Implementation of mega construction projects is very challenging because of the complexity of these projects and the involvement of different stakeholders. The probability of these projects exceeding stipulated budgets and being completed late is very high. One of the best strategies of increasing the possibility of completing this kind of projects successfully is by selecting an appropriate procurement method. Federation Square is an example of how a mega construction project can be challenging to implement. The project, which was sponsored by the Melbourne City Council and the State Government, was delivered amidst a wide range of challenges. These included: inadequate design brief at the start of the project, disputes among stakeholders, lack of transparency, political interventions, budget overruns, late delivery, claims, etc. One of the major goals of the project was to complete it within the stipulated time. The targeted completion time was May 2001 so that the space could be used for the Centenary of Federation. As a result, the Government made a decision to fast-track the project but this made it even more problematic. In general, Federation Square Project would have been implemented faster and at a lower cost if an appropriate procurement method had been selected. This report discusses the selection of a procurement method that is most suitable for the Federation Square Project.
There are different types of procurement methods in the construction industry, which are meant to meet varied needs of clients (Davis et al., 2008). The process of selecting a procurement method for a construction project is very important because it significantly influences the performance of the project (Ghadamsi and Braimah, 2011; Khisa, 2015; Ogunsanmi, 2013). Nevertheless, this process is always challenging as it has to match between the objectives of the project and priorities of the client (Jimoh, Oyewobi and Olanrewaju, 2016). According to Molenaar et al. (2009), procurement method is a comprehensive process used by designers, engineers, contractors, suppliers and consultants to provide design and construction services so as to deliver a project based on the client’s needs (Love, Skitmore and Earl, 2012). There are also different procurement methods hence the need to scrutinize each of them so as to select the most suitable one for that particular project. The procurement method to be used should be selected as early as possible so that responsible entities can know their tasks and develop strategies of accomplishing them efficiently (Lynch, 2015).
There are several factors that influence the choice of procurement method. These factors can either be internal or external. Some of them include the following:
The knowledge, experience, attitude, business culture and objectives of the client has significant impacts on the procurement method selected (Miller at al., 2009). It is very important to choose a procurement method that will involve the client adequately and make them be part of crucial decision-making processes.
It is important to consider the complexity, uniqueness, size and location of the project as they influence the cost, risks and completion time of the project (Department of Housing and Public Works, 2008). For example, the complexity of mega projects cannot be adequately addressed by traditional procurement methods, hence such projects require use of alternative or strategic procurement methods.
The requirement for price certainty by the client must be assessed and determined before commencement of actual construction. Each procurement method has a different price certainty level hence it is important to ensure that the procurement method selected matches the price certainty requirement by the client.
Most construction projects are needed to be completed within a specified period of time. If completing the project very early is an important factor then the procurement method chosen must support this. Each procurement method has different priorities in terms of time, cost, quality, etc. Therefore time certainty for the project must also be established and the procurement method should facilitate completion of the project within planned time frame (Eriksson and Westerberg, 2009).
Ideally, client needs have to be identified during early stages of the project. However, this may not always be possible and therefore changes are inevitable in most construction projects. The flexibility level required by the client to make changes during project period significantly influences the choice of procurement method (Davis, Love and Baccarini, 2008a). The impacts of these changes are different on projects depending on the procurement method used. This is because some procurement methods are flexible to changes while others are rigid to these changes.
There are several factors that must be considered when selecting a construction procurement method. These include: political, social, technological, legal and economic factors. For instance, changes in procurement policies, legislation or interest rates will affect different elements of the project such as cost, time and quality (Mathonsi and Thwala, 2012).
Sharing of risks among stakeholders is also a crucial factor to consider when selecting a construction procurement method. Some methods may impose a large percentage of risks on the client or contractor, while others distribute these risks equally among stakeholders involved. Therefore the procurement method selected should have a definite methodology of risks allocation.
The choice of procurement method is also influenced by how quality of the project is prioritized. A project is said to be successfully delivered if it is of superior quality thus fulfilling the client’s satisfaction (Forsythe, 2007).
