Working Of Design And Build Procurement Strategy

Published Date: 02 Nov 2017

The Latham report’s vital message was that the client should be at the core of the construction process (Latham.M, 1994) and the whole project and its players revolve around him. According to (Neap.H n Aysal.S, 2004) apart from the payment of bills, the client has duties and responsibilities such as selecting the project team, making his requirements understood, making decisions to recommendations and placing orders at the right times and in the correct ways to achieve the desired quality and value for his investment.

It all seems simple and straightforward but it’s not, because all the clients are not same. The clients can be categorised as experienced and inexperienced. The experienced are the ones who are involved in the construction industry every now and then, but the inexperienced are the ones who construct rarely or just once. Morledge.R (2006) says the majority of construction clients fall under the category of inexperienced. The experienced clients are not a problem as they have a very clear mind-set on the goal and due to their involvement in the construction they know how to work with the project team and the decision making is also very clear-cut while on the other hand the inexperienced clients don’t understand the nature of the construction industry and it’s working and the decision making is also all around the place as they have an insecurity of project failure. Therefore, the needs of the inexperienced clients are difficult to manage and need professional advice at every step of procurement.

The further breakdown of the term ‘client’ makes the client much more complex as Morledge.R (2006) further adds that clients may also vary from single-owner occupier to a multi-headed organisation with a large no. of stakeholders in it. The advantage with single-owner occupier client is that there would be only a single entity involved in the decision making so needs can be fulfilled easily and the project procurement can move at a steady pace without many stoppages. But the risk with a multi-headed organisation is that the decisions are rarely unified and to fulfil every stakeholder’s needs there can be many speed-breakers in the path of procurement and can cause an imbalance in the triangle of time, cost and quality.

The single-owner occupier clients and the multi-headed organisation clients can be further narrowed-down to public sector clients, private sector clients or a joint venture between both. The public sector clients fall under multi-headed organisation and has got many stakeholders in a project and are the most difficult to manage to manage as the needs keep on changing as they try to process a functional, value for money and a low risk project while the private sector clients are prepared to take some risks to achieve profit out of the project (Morledge.R, 2006). The private sector clients can be both a single-owner occupier and a multi-headed organisation and can be comparatively harder to manage as profitability is their main need and the projects are more complex in nature.

According to (Nkado R N and Mbachu J I, 2001) the clients have two sets of needs: the first set may be consciously or unconsciously concealed, yet its fulfillment brings about satisfaction. The other set consists of the stated needs, which are client’s perceived solutions or stated requirements for the fulfillment of the concealed or real needs. Non-performance, by the service providers, in the fulfillment of the stated needs would lead to dissatisfaction. However, the fulfillment of the stated needs alone does not automatically guarantee client satisfaction, but can only lead to satisfaction if the stated needs or requirements sufficiently address the concealed needs. Duffy (1992) identified different types of client value propositions such as use-value building, exchange-value building, image-value building and business value building. For a better understanding of clients needs these client value propositions should be categorized under concealed or stated needs. Each type of client has different concealed or stated needs and value propositions so by identification of value and needs as per the client, resolves the complexity of the client and further simplifies the procurement route to be chosen.

The client plays an important role in defining the project procurement strategy as a strategic brief is sets the guidelines for the procurement route to be followed. Functionality and the business case should be clearly identified by the client, and funds should be managed properly. Morledge.R (2006) suggests procurement of a construction project as a business solution involves risk to the client organization and requires direct involvement of the client with the construction professionals. The imminent risks such as project not meeting functional needs of the client’s business and project delivery within estimated time and cost can have a major impact on the client’s business. Therefore, risks should be sorted out in the procurement strategy at the appraisal stage of the project.

All the clients want the project to be completed within the frame-work of time, cost and quality. Morledge.R (2006) argues that the identification of that factor is important which will be a high risk to the business if it fails to be achieved and will assist in the development of priorities.

