Project Management Consuttant 3

CONSTRUCTION PROCUREMENT AND CONTRACT ICP 824

1.0 Introduction

Project management consultations are a method used in the construction industry to delivers

project or development from the start to finish. It’s considered to be one type to procure or to

deliver a project till the end. It has been known as an effective way to deliver a project with less

involvement from the client.

Widely used as in other industry such as accounting , real estate and also research now it has

been considered as one of the best procurement method to be used depending on the

suitability.

The project management consultant ensures the project achieves the highest standard of

compliance in environmental, social, resettlement and other similar safeguard activities.

2.0 History

The first management consulting firm was Arthur D. Little founded by Arthur D.Little himself in

Boston Massachusetts. He was a MIT Professor which has founded the first project

management consulting firm in 1886. During his time his consulting work merely focuses on

stock exchange and became a general management consultancy. Until present time their firm

has expanded to cover more scope such as Risk Management, Financial Management,

Information Management and Operation Management. In 1900s the management consultancy

became larger triggered by the Glass-Steagall Banking Act in the 1930s. People are demanding

financial advised to cover their strategy and organisation.

During that period there are three major management consultancy firm in the industry, There are

Arhtur D.Little , Booz Allen Hamilton and James O. Mckinsey. The three has been established

during 1886 to 1926. Their business has expand throughout the globe and and also opened

their branches in Europe ,Asia and South America Later. Today, PMC has been a major project

delivery method to be used in the field of construction. A glamour choice to the client in order to

seek advised and strategized their development one example are. Seri Setia Sdn. Bhd. was

formed on 5th April 1996 and they have cover the scope of project management consultancy

and facilities management. Several construction companies in Malaysia also have adapted this

skill and technique to become a project management company. One Example are Kajima

(Malaysia) Sdn.Bhd . They have take on several projects as a project management consultant.

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They tend to manage the development for the abroad clients which lack experiences in the local

network. In order to abundant such risk the client shall appoint a project management consultant

to take on the risk and the operation of the project from the start till the end.

3.0 Concept

Project Management Consultant (PMC) is an organisation appointed by the client to handle a

development or construction. These are their vital work scope. Where their main work are to co-

ordinate between client, consultant and contractor to ensure the construction throughout the

construction period. They have direct connection to the client, consultant and contractor. In other

terms they took over the client roles and responsibility to co-ordinate between consultant and

contractor. They commence their work in the pre-stage of construction and post-stage of the

construction. Their commences their duty by selecting the compatible consultant in order to

design the development according to the client needs. They must obtain the preliminaries’

estimate which are within the client budget and select the best design in accordance to the client

desire. Meaning the client has released their responsibility towards the project and the project

management consultant shall bear the responsibility. The idea by the client shall be carried into

reality.

In order to become a project management consultant, one must gain knowledge and knowledge

to make the best business and operation decisions. Examples of skill one must acquire are

managing budget towards resources and relationship to achieve the client objective.

Communication between one parties to the other are also a crucial skill in project management

consultancy. They must be able to define the consultant and contractor roles and function.

Project management consultant must obtained a problem solving skill to abolish any problem

occurs during the development period.Project management consultant must monitor and

analyse each data that came out during the development period in order to forecast any

upcoming problem and also be able to create contingencies plan manage the risk involved.

Client with lack of experiences in the industry demanding a management team which can

operate their project. Such client rely more towards the advised and the skill of the project

management consultant.

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3.1 Project Procurement System Selection Criteria

Identifying the best method to be adopted is the crucial aspect in the construction industry as

each project is unique and carries its own characteristic that differs from others. Thus different

procurement systems are used for different projects and the correct choice may help to avoid

problems and be the key to the attainment of project specific goals set up by the client. The

selection of suitable procurement methods for the development of high-end condominium above

is influenced by several factors which stern from its internal and external environments which is

comprises as shown in the Table 1 below.

Factors Criteria Sub-criteria ComponentsInternal

Client’s Requirements

Time

Short project duration – 4 years Completion within stipulated time

and budget Sell-able points – attracting

current trend of buyers

Quality of Works

Expecting high quality of products meeting the need to deliver high end condominium with full facilities

High quality of workmanship – minimizing liabilities and cost during DLP period

Best design through competition

Price Certainty

Required for price certainty before construction stage start.

