire processes of construction execution
and development and also considering the professional ethics in the construction context and
industries of build environment to the wider profession of global surveying. Since the client
is interested in procuring a project of construction of a hotel, there are some of the important
factors that he should put into consideration while procuring a contract in Australia, their
factors are explained below (Ashworth, 2012).

Procurement and Post-Contract Management 3
Procurement of the Hotel Construction Project
This section deals with the ways through which the project of hotel construction can
be optimally procured by the client’s organization of Samco Construction Company. The
different categories of the subcontractors that will be used would affect the cost and how the
experience and roles of the professional cost manager will influence such as advice. The
management of project procurement involves the process of closing, maintaining, and
establishing the relationship with the services and goods suppliers for the project.
The processes for the Hotel construction project by the Samco Construction Company
are outlined in this section of the report as well as the model for the management of supply
chain which would be developed for the industry of construction (Baron, 2011). There are
four basic processes that would be involved in the optimal procurement of the hotel
construction project, these processes include close procurement, administer procurement,
conduct procurement, and plan procurement. These processes are explained below:
Plan Procurement
The initial process of procurement is plan procurement process which involves the
creation of the plan of project procurement management. Decisions will be made through
which construction items would be made available to the project team as well as the items
that will be purchased. The documents of procurement should then be prepared and the
principles will then be established upon which the vendors’ selection base. This plan will
contain the requirement analysis for the hotel construction project, documents of the
consultation like risk register, project schedule, and scope baseline. These documents will
provide the data that is required (Battaglini, 2011).
Conduct Procurement

Procurement and Post-Contract Management 4
In this process, the vendors are chosen and the contracts or procurement will then be
given out. The resource calendars which will state the time when the resources will be
utilized are then created and the plan of project management will be updated based on the
resources availability. Numerous techniques and tools are utilized for conducting the process
of procurement. The conferences will be held with bidders with an aim of briefing them on
answer questions and requirements of the construction project. The proposals will then be
evaluated carefully, followed by the advertisement which will be done by bidders that are
solicited, searches on the internet will also be utilized as well as negotiations will also be
performed (Brook, 2016).
Administer Procurement
This is the third process in this procurement of this hotel construction project. These
are methods that are utilized in administering the relationship amongst the vendors during the
construction of the hotel project. This administering process would lead to the creation of the
documents for procurement and may lead to the variations in the project. A system of the
change in the contract will be utilized to determine and analyse carefully if the variations in
the contract are actually required. The reviews will then be performed of the performance of
the procurement, audits and inspection will be utilized, the reports of performance will be
produced, and the systems utilized to make sure that the payments on contractors when the
need arises (Building, 2010).
Close Procurement
This is the final process of the hotel construction procurement process. These entail
all the methods that are required to terminate the contracts of procurement, after the
completion of the inspection and/or previously when it is necessary. Audits will be performed

Procurement and Post-Contract Management 5
on the continuation of the project and negotiations will be critical in resolving the disputes in
the contract (Clamp, 2013).
Types of Subcontractors and their Impacts
This section of the report discusses the types of the subcontractors that would be used
in the Hotel Construction Project. The effects that these subcontractors would have on the
price, as well as experience and role of the professional cost manager, are also discussed in
this section. The types of subcontractors that will be used in this Hotel Construction Project
include cabinet makers, painters, roofers, framers, carpenters, tile setters, electricians, and
plumbers (Covello, 2012). These subcontractors are discussed below:
Electricians: The electricians will be effective after the completion of the hotel by the general
contractors. Their work is to install electric circuits in the building by incorporating electrical
gadgets such as alarm system, wiring system, heating system, lighting system and security
systems. The electricians would increase the cost of construction of this project since they are
likely to double the price of electrical equipment which will be installed in the building. This
would increase the overall cost of construction (Fellows, 2010).
Plumbers: Just like the electricians, the plumbers will be effective to perform plumbing
systems in the building just after the completion. The plumbers would install the watering
system, drainage system, and ventilation system of the building. The plumbers would
increase the cost of construction by doubling the prices of plumbing equipment that they will
use in the construction of the hotel, this will increase the overall cost of construction.
Roofers and Framers: The framers would be involved after the completion of the walls of the
construction. They will incorporate frames depending on the framing system that is effective
for the building and then give way to the roofers. The roofers are involved in roofing the
building after the walls of the building have been completed. The type and design of the