The Latham report 'Constructing the Team' wished-for an understandable action plan with timescales, scheduled people to implement its recommendations and consequently sought the views of contractors and key private and public sector clients (NAO, 2001). It charged both the private construction client and the UK government that its recommendations implementation onus is on them and recommended that the latter should commit it to becoming a best practice client (NAO, 2001). Therefore, the right strategic brief should help the client in building the right team which will deliver the project successfully to the client and the client should take independent advice on this decision (Morledge.R, 2006).

Now the clients from both public as well as private sectors have realized that a more strategic approach to construction procurement is required as both the sectors don’t want to bear any losses in this highly competitive market and a bizarre global economy. Therefore, Morledge.R (2006) suggests that externally facilitated project strategy workshop incorporating input from all of the major stakeholders should supplement the standard briefing procedure. The end-users, the budget holders and the facility managers should be included in this type of workshop for the private sector. While representatives from the department of audit and law should be included for the public sector so that project procurement methods are strong for public accountability.

The complexity of the client is the biggest challenge which is faced by a project manager and to resolve this complexity firstly, there is a need to identify the type of client, then to identify his needs, the business case afterwards and finally the procurement strategy. One should to highly focus on choosing a procurement strategy which fulfills the first three needs so that the running of the project is simplified and no changes are required afterwards.

Task 2-

Figure2.1- Walker Diagram for Client 1

Client 1- Delsey Food sales Plc are a manufacturer of ‘long-life’ ready meals. The industry they come from is bulk food processing and manufacturing and for them delivery of the product to the supermarkets at the earliest is the most important criteria. As we can see from the case-study of their business, other competitors have started to impact on their business and there is intent to move to new premises for improvement in the working environment and to reduce handling time.

Therefore, for the client ‘time’ is the biggest priority because already the competition has impacted on their sales and the sooner they’ll go to the new premises the earlier they can get a strong hold of the market, so speedy completion will have more criteria over time-certainty. The secondary aspect should be ‘performance’ of the new facility as the case-study already tells us they want to use a greater mechanisation. The advantage of greater mechanisation is better productivity both in quantity as well as quality, so functionality of the place has more criteria over the quality of the space and design for a manufacturing unit is standardised. For the client 75% of the priority needs to be ‘time’ and ‘performance’ because food industry is such where the customers demand good quality product at the earliest. ‘Cost’ should be given the remaining 25% priority because the company’s bank is already agreed to give a loan and the local authorities have also indicated its support for the venture and what should be considered is the price certainty rather than complete pricing and lastly the whole-life criteria cannot be fixed in this case as this one industry which is ever changing. The important point to note is if the first 75% is delivered accurately the company will take-over the market again and cost won’t be of any large priority as profit margins would go high.

Figure2.2- Walker Diagram for Client 2

Client 2- Towther Properties plc are a development company who build regional distribution centres throughout the country so that main store chains can access the local markets for their goods. For the client ‘cost’ is the most beneficial factor as they are building the stores and leasing it for 15 years as per the case-study. Therefore, complete pricing is the most important criteria as this would be a store where a lot of people will visit and will used ruggedly therefore after 15 years refurbishment would be required before leasing it for the next time so price certainty and whole-life become secondary here. The next priority is ‘time’ as sooner they build, earlier the building can be given on lease and speedy construction & time certainty play equal roles in this case. And the last priority in this case should be ‘performance’ as it is a standardised place of trade and quality is the last aspect anyone would see, so therefore design and functionality should be very simple and standardised.

Figure2.3- Walker Diagram for Client 3

Client 3- Shearlife Plc is an insurance company that invests money in construction projects in the commercial and industrial sector. This is a very different type of a client as compared to both the clients above because this is a corporate client. For this type of client ‘performance’ of his buildings matters the most because when their clients visit, the ‘performance’ of the buildings impresses the client and becomes the selling point. This client is more concerned with the quality in his building as compared to the design aspect and functionality is least considered. The secondary priority is the timely completion because it sets the right impression on the customer with time certainty definitely ahead of speedy construction. These both factors are the selling point of this client and constitute 3/4th of his priority. The last and remaining bit of the priority is the ‘cost’ as for him as he knows with the corporate image that his company has he has to spend well to get the maximum output of the building and has to put the whole-life above complete pricing and price-certainty.

