Established methods of procurement

Once a client has established a business case for a project, appointed a principal advisor, and determined their requirements and brief, a decision needs to be made on which procurement method will be adopted.

An understanding of the characteristics of various procurement options is required before a recommendation can be made to a client.

Some procurement systems can be categorised as ‘established’ methods, which include:

  • Traditional
  • Design and build
  • Management contracting

Traditional procurement

The traditional procurement route commences with the client’s employment of an architect as its principal agent. The client appoints a team of consultants (comprising an architect, quantity surveyor, and so on) to prepare the tender documents which include a full design (comprising of specifications and drawings), pricing document (typically a bill of quantities prepared by the quantity surveyor) and standard form of contract, which allows the selection of a contractor to carry out the on-site construction works.

The traditional procurement route is characterised by:

  • The need for the design to be largely complete before appointing the contractor. This prevents the contractor’s design expertise (which is often significant) from being incorporated into the design, which can result in poor buildability
  • Reliance on competitive tendering to appoint the contractor requesting the lowest price to construct the completed design, although negotiation is possible
  • Client control over the design process via its appointed consultants. The contractor does not normally assume any design responsibility

The following diagram, taken from Masterman (2002), indicates the operational relationship for traditional procurement:

The Masterman diagram shows that the client has a contractual relationship with the quality surveyor and the main contractor. The client also has both a contractual and functional relationship with the architect acting as design team leader and project manager, and an alternative relationship with the design consultants. The design consultants also have an alternative relationship with the architect acting as design team leader and project manager. From there the the architect acting as design team leader and project manager has a functional relationship with the design consultants and quality surveyors (who have a functional relationship with each other) as well as with the main contractor. The main contractor then has a functional relationship with the quality surveyor and both a functional and contractual relationship with the nominated/named subcontractors, the direct management and labour force, and the domestic subcontractors.

*If you click on the Masterman diagram it will open a pdf version of the diagram in your browser. This is also available in the ‘Downloads’ section below

What are the advantages of traditional procurement?

  • Competitive fairness and transparent tender process
  • Design-led process which delivers client quality
  • Price certainty before commencement on site
  • Oldest and most well-known route
  • Post-contract changes are reasonably easy to arrange and value

What are the disadvantages?

  • Overall project duration may be longer than other procurement routes owing to the time spent pre-contract on the design
  • No input into design and planning by the contractor can lead to poor ‘buildability’
  • Potential for adversarial relations once work starts on site if contractor is losing money on the project
  • Design risk lies with client

Key procurement features

  • Time – seen as taking longer than other procurement methods owing to pre-contract design work; on-site time normally fixed, albeit the contractor can ask for extensions of time
  • Cost – preferred if budget is fixed as low-cost risk owing to lump-sum contract
  • Quality – low risk as the majority of work completed before site by consultants working for the client

As with all procurement routes, traditional procurement may be adapted to the process described above. For traditional procurement, this would be in the use of the pricing document leading to alternatives from the lump-sum approach to allow choice with either admeasurement or cost reimbursement pricing approach.

Your task

Produce your own notes as to how the design and build, and management contracting procurement methods operate.

Pay particular attention to:

  • Their advantages and disadvantages
  • How they deal with the key project criteria of time, cost and quality

Use the approach taken to describe traditional procurement in this step to help you.

You may also want to read the Design and Construct Procurement section beginning on page 14 of Australian Guide to Building Procurement Methods.

Reference

Masterman, J. W. E. (2002) Introduction to Building Procurement Systems. 2nd edn. [online] London: Spons Press. available from https://locate.coventry.ac.uk/primo-explore/fulldisplay?docid=COV_ALMA5198239380002011&context=L&vid=COV_VU1&search_scope=LSCOP_COV&tab=local&lang=en_US [16 April 2019]

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This article is from the free online course:

Pre-Contract Management for Construction Projects: The Basics

Coventry University