Price offered meeting up with fulfilling all requirement until completion date

Expected good value of ROI & minimizing loss

Price Competition Expected for a fair and

transparency competition Best price and value for money

Accountability/ Roles & Responsibility

Minimizing tier of communication Client’s input and idea to be

incorporated Involved in all construction

phases

Flexibility in changes

In term of fulfilling client’s idea and needs as well as market trend

To have controlling power over the design

Client’s Experience & Ability Middle east developer with no

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Factors Criteria Sub-criteria Components

Characteristics

experience in local construction industry

Required good project advisor and high standard contractor

Administrative & Financial Burden

Financially stable High margin of profit expected –

open for changes in any stages if provide high return

Remote control and monitoring

Project size & complexity

Medium scale Specific technicality required Two tower high-end residential

with full facilities Project Type Property/residential development

Project Duration Four years

Project Location KL Sentral, Kuala Lumpur Among busiest business district

in Kuala Lumpur

Value/Project Specific Needs

Green technology – rainwater harvesting system, passive design, energy efficient and smart building

Islamic features – courtyard design, water elements, qiblat orientation

External

Environmental Conditions

Market competition for the project

Current market trends – GBI building

High end condominium buyers International customers –

Malaysia 2nd Home Initiative Visitor trend – tourism sector

Economic condition and the fiscal policy

Local economic stable

Law & Regulations

Regulations and the environmental

guidance

Compliance to the act and regulatory

EIA – no needTechnology Pulling factors GBI

Figure 1: Internal and External Comparison

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• Traditional Method• Design & Build Method• Construction Management

Method

Project Selection Criteria

Client’s Brief

Identifying Suitable Procurement

Methods

• Project Brief• Client’s Requirements &

needs• Client’s objectives• Client’s characteristics

• Factors related to client’s brief that will affect the process of procurement selection will be studied and identified

• Internal factors : Client’s requirements [time, quality & cost factors] , Clients characteristics & Project Characteristics

Shown in Table 1

Identifying Available

Procurement Methods

• Analyzing the advantages and disadvantages of each suitable procurement methods against the identified factors

Analyze the identified factors with the suitable

methods

Select the most appropriate

procurement method

SWOT Analysis

• Selected procurement method further analyze by studying it strength, weaknesses, threats & opportunities to eliminate any foreseen un-circumstances

Shown in Table 2


Multi-decisive factor model for construction procurement figure 1 were used to find best suitable

procurement method for this project. The selection phases are shown in the Figure 2 below.

Figure 2: Procurement Selection Diagram

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Upon identifying and analyzing all the factors related that will affect the selection of procurement

method as stipulated in the table above, current existing procurement methods are identify as

shown in the Figure 3 below.

Figure 3: Procurement Method

From the above figure, three suitable procurement methods have been identified based of the selection criteria as below:-

i. Traditional Method

Figure 4: Traditional Method

Under this method, the responsibilities of designing and construction of the project are separated and carried out by different independent organizations namely the designers/consultants and contractor. This method also called linear or sequential contracting system or multiple responsibilities contracting approach.

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ii. Design and Build Method

Figure 5: Design and Build

D&B integrates or combines the responsibilities of design which both responsibilities are contracted out to a single contracting organization. This method also known as parallel or single responsibility system whereby the client will only need to deal with a single organization for both designing and constructing the proposed project.

iii. Management Contracting Method.

Figure 6: Management Contracting Method

It is a system that gives greater emphasis on the management and integration of the design and construction of projects. Under this method the management of the design and construction of a project is contracted out to a contractor or project management company who acts as a management consultant on behalf of the client. The construction itself is commissioned to many specialist or sub-contractors who enter into contract with either the management contractor or the client.

In order to select best suitable procurement methods, study and analysis on advantages and disadvantages of the three identify methods are further clarify in this step. Advantages and disadvantages of the three suitable procurement methods are analyze against the project external and internal factors which highlighted in Table 1.