What we can see in these three cases is that all of the three clients have different priorities towards construction as all of them are from different types of business categories and by looking at this one can definitely say that the manufacturing industry is a time based industry and for them timely delivery of the product is the only criteria to succeed in the market (client 1). Secondly, the low and mid-level construction companies or development companies are cost-based as for them delivering the project in minimum cost is the main criteria irrespective of quality (client 2). And thirdly, the big corporate houses (client 3) largely depend upon the quality of the building or project because for them it’s a show-off business and the better you portray your image and project; the more likely you’ll have the customer in the bag. So, one can say that it’s important for the project manager to analyse the nature of the client’s business and his priorities.

Task 3-

Procurement can be defined as the process that deals with the project definition and delivery and the technical abilities of the industry and the clients more and more see the procurement route used as a key aspect in getting value from their projects (De Valence G, Best R, 1999). According to Morledge.R (2006) the setting of a procurement strategy that identifies and prioritises the important project objectives , reflects upon the aspects of risk, and establishing how the process will be managed, are key to a delivering a successful project.

In the first case-study where the client Delsey Food Sales Plc manufacture ‘long-life’ ready meals have to move from their existing premises to new premises. The key highlight points in this case are (1) they are already struggling in market due to the growth of their competitors; (2) want to reduce manufacturing time and (3) are taking loan from their bank at +4% bank interest-rates.

Therefore, the client needs to build the new facility as soon as possible. In the previous task a priority split was done and it was found that the ‘time’ is the most important priority for the client, ‘performance’ comes secondary and ‘cost’ comes last. In this scenario the best procurement strategy which suits the client for this project is ‘Design and Build’.

design1.gif

Figure 3.1- Working of Design and Build Procurement strategy

Design and build is a procurement strategy in which the client has to deal only with one agency or firm which will design and construct for him. It is a fast-tracked strategy as construction can start before all the detailed design is completed (Morledge.R, 2006). This procurement strategy suits our client’s case because it reduces client’s time and resources contracting with designers and contractors individually. Morledge.R (2006) also argues that the work will be done at contractor’s risk but in this project the client needs a very standardized manufacturing unit design so the risk reduces as there is no such complexity to the project.

What it also does is it gives the client a price certainty in the project provided there are no changes incorporated afterwards. By getting this price certainty the client can fix the cash flow in the project and the risk of external risks also reduces. The most highlighting factor of this route is that reduction in the total project time to early completion is possible as the activities overlap (Morledge.R, 2006) and this is what the client needs in this case.

In the second case-study the client Towther Properties Plc are a development company who build regional distribution centres across the country which enables main store chains to access the local markets without travelling a lot. They identify the site, buy the land, obtain planning permission and use local contractors to build. Then these are leased to store chains on a 15 year lease. While doing the priority split for this client in the previous task it was realised that the client‘s main priority is ‘cost’ and ‘time’ & ‘performance’ follow in order. The cost is important because firstly, the client is not using it in fact he is leasing it to get annual rent; secondly, these facilities are trade centres where a lot of people will visit and it will become distorted with time and thirdly, no one will judge it or get impressed by the design of it. Therefore, it should be built at minimum cost as possible.

‘Measurement’ procurement strategy should be used. According to Morledge.R (2006) with a measurement contract the contract sum is only established with certainty on completion of construction, when remeasurement of the quantities of work actually carried out takes place, and is then valued on an agreed basis. This becomes beneficial because of the involvement of the local contractors, as they might stop doing work in between. It works on the principle that the work carried out is measured and valued at prices for each type of work tendered by the contractors.

Another cost saving it does is it works on the basis bill of quantities and no lump sum arrangements are made so therefore there is no chance of paying extra to the contractor. It also reduces the overall programme for design, tender and construction.

The other advantages that it offers

Pre-construction time-saving potential, as the later aspects of the design are still on-going as the works are progressing on site. What this does is makes the client think about the potential reducing of entities which are unwanted.

After the bill of quantities is done tendering can be done on competitive prices and the lowest bidder can be given the work as it saves a lot of money.

Changes can be made easily in the latter stages of design.

Easy for accountability and auditing.

