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The Factors Influencing Procurement Strategy Construction Essay

Masterman described project procurement as the organizational structure needed to design and build construction projects for a particular client. That is very true to an extent because the procedure of "obtaining" a building by a customer involves a group of folks who are brought together and organized systematically in term with their roles, duties, duties and interrelationship between them. After assessing all options and confirming the need for a construction project, a more detailed case for the project should be developed.

A strategic method of procurement should be predicated on understanding the client's business needs and drivers, also to fully appreciate the marketplace where it operates. That is absolutely fundamental in establishing how efficient the construction project can assist the client in reaching business success. The bespoke nature of several construction projects increases the inherent risks. These risks include completing a project which will not meet needs, which is delivered late or costs more than the client can pay or fund. Each one of these risks can impact the client's core business, seriously. The procurement strategy developed should balance risks against project objectives at an early on stage. Even as of this early stage, initial concept designs can be developed to permit the client and those who will use the new facility to check out how initial designs will respond to business needs.

FACTORS INFLUENCING PROCUREMENT STRATEGY

The collection of an appropriate procurement strategy has long been identified as a major contributor to project success but which route is the most appropriate depends on the goals, requirements and resources available. Many procurement strategy selection techniques have been developed, with a view to assisting clients in their choice of the most appropriate procurement approach for their projects (Kumaraswamy and Dissanayaka, 2001; Luu et al. , 2005; Perng et al. , 2006; RICS, 2007).

Most conventional procurement selection techniques are based throughout the concepts of your time, cost and quality. While the use of such conditions can be used as a guide to assist decision-makers with an initial understanding of the basic attributes of a specific procurement method they shouldn't be used as the only real basis for selecting the procurement method. This is due to underlying complexity associated with matching client needs and priorities with a specific procurement method.

An selection of variables can influence the choice of any procurement method. Once the primary technique for a project has been established, then your following factors is highly recommended when evaluating the most likely procurement strategy (Rowlinson, 1999; Morledge et al. 2006):

External factors - consideration should be given to the actual impact of economic, commercial, technological, political, social and legal factors which influence the client and their business, and the project team during project's lifecycle. For example, potential changes in interest levels, changes in legislation and so forth.

Client characteristics - a client's knowledge, the knowledge of the business with procuring building projects and the environment within which it operates will influence the procurement strategy adopted. Client objectives are influenced by the type and culture of the business. The degree of client involvement in the project is a significant consideration.

Project characteristics - The size, complexity, location and uniqueness of the project is highly recommended as this will influence time, cost and risk.

Ability to make changes - Ideally the needs of the client should be recognized in the early stages of the project. This is not always possible. Changes in technology may result in changes being introduced to a project. Changes in scope invariably cause increase costs and time, especially they occur during construction. It is important at the outset of the project to consider the extent to which design can be completed and the probability of changes occurring.

Cost issues - An assessment for the need for price certainty by the client should be undertaken considering that there's a time delay from the original estimate to when tenders are received. The extent to which design is complete will influence the cost during tender. If price certainty is required, then design must be complete before construction commences and design changes avoided.

Timing - Most projects are required within a specific time frame. It is important that an satisfactory design time is allowed, particularly if design is required to be complete before construction. Assurances from the look team about the resources that exist for the project should be sought. Planning approvals can influence the progress of the project. If early completion is a crucial factor then design and construction activities can be overlapped so that construction can commence earlier on-site. Time and cost tradeoffs should be evaluated.

Risk - The unique and bespoke nature of creating projects means that clients who opt to build are invariably confronted with high levels of risk. The chance inherent in every construction project can be assumed by another party. The main guideline in deciding whether a risk should be transferred is whether the obtaining party has both competence to fairly determine the chance and the expertise essential to control or minimize it (Harman, 1996). Hartman (1996) discovered that both parties will need to have a and similar knowledge of the risk.

The collection of a procurement method should be looked at as an iterative process whereby project objectives and constraints are constantly weighed against possible procurement solutions. Turner (1990) says that the key to procurement is to recognize the priorities in the objectives of the client also to plan a path, a procurement route which will be most appropriate. It is emphasized that priorities must be placed in order of precedence, each to be able before other, because by definition there may be only 1 priority.

SELECTING THE PROCUREMENT ROUTE

A significant amount of procurement methodologies are available to satisfy a client's priorities in the project objectives. You can find procurement methods that will achieve:

Certainty of cost and time for a design produced by an architect utilized by the client. However, this is a sequential and therefore slow process (known as the traditional procurement process or design-bid-build).

Relative speed and cost certainty. However, the look will usually be the responsibility of an contractor and consequently the client will lose some control over the design process (known as design-build).

