Describe about the Cooperative Research Centre for Construction Innovation.
There are multiple forms of procurement methods in the construction industry. This report has focused on analyzing three different procurement methods. These are: traditional method, design and build method and management method. Traditional method separates the functions of the consultants/design team (architect, quantity surveyor, mechanical engineer and structural engineer) and the construction team (main contractor, subcontractors and suppliers). Design and build method is where a client appoints a contractor who takes the responsibility of design and construction works. The entire project is under a single entity, contract and work. Management procurement method is where the client appoints a management contractor, pays him a fee and assigns him total or partial responsibility for design and/or construction works. Therefore each procurement method is suitable for a different kind of project. This means that if a particular method suits one project, it will not necessarily suit the next project.
This procurement method has been used in the construction industry for many years. It is undoubtedly the oldest procurement method for construction projects. Its components are: designing, bidding and building (design-bid-build). The method separates design work from construction work (Cooperative Research Centre for Construction Innovation, 2008). The design team is responsible for design work (designing the project/structure) while the construction team is responsible for executing the construction works. The design team, in conjunction with the client/developer, prepares a detailed plan of the project and gives it to the contractor before preparing the cost estimates. The contractor is responsible for dealing with all issues related to construction materials, workmanship, subcontractors and suppliers.
There are 3 forms of contracts under traditional procurement method. These are: lump sum contracts, measurement contracts, and cost reimbursement. Lump sum contracts are where the total sum of the contract is determined and agreed between the client and contractor even before the start of any construction works. Measurement contracts are where the total sum of the contract is determined on completion of the project and after taking re-measurements of work done. The re-measurements are done jointly between the client and contractor. Cost reimbursement is where the total sum of the contract is determined based on actual costs of materials, plant, equipment and labor then an extra fee is added to cover profit and overheads.
Under traditional procurement method, the client hires consultants and they work together to determine the design, quality and cost of the project. Tender documents are prepared first before inviting bidders. After awarding the tender, the contractor will depend on the instructions and information provided by the consultants. The consultants are also the ones who deal with all issues related to valuation of the project and payment.
This method enhances accountability because the client selects the design team and construction team on a competitive basis.
It gives all contractors a level ground to bid for the tenders. Thus contractors have a competitive equity
The client and design team have a direct influence on the project and therefore they can determine and improve the overall quality of the design
The total price of the contract is known at the time when the contract is being awarded. This price certainty makes it clear on what the client has to pay and what the contractor will get (guaranteed lump sum) on completion of the project.
It clearly specifies what each party should do. This promotes responsibility among the parties involved because their works are clearly separated
It is a very common procurement method that has been tried and tested hence many clients and contractors are familiar with it.
The client carries almost all the design risk. In this method, the contractor does not take any design management risk
Contract changes or variation can be easily arranged and managed as the project continues
It takes a lot of time before producing complete tender documents. Clients have to spend significant resources, including time, to prepare complete designs and tender documents so as to reduce or avoid disputes
The method usually increases the overall duration of the project. One of the reasons for this is because construction works cannot commence until all required design documents have been produced. Therefore it is not suitable for fast track construction projects
The contractor does not contribute to the design and cost estimation of the project and therefore risks are allocated in his absence. In most cases, the contractor is appointed after the design and planning stages of the project. This exclusion is likely to cause disputes, especially those related to the design
When to use traditional procurement method
This method of procurement is recommended to be used when:
There is adequate time to execute the project. This allows sufficient time to prepare the design and contract documents and also follow all other procedures related to bidding and awarding the tender
The design of the consultant is warranted. This reduces design risk
The client wants to select consultants and contractors individually
Price certainty of the project is needed before the construction starts
The quality of the final product or work is of great importance
There is need to distribute risks between the client and contractor. Under this method, the client and consultant are responsible for design risks while the contractor is responsible for construction risks
The value of the construction project is small
This is a procurement method where the client appoints a contractor to take responsibility of design and construction works. Here, the roles of design team and construction team are integrated (Design-Build Institute of America, 2016). This means that design and construction services of the project are under a single entity, single contract, and single work. The client only manages one contract. If the client has no expertise on the project, he may appoint consultants who will advise him on issues related to his design needs and cost. The contractor, who takes partial or total responsibility of the design, may also appoint consultants to help him design and execute the work.
There are two ways in which a client may appoint a contractor under design and build procurement method. These are: competitive tender and negotiated agreement (Sarah, Stanley and Hugh, 2009). Competitive tender is where the client, with the help of his consultants, prepares his design specifications or documents then invites contractors to bid. The contractor is selected based on a competitive basis. In negotiated agreement, the client only involves one contractor to discuss the project
This method can be more effective if there is straightforward and timely communication between the client and contractor. The two teams have to work as partners with a common goal (The Chartered Institute of Building, 2010).