Procurement and Post-Contract Management 6
roofing will be according to the specifications of the contractor. The roofers and framers are
likely to double the prices of the roofing materials and framing materials which they are
going to use in the roofing and framing of the building, this will increase the overall cost of
construction (Gibson, 2012).
Painters and Cabinet Makers: The cabinet makers will be involved in designing the cabinet
sections of the hotel. They will design the various furniture that would be used in the hotel.
The painters would be involved in the final painting of the whole building, the types of paints
that they will use should be approved by the general contractor. The painter and cabinet
makers are likely to double the prices of the materials that they will use in painting and
furnish the hotel, this will likely increase the overall cost of construction (Greenhalgh, 2012).
Professional Cost Manager
The Professional Cost Manager is a person who will be involved in the provision of
consultancy services of the operating cost to the construction company hence minimizing the
cost of construction. Some of the services that will be provided by the Professional Cost
Manager include services of water cost recovery such as wastewater and water, services of
telecoms cost recovery such as mobile, data, and voice recovery services, services of energy
cost recovery such as gas and electricity cost recovery, and services of accounts cost recovery
such as contract review, payment, and statement services (Higham, 2016).
The Professional Cost Manager will come up with a plan which will be motivated
towards minimizing the operational cost of construction, this plan will focus on proactive
thinking, control cost, managing project to the cost, and planning cost for the project. The
profession cost manager would prevent an unnecessary doubling of the cost of materials by
the subcontractors which is normally done by electricians, plumbers, roofers, painters, and
framers (Hoffmann, 2014).

Procurement and Post-Contract Management 7
Cost Control System
This section of the report focuses on the primary requirements of the client by
focusing on the system of cost control which includes the importance of future and initial
costs as well as the significance of the building in its entire life. The general feeling around
the escalation of cost tends to be that the risks are contractually passed on to the
subcontractors. The following are some of the cost control systems that can be adopted by the
Samco Construction Company:
Contract
It is normal to incorporate the clause of escalation in subcontracts, however, it is
necessary to inquire if consideration should be done to incorporate the concerns around the
escalations in the contract of the owner. Through sharing of the risks by all parties involved
in the construction of this hotel, it is likely managed and mitigate the cost of construction
(Joshi, 2014).
Prequalification
The prequalification of finance is important when insulating the project of the
contractor from the effects of escalation of cost by the subcontractors. In case the risk is
borne by the subcontractor, the person will have to perform all the analysis of the finance
which will become a critical component of an overall effort of prequalification of the
contractor. The financial ratios of the subcontractors can be at peak volumes about the risk of
enterprise especially period of WIP, pipeline and their cash (Kirkham, 2014).
Schedule
The schedules of construction also avoid potential in minimizing the exposure of
escalation or mitigating the effects of escalations on the cost of construction of the hotel. To

Procurement and Post-Contract Management 8
minimize the hotel project’s exposure time, as well as the prospective exposure to numerous
forces contributing to escalations in the cost of construction, the contractor should scrutinise
their schedule for prospective escalation (Loftus, 2016).
Value Alternates
The subcontractors are normally on the front since they have the advantage of
proximity to labour and suppliers to observe the emerging escalation perspective. There is
need to work with substitutes to locate the value alternates and engineering when a given
practise or material exposes the construction company to prospective escalation (Lowe,
2013).
Initial and Future Cost of Materials
The contractors have the materials procurement related options when they understand
that the escalation of the cost of materials is imminent. They need to have a product storage
plan or strategic delivery to enable the client to possess strategically staged and purchased
materials in advance of the requirement. These strategies that can be implemented by the
Samco Construction Company include paying subcontractors to purchase materials through
payment of materials stored or the company purchasing materials in advance themselves. The
initial and future cost of materials should be a major factor that must be considered by the
contractor or Professional Cost Manager since the prices of materials are likely to vary, these
variations should be determined before the purchases are made (Management(IACCM),
2014).
Benefits of the Hotel Project under Construction
The building that will be constructed by the Samco Construction Company which is
an International company seeking a procurement contract on this project in Australia will
serve as a five-star hotel in the city of Melbourne, Australia. The hotel will be beneficial to

