Procurement Routes
An Overview Curtin University of Technology
Overview of Principal Routes
Traditional / conventional design led Design and construct Management (Fee)
Traditional
Client appoints consultants to:
Administer contract - certify payment Develop a design based on an agreed budget
Client appoints contractor direct to:
Organise works programme Establish the site and carry out the work
Key issues:
Separation of contractor from design Client reliant on design team for quality of tender documents
Traditional - Tendering
Single stage
Tenders are usually based on complete design
Two stage
Tenders based on partially developed consultant design Contractor assists with final development of design and tender documents First stage tenderer may tender/ negotiate second (construction) stage
Traditional - Variants
Contractor design portion
Client consultant team completes the design for majority of the works Contractor completes the design balance of the works Used where specialist design input required
When is Traditional Suitable?
Suitable for:
All clients, including inexperienced clients A developing brief Complex projects Quality design development Cost certainty
Less suitable for:
Fast track (Overlapping of design and construction)
Design & Construct
Client appoints Consultants to:
Prepare outline design and employers requirements
Design & Construct
Client appoints contractor to:
Complete design and construct the works
Key Issues:
Tendering is more expensive and riskier exercise for the contractor than with traditional approach Client has a single point of contact Changes made by client during design stage can be expensive
When is Design & Construct Suitable?
Suitable for:
All clients, including inexperienced ones and those who do not want a close involvement Cost certainty
Not suitable for:
Projects where client wishes substantial input to detailed design Projects with significant potential for change
Design & Construct - Variants
Develop and Construct
Client completes part of the design Contractor finishes the design and the construction Contractor may re-employ the original designers to complete the design
Package Deal
Contractor provides an off-the-shelf building Building type often modular so that its size can be adjusted
Design & Construct - Variants
Single stage
Contractor's tenders are usually based on an outline design and Employers Requirements
Two stage
Tenders based on a partially developed design Contractor assists with further development of design First stage tenderer has the opportunity to negotiate the second stage.
Design & Construct - Variants
Two Stage with Guaranteed Maximum Price
Contractor's tenders based on a partially developed consultant's design (Stage 1 tender) Preliminary and on costs agreed Contractor assists with further development of design Defined elements are negotiated and prices agreed. Contractor assess risk associated with design development of remaining undefined elements and GMP negotiated
Management Fee
Client appoints consultants:
Develop design with contractor
Client appoints contractor:
Paid a fee for managing the construction works Develops a programme for construction, design and tender documents in appropriate works packages Manages work package contractors
Management Fee
Key Issues:
Contractor brings practical buildability advice during design Contractor is reckoned to be more client orientated - more professional - leading to a less adversarial relationship but depends on the contractor's team Construction work is carried out by Work Package Contractors Design and the start on site often overlaps Less price certainty
Management Fee - Variants
Management contracting
Management Contractor contracts with Work Package Contractors Contractor manages the Works Package Contractors and arranges for their payment
Construction management
Client contracts directly with Work Package Contractors Contractor manages the Work Package Contractors Client arranges for their payment
Management Fee - Variants
Construction Management Management Contracting
When is Management Suitable?
Suitable for:
Experienced clients Fast track projects Complex buildings Developing brief and constructability advice
Less suitable for:
Inexperienced clients Cost certainty before starting construction Client wanting to pass on risk to contractor
Risk Allocation
Criteria
Certainty, risk, complexity, competition Time, cost, quality Value for money Market factors: cost of capital, interest rates, inflation, skills capacity
Procurement Comparison
Comparison of Procurement Methods
Traditional
Not the fastest of methods Desirable to have all information at a tender stage Consider two stage or negotiated tendering
Design & construct
Relatively fast method Pre-tender time largely depends on the amount of detail in the Employers requirements Construction time reduced because design and construction proceed in parallel An efficient single contractual arrangement integrating design and early construction expertise within one accountable organisation
Management
Speed
Early start on site is possible long before tenders have even been invited for some of the works packages
Complexity
Basically straightforward, but complications can arise if Employer requires that certain sub-contractors are used
Design and construction skills integrated at an early stage Complex management operation requiring sophisticated techniques
Procurement Comparison
Comparison of Procurement Methods
Traditional
Certainty in cost and time before commitment to build Clear accountability and cost monitoring at all stages
Design & construct
There is a guaranteed cost and completion date
Management
Employer is committed to start building on a cost plan, project drawings and specification only
Certainty
Competition
Competitive tenders are possible for all item Negotiated tenders reduce competitive element
Difficult for the Employer to compare proposals which include for both price and design. May be difficult to evaluate for competitiveness No benefit passes to Employer if Contractor seeks greater competitiveness for specialist work and materials
Management Contractor is appointed because of management expertise rather than because his fee is competitive However, competition can be retained for the works packages
Balancing of Criteria
Comparison of Procurement Methods
Traditional Design & Construct Management
Summary
Benefits in COST & QUALITY but at the expense of TIME
Benefits in COST & TIME but at the expense of QUALITY
Benefits in TIME & QUALITY but at the expense of COST
Key Issues
Balance of Priorities
Budget Programme Design
Constraints
Compliance with regulations and standing orders Approach to risk transfer Incentivisation
Potential for Change