And parallel working can be achieved as the contractor is selected before the design and project planning processes are completed. (Morledge.R, 2006)

This is how the client can also build relation with local contractors and do the work at competitive low prices. There is always a risk when awarding a new local contractor work, whether the work will be done or not. As the payments would be made after the measurement of the work so the chances of cheating and fraud also goes minimal.

Therefore the ‘Measurement’ procurement strategy suits the client perfectly and as per the priorities established in the previous task there is no contradiction.

In the second case-study the client Shearlife Plc is an insurance company that invests money in construction projects in the commercial and industrial sector. This is a corporate client and as discussed in the previous task the client needs a project which sells and impresses customers.

Therefore in this scenario the client requires is ‘Design-bid-build’ or the traditional procurement strategy. This is because as per the priority split, this client prioritises performance of the project over anything else and hence will be an influence on the project. This procurement strategy will help him getting involved and have his say at every step.

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Figure 3.2- Working of Design-Bid-Build Procurement strategy

What is does is it gives the client a competitive fairness in tendering as the criteria is the same for all the contractors. It also enables the client to have a direct influence especially in the design therefore the design can be matured and enhancement in the quality of the building or project because it helps them in show-off business and the better you portray your image and project; the more likely you’ll have the customer in the bag.

Morledge.R (2006) further adds

Reasonable price certainty at contract award can be based upon the market forces.

This strategy is beneficial for the client as for an insurance company auditing is very important, therefore this mode of procurement is transparent and based upon competition

Another driving factor is that this route is not new and everyone is well aware of it therefore it gives confidence to be assured to the people involved in the whole supply chain.

Changes are easy to arrange and value where the design needs vary due to client needs or technology.

Morledge.R (2006) also argues that it is the commonly adopted UK strategy, particularly for inexperienced and/or occasional clients while the clients in this case are experienced but this procurement strategy allows Shearlife Plc to be directly involved in the project and mitigate the risk out of the project and get the design done their way.

Task 4-

Durward Manufacturing Ltd is the manufacturers of electric cycles and is popular and growing year on year. Profits are good and have a strong financial situation. Their main competitor is based in Malaysia and the company is concerned to ensure that they can meet the demand in the market and remain competitive. The board of directors made a decision to encounter this threat by expanding its capacity and increase efficiency. And this couldn’t have been done in the old facility so the manufacturing plant needs to be shifted to more suitable premises. The current capacity of production is 5000 units annually but the projected sales are expected to go up to 12000 units in the next 5 years. By moving to a more efficient facility the cost of manufacturing each unit would come down from £1200 to £1000.

As the project manager we are asked to carry out the risk identification and evaluation and to propose risk management strategies to tackle these risks.

But before moving forward and identifying these risks few assumptions are needed to be made. Firstly, the manufacturing plant was earlier in UK and the company is basically catering to the UK market so therefore the new facility needs to be in UK itself. Secondly, the new facility needs to be constructed because it gives a benefit of future expansion as this a growing industry and designing as per the needs of the client. And thirdly, the fuel prices as per March 2013 were £1.36 in UK to £0.47 in Malaysia [1] , therefore the need of these eco-friendly cycles would be more in UK.

The type of risks the client would face and their risk management strategies are:

Design Risks- These constitute to the risks faced by the client at the appraisal stage of the new facility like insufficient design analysis; complex hydraulic & mechanisation features; inaccurate assumptions during planning phase; incomplete quantity estimates; incorporation of value in design and incomplete surveys.

These need to be tackled carefully and at appraisal stage only otherwise these can disrupt the project. Appointing a project manager at the earliest and selection of the right project procurement strategy (design-bid-build in this case as it will involve the client in the process and changes can be mitigated at later stages as well) is the solution for design risk.

Construction Risks- These constitute to the risks faced by the client at the construction stage of the new facility as the client is inexperienced because he is not involved in the construction industry every now and then. These include unidentified utility impacts like high-tension electric lines, etc; unidentified archaeological findings like caves beneath the site; changes in construction which were not included in the contract; health and safety risks; and delays due to traffic management.

To manage construction risks there should always be a contingency plan in play which should not be disclosed to the project team. And a full site survey and review should be done before the commencement of the work.