Relative speed for a design developed by an architect utilized by the client. However, cost is uncertain almost until completion (known as either management contracting or construction management).

Here, we look at each of these strategies in a bit more detail.

TRADITIONAL PROCUREMENT

This is probably the mostly used method of procurement and it is ideal for: all clients (experienced or inexperienced), complex projects and/or projects where functionality is a prime objective, time predictability, and cost certainty. However, it is not well suited for fast track projects.

The client develops the business enterprise case for the project, offers a brief and budget and appoints a team of consultants to prepare a design, plus tender documents. Your client appoints the building contractor to create the works to the look, by the contract completion date and then for the agreed price. Usually much of the task is sub-contracted to specialist companies however the contractor remains liable. The consultants administer the contract on behalf of your client and advise on aspects associated with design, progress and stage payments which must be paid by the client. The separation of the contractor from the design often means missed opportunities for contractor or specialist contractor to input on buildability.

This strategy is a low-risk option for clients who wish to minimize their exposure to the risks of overspend, delays or design failure. However, the exposure to risk will increase where in fact the design phase is rushed, where unreasonable time targets are set or where the tender documents are not fully completed.

There is a variation of the method that involves two-stage tendering - contractor's tenders derive from a partially developed consultant's design (stage 1 tender). The contractor then assists with the final development of the look and tender documents, against which tenders for the construction works are ready (stage 2 tender). Whoever submit the first stage tender has the opportunity to tender or negotiate the next (construction) stage. This process increases the risks of an increase in overall price and a less certain completion date but contractor involvement is likely to raise the likelihood that both these criteria are realistically established.

This method of procurement involves the contractor being in charge of design as well as construction, and it could be suitable for: all clients, including inexperienced clients and those requiring distance from the project, faster track and where cost certainty is desired. However, it is not suited to uncertain or developing client brief as well as complex buildings.

Responsibility for both design and construction is borne by the primary contractor and will either use in-house designers or employ consultants to execute the design whiles specialist or sub-contractors execute the bulk of the construction work.

The contractor tenders against a customer brief and will often follow a short concept design prepared by consultants appointed to advise the client. The look will be developed by the contractor and the works will be completed, usually for a fixed price. Tendering is more expensive so it carries more risk for the contractor than the original approach. It is because the contractor must develop an outline design and an in depth price. Tender lists will probably be shorter than for traditional contracts.

The Design & Build approach provides client a single point of contact. However, your client commits to the expense of construction, as well as the price of design, much earlier than with the traditional approach. Whilst risk is shifted to the contractor, it's important that design liability insurance is maintained to protect that risk. Changes made by the client during design can be expensive, because they affect the entire Design & Build contract, rather than just the look team costs.

Noteworthy is the high design/quality risk associated with this process as the contractor develops the look. To overcome this, we can have a refinement to the approach where the client gets the design ready to concept or scheme design stage and the contractor assumes 'finishing off' the design and construction (develop & construct). Furthermore the contractor may re-employ the initial designers to complete the design in a practice known as novation.

MANAGEMENT CONTRACTING

This is suitable for fast track projects, complex buildings, and a developing brief. However, it is less suitable for inexperienced clients, clients wanting to pass risk to the contractor, and where cost certainty is desired before starting construction.

Here, the client appoints designers and a contractor (management contractor) separately and pays the contractor a charge for managing the construction works. A feature is the early appointment of the contractor to work alongside the look team to develop a programme for construction and contribute to the design and costing of the works. The works are let competitively by the management contractor to subcontractors and specialists in appropriate works packages. This process often means that design and the beginning on site overlap, with the look and tender packages becoming available 'just-in-time' to match the construction programme.

The management contractor will not carry out construction work. This preserves the management contractor's independence and reinforces a consultancy relationship with the client. Payment is made to the management contractor on the basis of the cost of the works packages in addition to the agreed fee. Much of the success of this approach is determined by the contractor's team. Unless the team is drawn from companies which can be experienced in this type of team working, the huge benefits are not always realised.

There is less price certainty first, because construction tends to start out before completion of most design stages and at a spot when many of the work packages have yet to be tendered. This often means adjustments are created to the look and specification of works packages later in the programme to keep the project within budget. However, the overall procedure for design and construction is commonly shorter than in either traditional or design & build situations.

CONSTRUCTION MANAGEMENT

This approach is similar in concept to Management Contracting. Contractors are contracted directly to your client and the construction manager manages the procedure for your client on a straightforward consultancy basis. Although in a sense this gives your client a greater way of measuring control, it does mean that the client accepts a considerable amount of risk. The management contractor is simply a realtor, and usually cannot guarantee that the project will be finished to time and cost. Since it requires continuous involvement by your client this approach is actually only ideal for experienced clients.

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