Procurement Report: Computing, Engineering and Mathematics

It is a process of buying products, the services or any other facility at a best possible price as compared to market. This process makes sure that the buyer purchases his required items without compromise on quality and standards. There has been time delays, extra cost and other disadvantages in number of contraction projects due to different reasons, but still there is no change in the construction procurements methods since last twenty five years (Smith and Love, 2001). The type of the procurement method to be used on a specific project depends on the nature of the problem and on the requirements of the client in the project (Love et al., 1998). Following three types of procurement methods are reported to be important considering the construction projects. The report discusses the most commonly used procurement methods used in construction industry, and their positive and negative factors.

Public Private Procurement (PPP)

This is a mutual cooperation between the public sector organization and private company that is sponsored by private companies or the government. It gives a better chance to both the stakeholder’s to learn from each other. This method is used in UK’s labor market to a greater level due to its extra positive affects (Treasury, 2000).  However there has been other arguments as well that highlight the negative factors of PPP and suggest that this method should be replaced for UK’s market especially in rail service (Ruane, 2000). A study has been conducted to find the positive and negative factors of using PPP (Li et al., 2005). These are mentioned here.

Positive Factors

  1. It limits the final service budget included in the project.
  2. With the involvement of the government organization, the cost of the administration work is reduced, as most of the office work is handled by the employees of the government company.
  3. It resists the blocking the public money in the capital investment of the project, as the private company tries to finish the project as early as possible.
  4. The combination of both the sector causes a reduction in the total budget of the project, as compared with other methods of procurement.
  5. The public sector projects have budget constraints, but this type of procurement method is applicable to complex and costly projects.
  6. The public funding required for the project is decreased to some limit.
  7. The constructability of the project increases to a greater limit.
  8. The project is accelerated at faster pace as compared to public or governmental projects.
  9. The time duration for the completion of the project is reduced.
  10. In case of failures occurred after the completion of the projects, the ability to maintain the products is reduced.
  11. There is higher tendency of the local area economy to grow.
  12. The technology is migrated to local contractors (Valila, 2005).
  13. It employs new and innovative techniques for the completion of the project, the workers skill level increases to a higher levels (Birnie, 1999).
  14. The flexibility of this method provides number of solution to the faced problems (Budds and Sohail, 2000).

Negative Factors

  1. It is risky to work with private partner while being a government organization.
  2. There are only some of the projects that are reached to the contract because of complexities present in the government organization’s structure.
  3. Inexperience and shortage of suitable skills are often missing in these kinds of projects (Birnie, 1999).
  4. The risk factor is increased with the involvement of the private sector.
  5. It offers higher resistance to participation as the independent style of working is dominant here.
  6. The final price for the end customer is increased to a higher limit as compared with other methods.
  7. A mismatch can occur between Governmental aim behind the projects and the evaluation of project by the private organization.
  8. The time can be consumed in the long discussion before the starting of the projects.
  9. It decreases the possibility to arise for the employment in the locality.
  10. It decreases the project responsibility and liability to the contractor’s end.
  11. Long period is dedicated to in the formation of the contract between the managers (Ezulike et al., 1997).
  12. Political influences are easily impacted on these kinds of projects and long delays may occur
  13. These kinds of projects may be cost more than the other projects of the same kind (Ezulike et al,. 1997)
  14. Traditional Procurement

This method is also known as design bid build. It is the most commonly used method for the procurement in construction work. A coordinator of the project has to be appointed having engineer’s or architect’s background, who is made responsible for the project progress and cost management. The design work is usually different than the construction part of the project in traditional procurement technique. Designing and cost management is done by consultants; contractors are made responsible for carrying out the whole execution part of the project. The tenders are advertised to select a competent contractor; however depending on the potential and the experience of the contractor they may also be hired without advertising the tenders. It is assumed that the design is selected by the consultants, but they still have no liabilities for the selected design, special terms are agreed on this issue. The traditional procurement is used where there is sufficient time before the start of the project, the designer and consultants are appointed separately, the cost of the project to be decided before the start of the project and quality of the project is necessary (Masterman, 2003).

Three types of contracts can work under the traditional procurement; these are lump sum contracts, measurement contracts and cost reimbursement contracts. In lump sum contracts the total amount of the project is determined before the starting of the project. This contract requires the documentation to be complete in all respects before the advertisement of the tenders. The measurement contracts are applied where it is not possible to calculate the total amount of work to done, therefore the total amount is calculated at the end of completion of the project and agreed by both the parties. The measurement contract is also known as re-measurement contract. This method increases risk on the end of the client as they are not certain about the amount of cost and time required of the completion of the project. The measurement contract is best for small projects only. The cost reimbursement contract uses cost of labor, plant, overhead cost and profit; all these costs are added individually. This is also known as cost plus contract. This type of method has three types of profits i.e. In “cost plus percentage fee” the contractor is paid a percentage of the prime cost of the project, and there are no benefits for the extra efficiency in the work. A fixed fee is charged to the contractor in “cost plus fixed fee”. The fee is varied between the prime cost and the estimated cost in “cost plus fluctuating fee”(Blanc-Brude et al., 2006).