Environmental Risks- These constitute to the risks faced by the client at the appraisal stage, construction stage and as well as the running stage of the new facility. These include unanticipated noise impacts as the sounds; affect on any resources like water, etc; environmental clearance; unanticipated barriers to wildlife and toxic release in the air.

To manage environmental risks a full environmental impact assessment should be done by the certified agencies and reported to the required government department to take clearance for the commencement of work.

External Risks- These constitute to the risks faced by the client from the outside of the construction of the new facility. These include funding problems; political factors; permit delays; public objection; inflation & other market changes and most importantly the exchange rate between Malaysia and UK because GBP is already 4.5 times the Malaysian Ringgit and the dropping of Yen (Japan’s currency) has allowed it to capture global markets [2] especially the US as the domestic manufactured goods become expensive and the people tend to move towards the cheaper goods.

To manage these risks experts should be hired to get the necessary planning permissions, the home market (UK market) should be held firmly & a constant evolution in the technology of the product is necessary (good R&D) and jobs should be opened for locals so that there is a goodwill with the locals & government.

Organisational Risks- These constitute to the risks faced by the client within his own organisation such as resource conflict with other projects; inexperienced staff assigned to the new facility to be constructed; approval delays & poor decision making; and priority shift from the on-going project.

To manage these risks a specialised team of staff should be allocated to this project and should be well integrated with the project manager and the project team so that decision making is correct.

Project Management Risks- These constitute to the risks faced by the client when the inexperienced client tries to be the project manager himself or doesn’t hire the right professional. These include inadequate project scoping and scope creep; consultants & contractor delays; improper coordination of the project team; estimating & scheduling errors; and resources not used properly eventually leading to project over-cost.

To manage these risks the client needs to hire an expert and experienced project manager who has done such kind of a project and is highly accomplished in the construction industry.

According to Morledge.R (2006) the risks can also be managed by looking into previous risk management cases as risk management can be audited, be measured and provides a background experience for the future projects. He further adds the procurement strategy must include a risk register in which risk management techniques are formally recorded, and for regular updating of the risk management strategy as the project proceeds. Therefore, common risks can also be managed from previous cases of risk management as it saves a lot of time and resources. And there should be an overall project insurance done so that it manages any kind of risk when these risk management techniques come to failure.

Task 5-

There are three kinds of collaborative procurement strategies:

Partnering- the concept of partnering has evolved over the years as an attempt to rise above the nuisance of adversarial relationships on construction projects, due to result of contractual disputes (De Valence G, Best R, 1999). According to them it establishes a cooperative relationship between two parties that promotes a spirit of goodwill and fair dealing with a common intent of successful completion of the project and hence this strategy focuses upon win-win principle.

According to (Griffin, 1994) partnering helps to improve project outcomes, lower costs and opportunities for innovations also increase. It also enhances the prospects for financial success and it certainly can reduce disputes stemming from outdated adversarial attitudes and approaches.

(Ronco and Ronco, 1996) describe the benefits of partnering as reduced costs, usually as a result of compacted or more closely monitored project schedules and time lines, reduced frequency, extent and severity of litigation, increased building quality, and improved safety of the project. The United States Construction Industry Institute Task Force, CII (1991) collaborated the benefits of partnering into 4 groups: (1) an improved ability to respond to changing business conditions; (2) improved quality and safety; (3) reduced cost and project time and improved profit and value; and (4) more effective utilisation of resources.

The Royal Commissioner Gyles in his final report into Productivity in the Building Industry in New South Wales, Australia recommended

"I recommend that the public sector constructing authorities be asked to provide a plan for familiarisation with and the trail of partnering. In the course of doing so, the requirements of probity, fairness to contractors and value for money will have to be accommodated." (Gyles, 1992)

Easier said than done, as per (Ronco and Ronco, 1996) the main problem is that in practice it is not always possible to find a contractor with best motivations and as well for the contractors it is not possible to find such clients with good intentions. To find this ‘Bliss of partnering’, firstly one needs to eliminate the factors such as greed and failure to see the other succeed, because as soon as the greed breaks the equilibrium between the parties the partnering dissolves. According to (Cox and Townsend, 1998) the relationships like this cannot work on a short-term basis. So, therefore for partnering to be implemented in the industry firstly these relationships need to long-term.