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3.2 Procurement Method Analysis

3.2.1 Advantages

Factors

Project Characteristics /

Clients Requirements

Suitable Procurement Methods

Traditional (T) Design & Build (D&B)Management

Contracting (MC)

a. Time

To be completed within 4 years – fast track/early

completion

Longer project duration – more time during pre-tender/contract stage allowing client and the project team to scrutinize and review the tender documentation.

Fast track or build-it-fast project delivery system due to the integration between design and construction matters.Allows the process of detail design and construction to run almost in parallel and concurrent to each other.Reduce construction time by rationalizing between the design, construction process and site activities/matters.

Speed delivery period as early start of construction – preparation of simple or basic tender document & the shift of the process of schematic & detail design to construction phase.Close communication & partnering working within the project reduces defects & accident rates thus contribute to early finish of the project.

Analysis in relation to the project

- √ √Shorter project duration is required. Thus D&B and MC method best suit to

the project needs in comparison with T which more time has to be spent during project inception and preparing tender documentation.

b. Quality

High end condominium – client expecting high standard of

product and quality workmanship

Client requires certain standard to be achieved. Thus any variations (changes) to the contract during the construction stage are relatively easy to arrange and manage.Quality is pre-determined as client and consultant already stipulated expected specifications in tender documentation/BQ.

Better work performance and quality as it allows contractor to be innovative & improve the between design and construction.High quality and workmanship based on the contractor’s vast experience, knowledge and competency in construction.

Client has the ability to control & supervise the quality as responsibility falls within the appointed Management Contractor.A long-term working relationship provides a continuity of works that allows contractors to understand the client’s needs & standards.

Analysis in relation to the project √ √ √High quality of project delivery and workmanship are expected. All three methods addressed the issue of meeting clients need in delivering high

quality and product workmanship. However, client has more control power

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FactorsProject

Characteristics / Clients

Requirements

Suitable Procurement Methods

Traditional (T) Design & Build (D&B)Management

Contracting (MC)in-term of assuring quality of works as compared to D&B where quality lies

solely on the contractor’s design, experience and expertise.

c. Price Certainty

Required for a project price

certainty before construction work

commence

Price certainty will be known once tender documentation submitted by tenderer.

Price certainty as the contractor propose comprehensive project proposal inclusive of project estimation for evaluation.

Price certainty will not be achievable as price is based on management contractor estimation and subsequently awarding to sub-contractor by package works.


√ √ -Price certainty important as a point of determination on viability of the project development which can be done through T and D&B method

especially in term of budget allocation and ROI.

d.Price

Competition

Required for a fair and transparency competition. Best

price and value for money

Tender documents are open for bidding and thus receiving competitive tenders. Tender price evaluated in comparison with consultant’s BQ.

Difficult to evaluate price as contractors submitting their own project design proposal thus different price quotation.

Competition retained in contractor’s selection based on work package. However, selection also based upon relational contractual.


√ √ -Price competition practice clearly within T and D&B methods where both in

return provide client with best price and project proposal development. However, in D&B method client has the opportunity to reduced price upon negotiation and redesign/resubmission before project development agreed

by both parties.

e.

Accountability/ Roles

& Responsibi

lity

Minimizing tier of communication.

Client’s input and idea to be

incorporated and to be involved in all project phases

Clear cut where responsibility for designing and construct carries by different parties.

Clear – design & build. Parallel or single responsibility procurement system where client/project owner only dealing with a single organization for both designing & constructing.

Success factors depend on the Management Contractor skills where the pain/gain formula encourages supply chains to be innovative & improve performance. Mainly with client & wholly in Construction Management.


√ √ √All three method has clear and definite define of roles of each parties involved. However, client requires for an easy handling project and

requested for accountability during construction to bear fully by contractor as remote monitoring will be done and supervision by appointed project

advisor. Organizational concept for each methods shown in Figure 4,5 and 6 above.

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f. RiskRisk avoidance with

desire to transfer complete risk

Any changes will be bear by the client and complete risk.

Risk will be bear solely by awarded contractor provided changes are not upon client’s request and instruction.