Positive Factors

  1. The selection of method is purely depended on the competence of the organizations, therefore higher responsibility measures are considered.
  2. Higher level of compromise on the quality and on the cost is assured, as all the companies bid on the same project with full attention to get the project.
  3. The client has higher level of involvement in the projects that enhances the quality of the design, over all stages of the project.
  4. Once the contract is awarded the payment is saved.
  5. The modifications in the contract can be discussed and made easily through proper channel, after the starting of the project.
  6. This method of procurement in quite useful and known in the market (Chasey et al., 2012).

Negative Factors

  1. The traditional procurement can cause disputes among the different stakeholder involved in the project, as the incomplete design can be documented with the benefit of less time and decreased cost.
  2. The traditional procurement project length is greater than the other kinds of the procurement methods, as the project cannot be commenced until the design is complete.
  3. The contractor cannot contribute the design or planning of the project, as the contractors are appointed after the initial designing phase (Davis et al., 2008).
  4. Design and construct procurement

This method is also known as design and builds procurement method. The contractor accepts the liability of all the design in a project in design and constructs procurement. The level of responsibility of the contractor is mentioned clearly in the contract of the project. This method decreases the risk from the end of the client. The liability of the contractor can also be shared with client that is totally dependent on the type of the project to be performed in the organization. This type of procurement is a team work of the design and construction firms, and that can retain up to one project or for long term cooperation. It has been the reported that the application of design and construction procurement has increased to certain as compared to other methods (Ling, 2004).

There are number of positive and negative factors associated with the design and procurement contracts, these are as follows.

Positive Factors

  1. There is no need to have contact between the client, contractors and designers separately as the client is in contact with one contractor who has most of the liability.
  2. The total cost of the project is decided at the start of the project, it is not permitted to modify the terms or the design once the contract is signed.
  3. The maximum possible money is paid to contractor, which is time saving and also impact on reducing the overall cost of the project.
  4. The designing and construction can be performed side by side at one time, which is quite effective in saving the time.
  5. As the contractor advice is directly implemented, therefore overall efficiency of this type of construction project is greater than the other construction projects (De Mozota, 2003).

Negative Factors

  1. There are number of difficulties for the clients in handling the complex and comprehensive projects as this method is most suited for the project with medium complexities.
  2. It is quite difficult to add the changes in the project once the project is initiated and if they are possible they cost a lot to the client.
  3. As the contractors have their own designs during the bidding of the tender, which produces a great difficulty in comparing these designs with each other and assigning the project to the best bid.
  4. It is necessary for the client to select one of the designs before the detailed design is complete; this offers a big risk to the client.
  5. There are some standard contracts available, and most of these agreements are signed according to these contracts with no further enhancements (Davis et al., 2008). 

References:

Birnie, J. 1999. Private finance initiative (PFI)-UK construction industry response. Journal of Construction Procurement, 5, 5-14.

Budds, J. & sohail, M. 2000. PPP and the Poor in Water and Sanitation: Interim indings. Water, Engineering and Development Centre, oughborough niversity, nited ingdom. Available: http://www. lboro. ac. uk/wedc/projects/ppp-poor/queenstown. pdf.

Chasey, A., Maddex, W. & Bansal, A. 2012. Comparison of public-private partnerships and traditional procurement methods in North American highway construction. Transportation Research Record: Journal of the Transportation Research Board, 26-32

Davis, R. P., love, p. & baccarini, D. 2008. Building procurement methods.

De Mozota, B. B. 2003. Design management: using design to build brand value and corporate innovation, Skyhorse Publishing Inc.

Ezulike, E. I., perry, j. G. & hawwash, k. 1997. The barriers to entry into the PFI market. Engineering Construction and Architectural Management, 4, 179-193.

Li, B., Akintoye, A., Edwards, P. J. & Hardcastle, C. 2005. Perceptions of positive and negative factors influencing the attractiveness of PPP/PFI procurement for construction projects in the UK: Findings from a questionnaire survey. Engineering, Construction and Architectural Management, 12, 125-148.

Ling, F. Y. Y. 2004. How project managers can better control the performance of design-build projects. International Journal of Project Management, 22, 477-488.

Love, P, gunasekaran, a. & li, h. 1998. Concurrent engineering: a strategy for procuring construction projects. International Journal of Project Management, 16, 375-383.

Masterman, J. 2003. An introduction to building procurement systems, Routledge.

Ruane, S. 2000. Acquiescence and opposition: the private finance initiative in the National Health Service. Policy & Politics, 28, 411-424.

Smith, J. & love, P. E. 2001. Adapting to clients’ needs in construction-a dialogue. Facilities, 19, 71-79.

Treasury, HM. 2000. Public Private Patnerships- The government’s approach, The stationery office, London, available at www.hm-treasury.gov.uk/docs/2000/ppp.html

Valila, T. 2005. How expensive are cost savings? On the economics of public-private partnerships. European Investment Bank, Economics Department.

 

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