Joint Ventures- A joint venture is the project-specific collaboration of firms, on a temporary basis, through mutual investment of capital and expertise to undertake the works (De Valence G, Best R, 1999). It can also be defined as ‘the legal binding of two companies for the purposes of providing a competitive advantage that would be difficult to attain alone’ (Gould, 1997).

Since the construction of Hoover Dam in the United States in 1930 joint-venture has been used in mega projects and is particularly used in large-complex projects where specialised construction services are required.

According to (De Valence G, Best R, 1999) the formalisation of joint venture agreements is particularly important in assigning roles and responsibilities; allocating risks and liabilities; and sharing profits and losses between the parties/ firms collaborating. A joint venture can be between domestic as well as international firms. In case of an international joint venture it is generally seen that the international firm is the expertise in the specialised field and the domestic firm has a strong knowledge on the local market and country policies. Whereas a domestic joint venture is generally done to make the collaborated firm bigger as both the firms individually is incapable to of executing the project on its own or at times there is a turn-over criteria for selection so the joint venture makes the finances big.

(De Valence G, Best R, 1999) further adds that Joint Ventures can be highly effective for the clients with earlier specialist design input and the single point of responsibility that is achieved.

Strategic Alliances- Strategic alliances is nothing but the further evolvement of partnering, it not only promotes cooperative relationships but also focuses on long-term relationships between the parties (De Valence G, Best R, 1999). Strategic alliances can be defined as extension to the partnering agreement with a common aim of doing number of projects to attain long-term goals of both parties. The alliance is characterised by the in progress association of the contractor in the client’s business plans and hence strategic alliances give the contractors more certainty of their future in the industry and hence creates a better relationship between the client and the contractor. The result of this confidence in the contractor motivates him to be more innovative and invest in the infrastructure of his company such as investment in new technologies and work practices.

According to (De Valence G, Best R, 1999) for this strategic alliance to be successful it is a must that both the parties have a relationship based on the mutually agreed objectives and practices, rather than rely highly upon contractual rights under contractual agreements. The roles and obligations of both the parties should be clearly defines through operating principles, performance objectives and evaluating mechanisms. Apart from the cost plus strategies what strategic alliances give is ‘open book’ contracting. The benefits of ‘open book’ contracting are reduced costs associated with administrating the various contracts and the client also enjoys the flexibility of design during the project and will get impartial feedback from the contractor regarding design and construction issues.

(De Valence G, Best R, 1999) adds that under perfect conditions a strategic alliance with a cost-plus payment arrangement is the most equitable strategy where the client has to pay no more or no less than due and contractor is guaranteed reasonable return on his investment and future opportunities.

The practice of Strategic Alliances mentioned above is from Australian Construction Industry and has been very successful over and there and should be implemented in the UK Construction Industry as well.

Task 6-

Project Execution Plan for Duward Manufacturing Ltd.

Project Overview-

The construction of the new manufacturing plant in United Kingdom to expand its capacity and increase efficiency of its manufacturing of electric cycles.

Project Objectives-

To increase the current capacity of 5000 units per year to 12000+ units as the projected sales figure show that the demand will rise upto 12000 in the next 4 years.

The construction of the new facility has to be very fast as their competitors in Malaysia are causing reasons to be concerned with the sales in the market.

The project should not exceed the planned budget by the company directors.

To maintain high standards in the manufacturing plant to increase the the work output and efficiency.

Efficiency of the plant should be such that the manufacturing cost per unit comes from £1200 to £1000.

