Contracts

D31PZ Contracts and Procurement

“Task A: Procurement”

Task A

Introduction

This assignment gives the detail explanation about the project that includes the construction of railway line in between new north-south railway (Raisbeck et al., 2010). The construction of this project involves the main station hall, parking facilities, tunnels, commercial space, bridges and concourse etc. at the same time, there are various complexities that and challenges which is faced by the project team. Therefore, to construct the project in an efficient manner, firstly the project manager required to appoint relevant contractors that is well suited for the project in terms to retain the quality design. Besides that, this study also includes a factor that is considered during the procurement strategy for the project. At the same time, the critically analyse for the procurements routes will also study. Lastly, this paper should cover the advance procurements practices for the project. Thus, this project provides the brief understanding about the project quality design and procurements of routes that is well suited to this project.

Contractor Appointments Method that is suitable for the Project

To achieve the relevant contractor for proving to be more suitable in regards to project, in such case, it is require using the management method for appointing the contractor to procuring the quality design for projects. As per this method, the contractor is appointed with the competitive tender or with negotiated agreements (Babatunde et al., 2010). In case of negotiated agreements, the project manager build agreements which is negotiated with one contractor and this process is known as single direct design and build. When large number of contractor is applied then in that case such situation is called as competitive design and build.

In addition to this, traditionally the clients used to select the contractors by taking references of existing contractors. In this case, the existing contractor has full responsibility of the newly appoint contractor in terms to their performances. Hence, it can be stated that construction companies mainly prefer to select or appoint the contractor on the basis of competitive tendering. It is because, this technique allows the project manager to judge the capacity and competencies of the contractor and accordingly they tale their appointment decision. Thus, such process reduces the chances of failure in workforces (Sebastian, 2011). Therefore, due to this reason companies develop more trust on the competitive tendering method.

Appointment Selection Criteria for Project

There are various alternatives that are used in the management procurements method. In context to appoint the project contractors for the construction of railway project, the management usually starts through appointing consultants to prepare project drawings and project specifications. It give the project manager clear picture about the contractor capabilities and its competencies (Osipova & Eriksson, 2011). Moreover, the clients select the contractor through the process of tender and interviews and provide payments on the basis of schedule services, prime costs and management free. It is also identified that some contractor are appointed on the daily basis work or some for a specialised related work. So in that case, there are different process is applied. Thus, there are different process of appointment is used by the companies in the railways routes construction project.

Critical Factors that provide the choice of procurements strategy for the project

It is identified that various factors that critically influence the project manager decision in terms to procurement strategy. The factor that affects mostly to the procurement method is the time, cost and quality. In this, project manager take decision about the quality standards and cost that need to be incurred etc (Chasey et al., 2012). Such decisions take long time which could affect the project effectiveness and these decisions are also prove to be riskier for the company. Moreover, matching the client’s needs and priories with particular procurements method is also considered as a complex activity for the project manager.

Furthermore, the eternal factors also consider as a cause of influencing the procurement strategy for a project (Wang et al., 2013). It can be stated that the economic, changing technology, political, social and legal factors are the potential factors which influences the clients and their business. For instances, the changes in interest rate, currency exchange rate and changes in legislation etc. the changes of such factors impacts the operations of the construction projects.

At the same time, a client knowledge also considers as biggest influences on the building of projects and the environment within which project is operates (Shrestha et al., 2011). Project characteristics and ability to make changes in the project also includes as a risk and critical factor for the companies.

Solutions for the issues that generates in Procurements strategy

There are various issues that always generate in the railways construction projects. In addition o this, the issues related to non-availability of raw material on time, lacking of sufficient skills in the workforces or it can be inadequate capital (Ogunsanmi et al., 2011). Thus, in order to respond such issues and problems, the project manager should keep contacting officers for the development of procuring schedules through review and analysis of the clients’ requirements. The project manager should create such schedule procurement that plans and monitor each activity as this practice helps the company to reduce their large investment. At the same time, it also reduces the risk of timing & risk of legal documentation (Burger & Hawkesworth, 2011). Therefore, the preparation of schedule procurements consider as a best response that gives the chances to project manager to overcome from the risk. In addition to this, the compliances with the policy could also help the project manager to compensate the risk of legal requirements that Construction Company need to fulfil at every step.