Any changes will be bear by the client and complete risk.


- √ -Risk avoidance can be applied only using D&B method where absolute risks under contractor’s responsibility

providing those changes are not upon client’s request and instruction. Thus, client will be able to transfer the said risk.

g. Flexibility in changes

In term of fulfilling client’s idea and needs as well as market trend and to have controlling power over the design

Client has complete control over design and construction field changes.

Client prepare project statement and brief or schematic design. Contractor is responsible for developing the design and proposal submission to client for agreement. Any changes during construction will bring heavy cost. Flexibility in contractor’s advantages.

Client may modify changes from designing and construction with additional cost incurred.


√ √ √All method offers flexibility in changes. However, changes during construction implicate additional and heavy cost to client. Thus, all client needs and requirements should be

fully incorporated during project inception stage and avoid fully during construction period.

h. Complexity Medium scale. Specific technicality required. Two tower high-end residential with full facilities

Straight forward. Efficient – integrated design and construction in one accountable organization.

Efficient & collaborative – close partnering working within the project supply chains appointed.


- √ √Since the project is relatively medium scale with specific

requirement on technical aspects, thus an efficient project delivery is essential. This best requires the involvement of

contractor in the design matter to ensure build-ability aspect and corresponding with green technology as well as

Islamic features are well emphasized and incorporated.

SUMMARYBenefits COST + QUALITY at the

expense of TIME

Benefits COST + TIME at the expense of QUALITY

Benefits TIME + QUALITY at the expense

of COST

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3.2.2 Disadvantages

i. Traditional Method

Time Speed Traditional method is not the fastest way to appoint the contractor as adequate time is needed to prepare the tender documents and design of the building. The architect and the engineer will need sufficient time to design the client’s requirements into a set of drawings. While the quantity surveyor will do the measurement to convert the drawings into a bill of quantities. The design stage and tender documentation will be step-by-step which requires duration of time. Tenders documents from an incomplete design can be produced but can lead to less cost and time certainty, and may lead to disputes during the construction stage. Moreover, the construction cannot be commenced prior to the completion of the design.

No collaboration

between parties

No input into the design or planning of the project by the contractor as they are not appointed during the design stage. The contractor may know whether the design is buildability or not as they are the key players during the construction. He also knows how to reduce cost by applying the right construction method which can help the client to reduce project cost.

Claims of Variation

Order

There will be claims for V.O as if there are changes made by the client during the construction stage. Moreover, if the design team failed to prepare a complete design and tender document, claim will be made by the contractor.

Tender Price Competitive tender will make the contractor wants to beat the tender price with other contractors. This will make the contractor reduce all the price which might affect the important prices in the BQ. This will make unhealthy situation where the contractors want to have the lowest tender price which have disrupt the price of risky item. Therefore, the lowest tender bid sometimes cannot be the best choice among the others.

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ii. Design & Build Method

Cost Higher cost – price proposal submitted higher to allow for any uncertainties by the contractor.

Tender price is the final contract sum – not subject to change and additional cost as all the financial risks are taken by the contractor.

Quality Client/project owner has no direct control Limitation in design and expertise by the selected tenderer/contractor. Quality of work tends to be questionable – the contractor tends to cut

corners to maximize profit as they are controlling the design matters and construction aspects.

Flexibility None.Competition Tender are open to only selected contractor based on experience,

knowledge, competency, financial and resources. Difficult to compare price and design of each therefore hard to evaluate

competitiveness [2].Risk Wholly within the contractor’s domain [2].

Lack in client’s brief

The contractor’s bidding solely based on the client’s prepared project brief – any lacking or not detail enough will be subjected to a lot of interpretations and understanding which could make the whole exercise futile and not in the best interest of the client.

Conflict of interest

Contractor provides the design and executes construction works based on his proposal.

Client wants to instill his idea and needs despite the accepted proposal.

iii. Management Contracting

Openness & Trusts

An inherent distrust as it is not an easy task to establish real trust between the clients, Management Contractor as ass the supply chain.

Any mismanagement due to behavioral issues will lead project management disaster.