It is also important to consider how responsibilities are expected to be shared among stakeholders before selecting a procurement method. This is because some procurement methods allow clients to be in control of project quality while others allocate this responsibility to other stakeholders.
The main goal of a procurement method is to facilitate seamless implementation of the project so as to reduce its cost, delivery time and risks, and increase its quality and client’s satisfaction. There are three main risks that are associated with construction projects. These are: completing the project without meeting the client’s needs, delivering the project above stipulated budget or cost; and delivering the project late (Construction Excellence, 2015). These risks can be prevented by selection of the most suitable procurement method (Lupton et al., 2012). Therefore the choice of procurement method is very important especially in mega projects such as the Federation Square Project.
The selection process of the most suitable construction project entails two key components (Love et al., 2008). The first component entails investigating and establishing project objectives’ priorities and attitudes and risks of the client. The second component entails considering potential procurement alternatives, analyzing them and then selecting the most suitable one. This can only be achieved if the needs and requirements of the client are very accurate and clear. According to Mathonsi and Thwala (2012), construction industry has significantly changed over the past several years. The complexity and size of these projects have increased, financial social, and political factors have changed, and use of modern technology are some of the factors that have revolutionized the industry. These have also resulted to establishment of alternative construction procurement methods. Many clients in the construction industry nowadays are dissatisfied with traditional procurement methods and are now seeking alternative or strategic construction procurement methods. For this reason, Federation Square Project would best be implemented using an alternative procurement method. Based on the characteristics of this project and the client’s needs and characteristics, the most suitable alternative method for the project is construction management.
Construction management is a type of procurement method where the client appoints a construction manager and signs separate contracts with designers, consultants and trade contractors. This method is usually associated with reduced project delivery time, higher degree of design quality control by the client, and reduced cost certainty (Osama, 2013). In construction management procurement, the client selects an organization or construction manager to work with other stakeholders, including designer and consultants, to develop appropriate designs and oversee all activities performed by trade contractors.
The construction manager is responsible for developing a project schedule, managing the project, coordinating the design and construction teams, and facilitating collaboration among all stakeholders involved so as to improve the constructability of the project. This procurement method is not commonly used because it is specially designed for very complex and big construction projects (Davis, Love and Baccarini, 2008). The method is most suitable for construction projects with the following characteristics: high risk, complex phasing, significant schedule constraints, high complexity level, budget limitation and cost savings, among others (Jones et al., 2016).
The work under construction management method is divided into different packages. The client allocates each package to a specialized trade contractor. Therefore the entire contract is divided into separate trade contracts that are allocated to trade contractors who are directly contracted by the client (Ripley, (n.d.)). The client appoints the construction manager and other professionals (project team), including architect, engineer and quantity surveyor. The main responsibility of the construction manager is to ensure that the project is designed, constructed and completed as needed by the client. Thus the construction manager instructs and coordinates both the trade contractors and professionals. The organizational structure of construction management procurement method is as shown in Figure 1 below (Savage, 2015)
The construction manager plays a variety of duties including, but not limited to: developing design and construction programs or schedules; providing advice on the choice of construction methods and sequencing; monitoring and commenting on the design and construction progress; providing advice on requirements for planning works, prototypes, temporary works and testing; preparing trade contracts (work packages); providing advice on trade contractors prequalification; preparing tender and pre-qualification documentation; assisting in negotiations with tenderers; planning, managing and controlling trade contractors’ works; observing and reporting progress of the project; providing advice on issues associated with performance of trade contractors; predicting impacts of design modifications on overall work progress; controlling the project’s financial aspects; and implementing actions suggested by the project team and client to mitigate cost overruns or delays; among others (Langdon, 2015).
In construction management method, the client only deals with one firm – construction manager. This makes it easier for the client to give his opinions, recommend changes or ask for information about the progress of the project. The key advantages of construction management procurement route are as follows:
Construction management procurement has the potential of saving a lot of time because it design and construction works can overlap. Besides that, trade contractors are selected based on their knowledge level, experience, professionalism, track record and portfolio. This makes it possible to select contractors who have the ability to complete works more quickly, efficiently and cost-effectively.