Critically analyse the basic procurements routes/ types for the proposed project

There are several basic procurement routes that are useful to complete this project in the given time period. All these procurements have different kind of role and responsibilities. Some of the methods are as follows.

Traditional procurement route– Traditional procurements route consider as a widely accepted route among all the methods. It is because, it helps the clients to appoint that contractors which have specialisation and experiences in design quality. Thus, such indicates that it is quite effective method for implementing the railway projects. This is also known as lump sum method .The reason behind this is the single lump-sum price for whole project. It is useful for the construction project, which is already designed by the investor. The traditional system was popular in past; when there was a need of small or medium projects are constructed (Hampton et al., 2012). The traditional method is very simple to understand, it is because the design is already developed by the investor before tendering procedure. In the project of new railway station it is not useful because it is for a small or medium project. The evaluation of actual cost of total construction is quite hard because of long time period. This methods also easy to use by the project manager as it reduces the various risk related to delays, failure if design. Therefore, it indicates that this is most efficient and widely used method (Hamza & Greenwood, 2009).

Design & Build method- Design & build method is proving more useful for the simple projects where design quality is not consideration. Under this method the constructor first makes design and then builds the construction and the investor only provides the outline. Sometimes the constructer may carry on parallel to the design and construction. This method of the procurement is most helpful for the medium and bigger projects. For this project, all the outlines of the construction are provided that main station hall, parking, tunnels, commercial space, concourse and bridges and the design will be made by the contractor. The big projects always have risks and that is coved by the insurance company (Hoppe et al., 2013). Under this method, both design and construction responsibility is passed to the contractors. In this, sub-contractor implement the construction work while contractor perform the design related work. Design and build method are one of the procurement route that is more favoured by the government bodies for publicly-funded projects. This project allows integrating team work from the starting phase. At the same time, this project also result in cost saving and promotes the innovation in the projects. This method biggest advantage is that it offers to employer independent professional in the role of the contract administrator monitoring the project (Ren et al., 2012). Other benefits that this method is providing that contractor is managing both the work including design and construction part. This saves the maximum cost of projects in term to hire the different teams for designing and constructing section. Hence, such practices gives the clear sign of the effectively development of projects.

Construction management- Under the construction management procurement method, all the work is constructed by the different experts or trade constructors. The main contactor only consults to the constructers to manage the work (Porwal & Hewage, 2013). For this project, it is hard to find out the sub-constructer for the different kind of the construction such as- bridge, electronic equipments, tunnels etc. The professional services that is used in this method is specialized project management technique to foreseen the planning, design and construction of a project team. At the same time, the main purpose of the construction management method is to control projects time, cost and quality. In this method, the project manager is the one who is responsible for the entire work related task. As project manager works in different areas and develop the plans from the beginning to end. So this will reduce the chances of uncertainty (Fu et al., 2010). Therefore, this method provides more systematic way to compete the project and at right time.

Management contracting- It is a hybrid method or combination of traditional procurement and construction management. The work is constructed by the different experts or sub-contractors but the price of whole project is fixed. In this project of railway station, the price of the project is not definite (Eriksson & Westerberg, 2011). This method has only one limitation is that it extent the time of project. Due to this, the cost issue also get arise as the long duration of projects demands high investment of the company on the project. This could influence the project in a negative manner.

Public Private Partnership (PPP) – The PPP procurement method is a partnership of public and private sector. The private company provides the better management and service, on the other hand the government sector provide the finance and maintenance to the project. This method is also useful for this project because of the co-operation of the private sector. In this case, all phases of project are awarded to the single contractor. Such practices help to bring the better scope and solution for the projects. At the same time, the cost which is incurred in the whole project can also be estimate in advances under this method (Meehan & Bryde, 2011). The best part of this method is that it gives the liability to all the parties in regards to perform that activity in which they are expertise or specialised. Thus it allows to collectively arrive at some possible decision which provides benefit to company.

Framework contracting- The framework contracting is initially used for the large projects. It allows the contractor for a long-term project and gets payment according to the project framework. This method also proves to be useful for this railway project. It is because in this long term project all the finance should not provided in single payment (Lewis & Bajari, 2011).