Equality Pain/gain sharing mechanism are not always equitable & risks allocation remains a contentious issue.

Mindset & capability

To change client’s mindset & mentality on lowest bidding price produce cheapest construction cost.

Lack of capable & competent partnering champions who are truly empowered to ensure that partnering could be implemented efficiently.

Commitment All partner/parties required to be committed & building teams. Inactive or disassociated partner will lead inefficient & ineffective project deliverables.

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3.3 Swot Analysis on Design and Build Method

Detail analysis has been done towards the three most suitable procurement methods for the high-end residential project and it concluded that D&B is the best method to be adopted. D&B method fully response to all the client needs and requirements as well as the project characteristic thus providing client satisfaction and guaranteed in term of high quality project delivery within the stipulated time and cost estimation.

3.3.1 Strength

The most outstanding strength of using design and build as the procurement method for this project is that

4.0 Organisation Diagram

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ClientProject Management ConsultantContractorConsultant


Diagram 1: Organization Diagram

The diagram represent the hierarchy the project management consultant where it has a direct

connection to the client . The contractor and the consultant didn’t not have a direct connection to

the client.

The contractor and the consultant can’t communicate directly towards the client. They need to

received their order and direction by the project management consultant.

5.0 Theoretically project.

Arab City Malacca

Arab city in Malacca are one of the development that use the concept of joint ventures as their

main medium of delivery. The client are an abroad developer who has set up a joint venture

development company in Malaysia to take on this development .This project located on 1.62

hectares reclaimed on Pulau Melaka. Arab City on Pulau Melaka is expected to be completed by

the end of next year and the one in Klebang in 2012

These total costs of the project are RM 250,000,000.00 and this project will have three major

locations:-Pulau Melaka, Klebang and Malacca River (KampungJawa). Its development includes

a complex that homes to 200 bazaars, 15 authentic Middle East restaurants and cafes, Arabic

health and beauty spas, and an ancient Egyptian museum.and the project are located at Pulau

Melaka.

Picture 1: Progress picture.

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The developer of this project are Golden Corporate Heritage Sdn.Bhd and the director are

Hesham Eldin Fath Mohamed Khalil .Golden Corporate Heritage Sdn.Bhd (GCH) has appointed

Chief Minister Incorporated (CMI) as a joint partner to take on this project. Where the cost of the

project shall be bear by Golden Corporate Heritage Sdn.Bhd. The management of construction

shall be take on by (CMI) the project management consultant of the project are the state

government of Malacca.

It almost seem as a joint venture company but Chief Minister Incorporated mostly act as a local

project management company to aid GCH in developing the project. GCH are a company which

specialize in oil and gas trading. They lack the experience as a developer.

In order to commence thus project they need to approach the project management concept.

They have established a relationship between the Malacca state government who also has

interest and benefit in this project.

The states of Malacca merely rely on tourism industry as their main source of economy. In order

to achieved that they must welcome any abroad investor to invest in their tourism industry. CMI

a subsidiaries company form by the state government that ventured from various state

governments in Malaysia.

In 2012 the project has been stop due to incompetency of the selected contractor. CMI has

failed to progress the work. Until today the project has been abundant. This is due to the lack of

responsibility taken by CMI as the joint ventures acting as the project developer.

For a complex project like Arab City, the client must know the best way to deliver the project.

Joint venture is a method widely used

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6.0 References

S.Ratnasabapathy and R.Rameezdeen, A Multiple Desicive Factor Modek For Construction System Selection, India.

Rosli Abdul Rashid, Ismail Mat Taib, Wan Basiron Wan Ahmad, MdAsrulNasid, Wan Nordiana Wan Ali &ZainabMohdZainordin (2006), Effect of Procurement Systems On The Performance of Construction Project, Malaysia.

Assoc. Prof. Sr. Dr. Hj. Mohammad Fadhil Mohammad (2012), Lecture Notes : IP824 Construction Procurement and ContractsUiTM, Malaysia.

Ashworth A. (2001), Contractual Procedures in the Construction Industry, New Zealand.

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Project Management Consuttant 3

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