The construction manager has the mandate of letting works packages to trade contractors who offer quality products or services at the most competitive prices. Therefore construction management method allows the construction manager to compare price quotes or bids from different trade contractors and choose the ones with competitive prices.
One of the major problems associated with some procurement methods is failure to involve all key stakeholders during design stage. Construction management solves this problem by allowing all key stakeholders, including contractors, to be part of the project from the planning stage. This gives the contractors the opportunity to contribute their opinions on how the performance or efficiency of the project can be improved. As a result, their inputs especially in the planning and design stages increase constructability of the project.
This method allows changes to be made in the design during the implementation process without having adverse effects on the project progress. The flexibility to changes makes it possible for design and construction stages to overlap. In addition, it allows the client to emphasize and improve quality of the final product.
In construction management procurement method, the employer tenders all works to specialists thus increasing the chances of reducing costs and improving quality. These specialists (project team, construction manager and trade contractors) have the desired knowledge, skills, experience and resources to accomplish the assigned works in the most efficient and cost-effective way. The trade contractors are also familiar with their areas of specialization and therefore know how to deal with potential challenges or issues, which helps in reducing delays and their related costs. This method also reduces the overall cost of the project because there is no main contractor to increase the costs for his profit.
This procurement method clearly defines roles for all stakeholders involved. The roles of the employer, construction manager, project team and trade contractors are defined before commencement of actual construction works. Besides the roles, these stakeholders also know the risks they are entitled to before the actual start of the project. This helps the stakeholders to plan and prepare on how to accomplish their assigned roles successfully and also prevent or reduce risks.
In construction management, the construction manager is largely responsible for administration works. There is no direct contractual relationships between the construction manager and trade contractors, which helps in preventing conflict of interest and improves project administration. This also helps the construction manager to focus on how to manage the project better and improve project delivery.
The client bears most of the risks in construction management procurement. This is because the client is the one who has direct contractual relationships with the construction manager, project team and trade contractors. If there are any risks between designs and work packages, the client is the one who bears them. On the other hand, this method is among the most risk-free procurement methods for trade contractors. So clients using this method should be experienced so as to make the right decisions when selecting the project team, construction manager and trade contractors. This would not be a big problem in this project because the client is well experienced from various public projects it had completed before.
The total cost of project implemented under construction management method cannot be estimated because the method does not allow complete development of design and work packages at the early stages. Therefore it was a big mistake for the client to award Multiplex Constructions a lump sum contract in the first place.
It is also difficult to estimate the total time that the project will take to be completed for the same reason of not developing full designs at early stages. Nevertheless, delivery time can be reduced by allowing design and construction works to overlap and choosing specialists who understand how to complete their tasks quickly and efficiently.
In construction management, every stakeholder has defined roles. The success or failure of the project depends on the performance of each stakeholder. The stakeholders are specialists and therefore work independently. However, low performance by any of the stakeholders affects the whole project. Therefore this method is only appropriate if all stakeholders deliver high quality works.
6.1. Time shortage
Construction management procurement method is best suited for projects with time constraints. If the project requires immediate commencement of works even before preparing a comprehensive design brief then this is the best procurement method to use. It allows trade contractors to move on site and commence work as soon as possible. Federation Square project had time constraints because the target was to complete it before May 2001 (Centenary of Federation). Therefore work was supposed to be started immediately so as to meet the client’s schedule. Construction management is suitable for this kind of requirements because design and construction can overlap. This facilitates smooth fast-tracking of the project.
Federation Square was a complex project and this made it nearly impractical to develop full design briefs before commencing construction works and complete the project within stipulated time. This being a public facility, project scope kept on changing making it unreasonable to develop complete designs and defining all risks before starting construction works. As a result of this, construction management would allow the project team to develop necessary design briefs for early stages of the project and allow trade contractors to start construction as the project team continued developing subsequent designs. For instance, this method would allow the project team to prepare designs of the substructure and allow trade contractors to start constructing the substructure as they proceeded to prepare designs of the superstructure. This would also have resulted to better designs thus saving the kind of criticisms that the square has received about its architecture (Levy, 2012). Figure 2 below is the photo of Federation Square, which has been named as one of the worst buildings to have been designed by one of the best architects, LAB Architecture Studio (Henderson, 2014).