Procurement and Post-Contract Management 9
the owner since it will be a profit-generating project through customers buying foodstuffs
ranging from drinks, main mails, and other recreational facilities. The hotel will also act as a
restroom where travellers and business people would book for rooms and spend their nights
(Murdoch, 2013).
This project will act as a source of employment to over 200 qualified personnel that
will be employed in this hotel in different departments such as cooking, cleaning, reception,
accounting, and supplying departments. The design of this hotel project is meant to look very
classic in appearance, this will act as a beautification factor to the city of Melbourne and to
the country of Australia in general. Just like any other private facility, the hotel will be a
source of government revenues in form of taxes which will improve the money circulation in
the economy through payment of taxes and also payment of salaries to the employees (Pearl,
2013).
Value Management and Value Engineering
Value engineering and value management are techniques and methods concerned with
the achievement, maximization, and definition of the money value. They are approaches that
are based on team collaboration and was first implemented during the 2nd world war for the
maximization of the output from resources that are limited. Value engineering which is
commonly abbreviated as VE is a term that defines the systematic way of improving the
value of services or products or goods through the use of function examination. The hotel
under construction can improve the quality of goods and services that they will be providing
to their customers by improving the function or cost reduction (Potts, 2015).
The major reason for VE is that the product is the product is expected to become
stylistically or practically obsolete after s given the duration, its product can only be design to
last for the specific timeframe. The maximum duration that the hotel can attain its peak is for

Procurement and Post-Contract Management 10
only fifteen years since numerous hotel is still under construction and may affect this hotel
after this duration. To prevent this hotel from being obsolete after fifteen years, there is need
of implementing value engineering technique. The hotel can be constructed by the use of
materials that are of high grade but still leads to the unwanted cost of the management
(Ritchie, 2017).
The company should use materials that are least expensive which satisfy the lifetime
projection of the hotel which is fifteen years. The materials that will be used in the
construction of this project should be of lower cost to match the lifetime of the hotel which is
fifteen years, these materials include roofing, framing, furniture, flooring, plumbing, and
electrification. Value management gives a powerful tool that is exceptional in exploring the
objectives of the hotel project and aspirations from the perspective of the client (Robinson,
2011).
The major objective of the construction of this hotel is to generate profit for the
company and also provide executive services to the customers. This objective will be
enforced by the value management technique so that at every time, all the employees stick to
what is expected of them.

Procurement and Post-Contract Management 11
Figure 1: Illustration of value engineering and value management is this hotel project
(Smith, 2015)
Risk Management and Risk Analysis
This section of the report illustrates the scientific management aspects of making of
decisions in risk management and risk analysis as applied in execution and development
processes in construction. The considerations of professional ethics are also discussed in this
section. Risk management is the process of prioritization, assessment, and identification of
risks followed by economical and coordinated resources application with an aim of
maximization, monitoring, and controlling the impact or probability of unfortunate events
(Stansbury, 2015).
Risks that affect this hotel project can come in numerous forms such as natural
causes, accidents, credit risk, legal liabilities, threats from the failure of the project at
sustainment, production, development, or design life-cycle, or financial market. There are
two categories of such events namely positive events which are categorized as opportunities
and negative events which are categorized as risks. For proper risks management, the
management should come up with risk analysis which will help id the process of decision
making (Younker, 2013). The risks management provide support to the decision by selecting
between alternatives, products and activities acceptance, and implementation of measures of
reducing risks. The process of risks management involves the following steps:
Context Establishment: The establishment of the context involves identifying risks in the
interest of selected domain, remainder planning of the process, mapping out objectives of the
project, framework definition, coming up with risks analysis, and risks mitigation using the
available resources (Stansbury, 2015).