Prime Contracting – prime contracting method consider as an extension of the design and build system. This is a long term partnership and most of the contractures want to work in this format because it helpful in the building maintenance. This method is widely used by the government institutions and in this they always achieve satisfaction (Chan et al., 2010). In this method, the owner of the project team is responsible for the work performances and to complete the contract. For this, they appoint one or more sub-contractors for carrying out the specific task of the contract. Under this method, the general manager is the one who perform the work from providing all the materials, labour and equipments and services for the better constructing the project. In addition to this, the general manager also hired the specialised staff to manage or perform some special work. Such practice of this method contributes largely on the benefit of the projects.

Thus, all these routes contribute high on implementing the construction projects in an efficient and effective manner.

The advances procurements practices that is suitable for this Project

The advances procurement practices that are well fitted to this project could be sustainable procuring. It also has positive influences on the company as sustainability procurements enable the government and Construction Company to achieve quality design of project. The sustainable procurements allow to bringing the better suppliers and standard price that prove to be relevant for the railway project. There are various benefits will able to achieve with the advances procurements practices. It can make satisfy the clients’ priorities under the project goals. Besides that, this practice also boosts the speed and quality design of the project. The advance procurement practices also support the procurement schedule that provides various benefits (Chan et al., 2011). Likewise, it helps to review and analysis of the clients’ requirements, it also helps to obtaining of security clearances. Other benefits that achieve from the advances procurements practices are that the project could able to develop the quality design and low cost investment with this practice. Moreover, this practice also helps the company to attract the large number of contractors with their tenders design. At the same time, this method also helpful for the company in terms to manage the control cost of the project.

In addition to this, it is estimated that the advance procurement practices also contribute towards the productivity through procuring the staff that have enough experiences in the same field (Meehan & Bryde, 2011). The project manager could also use the e-procurement practices in their project. It is because, e-procurements plays a vital role to promote the productivity through accessing the relevant suppliers and adopt the quality design. These all elements support to build the day to day transactions. It is also consider as per the advance technology that contributes in speed, cost controls. Therefore, e-procurements practices would prove to be advantage for the construction companies to procuring the right contractors for the railway projects (Ayala et al., 2011). Thus, such beneficiate indicates clearly that advance procurements practices prove to be advantage for the construction projects especially in case to prepare the tender for the railways projects.

The most suitable route that provide benefits to this project

In this context, the best suited route of procurements is the procurements by using the traditional method. Likewise, the traditional methods also consider as a beneficial procurement methods in this case. The tradition approach allows contacting the contractor on the basis of their design, cost control (Weisheng et al., 2013).  For that, they appointed them with the referral and tender methods. These both techniques guide the management to identify the experiences and expertise of the particular contractor in regards to pursue the work in an efficient manner in future.

The tradition method under this context is worked out with the following ways:- Initially  the client appoints the consultants to design the project in the detail manner and then ask him to prepare the tender that consist of drawings, work schedules, bills of quantities. Afterwards, the contractors through his tender invite the investors to make an investment in their company project. Therefore, through this technique the project manger procure the clients to make an investment and contribute to make appropriate projects. Hence, these two methods could prove to be beneficial for this project in terms to procure the practices.

This method is most commonly used method that supports all clients requirements, complex projects, time, schedule of projects, cost etc. Thus, such benefits will get from this method. At the same time, this strategy is the low risk option for the clients to minimise the risk related to delays in projects, design failure, not meeting with the quality standards.

Advantage of traditional method with regards to railway projects:- It is observed that the traditional method focuses on the high quality work as it supports the clients to keep closer control over the work. Likewise, this method also allows the consultant team to provide a design that could meet all the requirements of the clients. With the achieving the valuable advice and suggestion from the contractors, the client may able to compare and select the best design that has some quality and can be develop within the stimulated budget and time (Osipova & Eriksson, 2011).

The best part of this method is that all tenders are produce with same information base. So with this, it is easy for clients to obtain the best or lowest price by competitive tendering. Due to this, the construction cost will be accurate as tender consist of complete design and specifications. At the same time, this method is also prefer by the larger companies as it is used from the long period of time and both contractors and consultant are familiar about this method and know how to manage the risk during the procurements of a construction progress.

Moreover, there are many routes that are available for the construction of railways lines like design and build method which focus on the expertise level of the workforces for dealing with the project (Sebastian, 2011). But, to design the railways lines, it is find that submit tenders and building works are crucial to develop the project in an efficient manner. Hence, in such case, the traditional method is more appropriate than the design and builds method as this procurement method is not prove to be valuable in terms to supply and delivers efficiently to project manager.