This is related to the complexity of the project because design modifications happened almost throughout the project period. As stated before, it was almost impractical to develop comprehensive design of the project before starting actual construction works. Therefore the best way was to adopt a procurement method that allows constant design changes. The best method for this is construction management. The method ensures that all major design modifications and decisions are balanced through proper analysis of their cost and schedule consequences.
Construction management method is most appropriate for projects where the client wants to ensure that the links between him and the project are very close. In this case, the client (Victoria Government Office of Major Projects) wanted to have close links with the project and monitor and control its performance and development process. It is important to note that the project was constructed in the urban area and therefore had numerous impacts on the city residents and businesses. This required the client to closely monitor the project so as to investigate and mitigate its potential negative impacts on the city. It was also a high profile, large and capital-intensive project that had significant impacts on the region’s economy. For these reasons, the client had to monitor it closely so as to ensure attainment of project deliverables and objectives. Construction management is the best method to fulfill all these requirements.
Quality is a very important element in mega projects because any mistakes that can compromise quality always have huge impacts on the project. Federation Square project required design and construction products and services of the highest quality. This project would best be implemented through construction management because the method involves specialists only. The method requires the construction manager, project team and trade contractors to be specialists in their respective fields. This ensures that all works are done with the highest level of professionalism, which guarantees high quality.
According to DVPM (n.d.), construction management is most suitable for projects where current activities or occupation do not have to be interrupted. Federation Square project was built over Jolimont Railway Yards, the main transport hub of the city (Major Projects Victoria, 2017; Multiplex, 2016) and Flinders Street Station (Johnstaff, (n.d.)). These infrastructure and facilities were not supposed to be interrupted during construction of Federation Square. Construction management would have helped in fulfilling this relatively challenging requirement because the method involves specialists and experienced stakeholders who know how to achieve this.
Construction management is best suited where the client aims at making capital-intensive projects accessible to all kinds and sizes of companies, including small, micro and medium companies. This is one way of benefiting local trade contractors, engineers, architects, quantity surveyors, construction managers, and other professionals. These professionals are competitively vetted to choose the best. Therefore this method would promote local professionals, who are also in a better position to deal with common challenges experienced in the local construction industry.
Construction management method involves participants of high caliber, who understands the benefits of conflict voidance and quick resolution of disputes. These professionals usually target at avoiding disputes at all times and work collectively to resolve any issues amicably. If this method had been used, most of the disputes and claims that were filed could be prevented, thus avoiding their related delays and costs. In this method, all stakeholders are also paid directly by the client thus reducing chances of payment conflicts.
7. Conclusion
In general, construction management was the most appropriate procurement method for Federation Square project. The method best suits the project’s deliverables and objectives. This method would have allowed the project team to prepare designs for the substructure and allow trade contractors to start construction early as designs for superstructure were developed and prepared. The method would allow continuous design changes without having significant effects on the schedule or budget of the project. It would also enable the client to choose qualified and experienced construction manager, project team and trade contractors competitively thus almost guaranteeing high quality work.
The method would give the client more control of the project and allow him to be directly and actively involved at all stages of the project, which helps in ensuring that the clients’ needs are met within stipulated time and budget. Also, this method would avoid or reduce most of the disputes and claims that were filed by different stakeholders during implementation of the project. Therefore construction management was the most suitable procurement method for the following potentials: reduced project delivery time, reduced project cost, high quality of work, and reduced disputes and claims. This method is among the strategic, innovative or alternative procurement methods that addresses all the three elements of construction projects: time, cost and quality. It is also highly flexible and efficient if the client is very experienced. Victoria Government Office of Major Projects was very experienced because it had participated in different projects involving both private and public stakeholders.
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