Procurement Route & Form of Contract-

The client needs to build the new facility as soon as possible. After doing a priority split it was found that the ‘time’ is the most important priority for the client, ‘performance’ comes secondary and ‘cost’ comes last. In this scenario the best procurement strategy which suits the client for this project is ‘Design and Build’.

design1.gif

Figure 6.1- Working of Design and Build Procurement strategy

Design and build is a procurement strategy in which the client has to deal only with one agency or firm which will design and construct for him. It is a fast-tracked strategy as construction can start before all the detailed design is completed (Morledge.R, 2006). This procurement strategy suits our client’s case because it reduces client’s time and resources contracting with designers and contractors individually. Morledge.R (2006) also argues that the work will be done at contractor’s risk but in this project the manufacturing unit design is very straight-forward so the risk reduces as there is no such complexity in the project. The use of Performance Information Procurement System (PIPS) which is an information-based procurement system that uses the best value selection and a performance contracting approach can be used to reduce the risks as the best and experienced contractor is selected by an unbiased procedure.

What it also does is it gives the client a price certainty in the project provided there are no changes incorporated afterwards. By getting this price certainty the client can fix the cash flow in the project and the risk of external risks also reduces. The most highlighting factor of this route is that reduction in the total project time to early completion is possible as the activities overlap (Morledge.R, 2006) and this is what the client needs in this case as early completion of the project will give him the advantage of increase in supply of the electric cycles in the market.

Project Control Mechanism-

Change Control Procedure- The project should implement a project management control system as it provides the essential earned value information needed for management control of the project and maintains a database for progress reporting. This system integrates the cost and schedule baselines and provides the tools to monitor project performance. Basically it is under Scope, Schedule and Cost.

Project Reporting- Consistent project reviews and reporting needs to be done and submission of a formal monthly report to Duward Manufacturing Ltd. No later than the 15th day of each month.

Project Reviews- The reviews should be monthly progress review, Independent review and preliminary & detailed design review.

Risk Management- Undesirable events should be identified and analysed in terms of likelihood of occurrence and the resulting consequences and mitigation strategies should be in the database.

Environmental Issues- Integrated Safety Management System and National Environmental Policy should be followed.

Cost Control- A firm cost structure should be made by setting out a clear Budget Authority, Acquisition Strategy, Life-cycle cost and Contingency Management (Risk allowance).

Health & Safety- CDM coordination should be done.

Technical Analysis- Systems like Value Engineering; System Engineering; Configuration Management; Sustainable Building Design; Reliability, Maintainability and Operability; and Quality Assurance should be implemented from the early stages.

Transition to Operation- Final Inspection & Acceptance, lessons learned & Project Close-out needs to be done. The close-out should include

Technical, scope, cost & schedule baseline accomplishments

Financial close-out, including a financial report with details

Log deliverables and milestones completed

Equipment installation acceptance test results.

Photographic documentation

Baseline change control log

Final lessons learned report

Evaluation

Project Time Schedule-

Design and Build is a fast-tracked strategy as construction can start before all the detailed design is completed. The project is scheduled to be completed in 6 months as seen in figure 6.2.

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Figure 6.2- Gantt chart showing the Project Time Schedule

Project Budget-

The proposed final project budget from the board of Directors is £10 million which has been divided into

Figure 6.3- Pie-chart showing the Project Budget Split

It should be noted that the purchasing of the new land is 20% which £2 million of the total cost because the new piece of land was for £7 million and the current premises is worth £5 million and will be sold after the new manufacturing plant becomes fully operational.

Task 7-

‘The selection of consultants and contractors should only be on the basis proven previous performance and current capacity because the cost of fees is very low relative to total projects and potential project value to the client’.

As cited in (G.D. Holt, P.O. Olonolaiye n F.C. Harris, 1994) the fragmented nature of the industry’s clients with their endless range of needs is mirrored by an equally countless range of construction companies. This interface of supply and demand normally results in a selection exercise, which should enable the client to confidently entrust in the chosen contractor and consultant the responsibility to satisfactorily execute the project. Unfortunately this is not always the case; current selection methods exhibit significant variations, an over-reliance on subjective methods and are overwhelmed with inbuilt weak point (J. Russel and M.J. Skibnjewski, 1988) and (G.D. Holt, P.O. Olonolaiye n F.C. Harris, 1993).

The Performance Information Procurement System (PIPS) is an information-based procurement system that uses the best value selection and a performance contracting approach Morledge.R (2006).