 References

Ayala, R., Murray, M. P., & Villalobos, M. A. (2011) U.S. Patent No. 7,904,350. Washington, DC: U.S. Patent and Trademark Office.

Babatunde, S. O., Opawole, A., & Ujaddughe, I. C. (2010) An appraisal of project procurement methods in the Nigerian construction industry. Civil Engineering Dimension, 12(1), pp. 1-7.

Burger, P., & Hawkesworth, I. (2011) How to attain value for money: comparing PPP and traditional infrastructure public procurement. OECD Journal on Budgeting, 11(1), pp. 91.

Chan, D. W., Chan, A. P., Lam, P. T., Yeung, J. F., & Chan, J. H. (2011) Risk ranking and analysis in target cost contracts: Empirical evidence from the construction industry. International Journal of Project Management, 29(6), pp. 751-763.

Chan, D. W., Lam, P. T., Chan, A. P., & Wong, J. M. (2010) Achieving better performance through target cost contracts: the tale of an underground railway station modification project. Facilities, 28(5/6), pp. 261-277.

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, (2268), pp. 26-32.

Eriksson, P. E., & Westerberg, M. (2011) Effects of cooperative procurement procedures on construction project performance: A conceptual framework. International Journal of Project Management, 29(2), pp. 197-208.

Fu, Q., Lee, C. Y., & Teo, C. P. (2010) Procurement management using option contracts: random spot price and the portfolio effect. IIE transactions, 42(11), pp. 793-811.

Hampton, G., Baldwin, A. N., & Holt, G. (2012) Project delays and cost: stakeholder perceptions of traditional v. PPP procurement. Journal of Financial Management of Property and Construction, 17(1), pp. 73-91.

Hamza, N., & Greenwood, D. (2009) Energy conservation regulations: Impacts on design and procurement of low energy buildings. Building and environment, 44(5), pp. 929-936.

Hoppe, E. I., & Schmitz, P. W. (2013) Public‐private partnerships versus traditional procurement: Innovation incentives and information gathering. The RAND Journal of Economics, 44(1), pp. 56-74.

Lewis, G., & Bajari, P. (2011) Procurement contracting with time incentives: Theory and evidence. The Quarterly Journal of Economics, 126(3), pp. 1173-1211.

Meehan, J., & Bryde, D. (2011) Sustainable procurement practice. Business Strategy and the Environment, 20(2), pp. 94-106.

Ogunsanmi, O. E., Salako, O. A., & Ajayi, O. M. (2011). Risk classification model for design and build projects. Journal of Engineering, Project, and Production Management1(1), 46.

Osipova, E., & Eriksson, P. E. (2011) How procurement options influence risk management in construction projects. Construction Management and Economics, 29(11), pp. 1149-1158.

Porwal, A., & Hewage, K. N. (2013) Building Information Modeling (BIM) partnering framework for public construction projects. Automation in Construction, 31, pp. 204-214.

Raisbeck, P., Duffield, C., & Xu, M. (2010) Comparative performance of PPPs and traditional procurement in Australia. Construction Management and Economics, 28(4), pp. 345-359.

Ren, Z., Kwaw, P., & Yang, F. (2012) Ghana’s public procurement reform and the continuous use of the traditional procurement system: The way forward. Built Environment Project and Asset Management, 2(1), pp. 56-69.

Sebastian, R. (2011) Changing roles of the clients, architects and contractors through BIM. Engineering, Construction and Architectural Management, 18(2), pp. 176-187.

Shrestha, P. P., O’Connor, J. T., & Gibson Jr, G. E. (2011) Performance comparison of large design-build and design-bid-build highway projects. Journal of Construction Engineering and Management, 138(1), pp. 1-13.

Wang, W. C., Yu, W. D., Yang, I. T., Lin, C. C., Lee, M. T., & Cheng, Y. Y. (2013) Applying the AHP to support the best-value contractor selection–lessons learned from two case studies in Taiwan. Journal of Civil Engineering and Management, 19(1), pp. 24-36.

Weisheng, L., MM Liu, A., Hongdi, W., & Zhongbing, W. (2013) Procurement innovation for public construction projects: A study of agent-construction system and public-private partnership in China. Engineering, Construction and Architectural Management, 20(6), pp. 543-562.

 

 

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