Procurement Approaches

7/24/2019 Procurement Approaches

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PROCUREMENT

APPROACHES


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Procurement is the process of selecting a team for successfully

conducting a construction project.

There are three main ways in which owners procure construction

services: in-house capability, appointment and competition.


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IN-HOUSE

The in-house capability is extensively used by owners who

undertake large volumes of work, such as large private

developers and state agencies. The functions usually handled in-

house are related to design and facility management, because

there has been a shift towards outsourcing most project functionsin recent years.


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There are a number of important advantages offered by the in-house

capability option, including:

no need for a complete contract prior to starting the project

extensive administrative audit capability for the owner

minimal risk of opportunistic profiteering at the owner!s expense.

"owever, there are also important disadvantages of this option:

possible diversion from the owner core business

expensive to maintain in-house capability for small number of projects

possible production inefficiencies because of lack of competition.


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APPOINTMENT

#ppointment is often used for design and project management

services.

"owever, in many $uropean countries, appointment for public

projects is limited to a pre-established maximum contract value%

above that value a tender procedure is re&uired.

#ppointment may also be used when the project re&uirements are

so specific that only one entity can fulfil them or when the

re&uirement to mobilise resources is so urgent that there is no

time to go through a tendering process 'e.g. urgent repair of a

wall at risk of collapsing(.


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The advantages of appointment are:

restricted search of suppliers with lower costs and reduced risks

high-trust relationships built up between the client and the

supplier.

Possible disadvantages are:

lower levels of production efficiency and effectiveness due to

the lack of competition

lack of transparency of the appointment criteria

too-cosy relationships, leading to inade&uately rigorous

appointment criteria and this can degenerate into corruption.


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COMPETITION

)ompetition is widely used in the construction industry as a

means of procurement. *esign competition is primarily used

when the conceptual &uality of the design solution is paramount.


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The advantages of competition are that it:

generates opportunities for fresh competitors

brings transparency to the procurement process

encourages production efficiency.

#gainst these advantages, there are some important disadvantages:

only limited information on competitors is available for decision

some less important aspects of the offer may be over-assessed to the detriment

of possibly more important issues 'particularly in design competition(

procurement costs are high, both to the owners 'rewards, search and selection(

and to respondents to the competition 'in order to prepare the offer, which mayinclude creative work as in design competition(

re&uirements for high uncertainty transactions are difficult to prepare

underestimated winning tenders may lead to motivation problems during contract

delivery.


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TRADITIONAL PROCUREMENT

RELATIONSHIPS


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Traditional procurement assumes the separation of design and construction.

Typically, the owner first contracts design either to an architect for a building

project or to a consulting engineer for an engineering project, and they become

the owner!s agent during the design phase and act as the design team leader

+or small projects, the architect or the consultant engineer, as the case may be,

can take the role of contract administrator on behalf of the owner. #lternatively,a member of the owner!s staff can be appointed for this

)oordinators may be appointed to embrace the responsibility and authority of

part of the project team 'e.g. the design team, pre-construction team or the

construction team.

nder the traditional procurement approach, contractors are approached at the

pre-construction stage% eventually, a contractor is selected to carry out theworks. The main contractor must nominate a representative acting on the

contractor!s behalf, who tends to be called construction site manager, site

director, and contractor!s agent or even project manager, depending on the

countries.


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DESIGN AND BUILD

PROCUREMENT RELATIONSHIPS


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*esign and build arrangements aim at overcoming some of the

criticism of traditional procurement, namely the responsibility

chain, the need for complete design prior to signing the contract

and too late involvement of the

contractor in the project life-cycle.n order to develop the design, the contractor may use in-house

capabilities or outsource design to an independent team.


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MANAGEMENT CONTRACTING

RELATIONSHIPS


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nder this approach, the owner appoints a person or a company

to manage a set of work package subcontractors performing the

construction works on site

This approach allows for overlapping design and construction

because each work package may be launched only after thecorresponding design is sufficiently developed. This may result in

reduced contract period and lower construction costs.

the owner first contracts the design and then contracts the

management contractor. This allows the owner to keep control of

the design, while benefiting from the experience of themanagement contractor 'e.g. constructability and value

engineering( during the development of the design.


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CONSTRUCTION MANAGEMENT

RELATIONSHIPS


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nder the construction management approach, the owner directly

contracts each work package, and the construction manager

prepares the corresponding project execution and coordinates

works on site.


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RELATIONAL

CONTRACTING

elational contracting embraces various approaches, such as

partnering, joint venturing, alliancing, integrated project delivery

and other collaborative working arrangements and risk sharing

mechanisms


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Procurement Approaches

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