Advantages
The client only deals with a single firm thus reducing the amount of time and other resources that could have been used to look for contractors and designers separately
Post certainty is higher and is usually determined before start of construction because the client states his requirements first and changes can only be done with his approval
The contractor can save time and cost by using his own strategies considering that he knows the guaranteed maximum price even before starting the project. This allows the contractor to complete the project early and move to the next
The contractor is involved in the design process and therefore he has the advantage of innovating ways of improving construction methods
It enhances faster project delivery
There are less disputes and conflicts between the client and contractor
The client only requires a few technical staff because it is not his responsibility to examine the completeness and accuracy of the design team’s work (Legislative Analyst’s Office, 2005).
It may be quite challenging for the client to prepare a comprehensive project brief that adequate information and/or his requirements
It can be quite expensive for the client if he introduces changes to the project scope
It is challenging for the client to compare bids since each contractor submits a different design, project plan and schedule, and prices
It locks out small contractors since most clients using this method always look for contractors that are well established, qualified, experienced and with a proven track record
It limits guarantee of quality control. This is because the client does not provide the final design of what he wants at the time of awarding the contract hence he has limited control regarding the quality of the work (Simon Millman, 2013)
The contract is awarded subjectively, which sometimes ignores some crucial issues such as unique needs or complexity of the project
When to use design and build procurement method
This procurement method is suitable under the following circumstances:
If scope design provided in the brief can be changed
If the project is simple (not complex)
If the structure being constructed is more functional (not prestigious)
If it is possible to overlap activities in the project plan
If only one firm is needed to take risk and responsibility of design and construction works
If the project value is of medium size
This method focus on who will be responsible for the overall management of the construction project. There are three kinds of management procurement method: management contracting, design and manage, and construction management (Cooperative Research Centre for Construction Innovation, 2008).
Management contracting is where the client appoints a management contractor and a separate professional team. The contractor takes responsibility of all construction works and has direct contractual dealings with all other contractors involved in the work.
Construction management is where the client appoints a management contractor, pays him a management fee for him to prepare the project plan, facilitate design and construction works, enhance collaboration among all stakeholders and manage the project professionally. The management contractor organizes and manages works contracts but these work contracts are directly between the works contractor and the client. Here, the management contractor only acts as an agent.
Design and manage is where the client appoints a contractor, pays him a few and gives him the responsibility to oversee both the design team and works contractors.
Advantages
The client only deals with a single firm so the method promotes collaboration and coordination between design and construction teams
It allows time saving as the works can be started earlier and the design and construction works can also overlap
It is possible to get competitive prices for works packages
Since the contractor is involved in the design stage, constructability is improved
There are clear roles, responsibilities and risks for all parties involved
The client can make changes to the design as construction progresses
Price certainty cannot be attained until after letting the final works package
The client must be proactive and well informed about the project to get better results
Price certainty is usually very low
It requires close information and time control for the project to be completed successfully
The project can only be completed if the client provides all the necessary resources
The client may not control the design quality directly since it is influenced by the contractor
The client incurs high administrative costs
It may be difficult to allocate a single point of accountability regarding the quality of work or time of completion
When to use management procurement method
If the project has to be completed fast and early
If the project is large and complex
If there is trust and confidence among all parties involved
If design and construction works can overlap
If the management contractor is ready to put his interest in the project
If the client understands the project comprehensively and can make informed decisions about it
Conclusion
Each construction project has its own uniqueness. This is because each client, design requirements, contractor and construction site is different. Therefore there is no single procurement method that can suit the needs of all construction projects. Each procurement method in the construction industry has its strengths and weaknesses. It is therefore important for stakeholders involved in a construction project to evaluate each method, including their associated risks and effect on the client, design team and construction team, before selecting the one that suits them best.
References:
Cooperative Research Centre for Construction Innovation, 2008, Building Procurement Methods, CRC Construction Innovation, Brisbane.
Design-Build Institute of America, 2016, What is Design-Build? Viewed September 7, 2016, < https://www.dbia.org/ABOUT/Pages/What-is-Design-Build.aspx>
Legislative Analyst’s Office, February 3, 2005, Design-Build: An Alternative Construction System, LAO, California.
Sarah Lupton, Stanley Cox and Hugh Clamp, 2007, Which Contract? RIBA Publishing
Simon Millman, August 19, 2013, Design and Build Procurement: Cutting through the Misconception, viewed September 7, 2016, <https://www.fgould.com/middle-east/articles/design-and-build-procurement/>
The Chartered Institute of Building, 2010, Procurement in the Construction Industry, CIOB, UK.
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