Procurement and Post-Contract Management 12
Identification: After the context identification, the process that should follow this is the
identification of potential risks in this hotel project. Risks involve the actions that when
activated, cause benefits or problems. Therefore the identification of risks can begin with the
problem sources or with the individual problem. The sources of risks can either be external or
internal to the project that is the objective of risk management. The risk sources for this
project are likely to be the political stability of the country, employees, or stakeholders of the
project. When the problem or source is known, the events that might result in the problem
should then be scrutinized. The common methods of risk identification include risk charting,
common-risk bearing, taxonomy0based risk identification, scenario-based risk identification,
and objectives-based risk identification (Weinbe, 2016).
Assessment: After the identification of the risks, there is need of assessing them concerning
their prospective severity impact. Some of the measurement quantities can be simple to
determine such as the number of furniture damaged by fire. The statistical information can be
used in determining if the rate of occurrence of a particular risk (Zio, 2012).
Risk Analysis
The assessment of risks can be scientifically analysed to be the final decisive step in
the decision-making process. The test is a comparison between the experimented and
predicted value. The errors between the predicted value and experimented value should be
compatible with each other. If the difference between experimental and predicted value of the
risk being assessed in huge, then the values are said to be incompatible. The assumption
made in this report is that the sources of risks have the normal distribution in their evaluated
quantities (Zio, 2012). Given two quantities having standard errors of Dx, the risk analysis of
the two sources of risk can be scientifically represented as:

Procurement and Post-Contract Management 13
(Kelly, 2016)
Where t1-a is the critical value of t for a level of confidence. In numerous assessment of
risks, the real value of the risk cannot be directly confirmed by the experiment. In case of the
product of the factors of risks, it is possible for the verification of the risks for every factor
accurately and separately. A predicted value of risk can be calculated using the equation:
Where Drx and rx are the error and excess risk (Zsidisin, 2011).
Professional Ethics in Construction and Built Environment Industries
The professional ethics is composed of the moral requirements linked to a certain
profession and imposed on the members of that profession. In construction and built
environment industries contractors, surveyors, project managers, architects, and engineers
have the fundamental rights of conscience to their profession. This project will be subscribed
to the professional code of ethics according to the Australian standards. Some of the ethical
misconducts that a professional person should not take part in include collusive tendering
which will lead to price fixing or competitive bids, commissions and compensations for
unsuccessful tenders, hidden fees, and cover pricing (Ritchie, 2017).
Other unethical practices that have been reported frequency include the practices
related to negligence, breach of confidence, and fraud. Breach of confidence, sharp practice,
trickery, or deceit are ways through which professionals sought with an aim of gaining the
dishonest or unfair advantage over their opponents in their fields of professions (Heller,

Procurement and Post-Contract Management 14
2014). The major origin of negligence includes production defects, design defects, or design
negligence. These unethical practices are against the laws of Australia as well as global laws
and any company must refrain from such practices. The contractor should ensure that the
safety of the general public and employees are protected during the construction of this hotel
project. The construction should conform to the standards set aside by the Australian Codes
of Construction as well as International Standards (Smith, 2015).
Conclusion
This proposal report is about the procurement and post-contract commercial
management of the project belonging to the client both in overseas and in the within the
country. The different categories of the subcontractors that will be used would affect the cost
and how the experience and roles of the professional cost manager will influence such as
advice. The management of project procurement involves the process of closing, maintaining,
and establishing the relationship with the services and goods suppliers for the project. The
building that will be constructed by the Samco Construction Company which is an
International company seeking a procurement contract on this project in Australia will serve
as a five-star hotel in the city of Melbourne, Australia.
Risk management is the process of prioritization, assessment, and identification of
risks followed by economical and coordinated resources application with an aim of
maximization, monitoring, and controlling the impact or probability of unfortunate events.
The professional ethics is composed of the moral requirements linked to a certain profession
and imposed on the members of that profession.
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Procurement and Post-Contract Management 15
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