According to Morledge.R (2006) the PIPS process works like:

Forces contractors to accept responsibility for their references

Compels contractors to know and find out about their performance from their references

Transfers the liability of data collection from the project manager to the contractor

Prevents client bias entering into the past performance numbers

Defuses contractor protests and arguments about the inequity of the process

Morledge.R (2006) further adds PIPS selects the contractors and consultants on the basis of performance and price, and then form the key choice criteria. The two factors that form the performance criteria are:

Past performance of the general contractor; and critical subcontractors like the site manager, electrical subcontractor, mechanical subcontractor, waterproofing contractor including roofing and waterproofing; other critical systems (high cost, high risks items).

This criteria also effects the entire process of PIPS and should include

Identifying whether a contractor has performed in the past;

Motivating a contractor to pay attention and perform on the project at hand.

The ratings of the project will count towards a minimum of 25% against the future performance rating.

It is also safe to select a contractor who has the requisite experience, i.e. similar project nature, scope and size (D. Janssens, 1991). As per (H.M.S.O, 1992) it is best to choose a construction work type by which the contractor is measured. (G.D. Holt, P.O. Olonolaiye n F.C. Harris, 1994) cites a very good example for this scenario that a client with a project for a high rise office block and extensive car parking facilities may require contractors to have experience in structural frames, cladding, pavement construction and computer facilities. They further add, the contractor need to confirm completion of a contract about each work type within the last two years (as to be considered relevant recent experience) and provide details for verification where necessary.

Current capacity to reduce risk on the unique project.

According to (D. Janssens, 1991) the size of the projects completed by the contractors and consultants in the past gives a clear overview of their potential in two ways: (i) ability to commit adequate resources to a large project (is the proposed project too large to handle as per their previous projects in terms of financial and operational capacity) and (ii) the ability to scale down operations by contractors and consultants who are more used to major works but might be tendering for a smaller contract. The project should not be so small relative to the normal size of the project they do that submission of competitive tender is unlikely.

To keep the contractors motivated to perform and to eliminate the risks the client fears, the performance criteria should be based upon items such as ‘close out documentation’ and ‘documenting risk information during the project’ Morledge.R (2006).

The ten PIPS criteria when selecting a contractor:

Ability to manage project cost

Ability to maintain work schedule

Quality of workmanship

Professionalism and ability to manage

Close-out processes

Communication, explanation of risk and documentation

Ability to follow rules, regulations and requirements

Customer satisfaction

Total no. of projects surveyed

Total no. of different customer response

Morledge.R (2006) says PIPS takes into account the no. of jobs done in the past and their references. As per PIPS the contractor with more references on more projects with high rating will always succeed the contractor with fewer projects with fewer references but the same rating. It minimizes the client’s risk. Therefore on a risky project PIPS will give preference to the contractor who has done such kind of risky projects before successfully over and over again, as this reduced the risk.

According to Morledge.R (2006) the objectives of the PIPS approach are to:

Select the best contractor who can minimise the construction risk of the client

Assist the best value contractor to minimise his or her risk of non-performance

Ensure that the contractor uses the best practices principle of reviewing the project in detail.

Minimise any misconceptions and potential problems before construction.

What the PIPS process does is selects the best value contractors and successful completion of the project.

Task 8-

Project management can be defined as ‘the overall planning, control and coordination of a project from inception to completion aimed at meeting a client’s requirements in order that the project will be completed on time within authorised cost to the required quality standards’ ( CIB, 1992). According to (Bennett, 1986) project management is not a procurement method and it means that the client has employed a manager to help out in undertaking a managerial and coordination role within the project.

According to (Uher et al., 1993) the key functions of the project manager are to advice the client as to finance, land acquisition and other planning issues; prepare feasibility studies and advice on best possible design solutions; select the other members of the project team; prepare tender documentation and manage the contracts as the manager; coordinate all members of the team throughout the project; administrate the project budget and programme; report to the client the status of the project’s time, cost and quality progress; lease areas of the building where appropriate; and to commission the finished facility as shown in figure 8.1.

Similarly (Love, 1996) suggests a project manager should select procurement methods for their clients using a systematic first-principle analysis, by:

Defining the project;

Determining the project needs;

Establishing a program;

Designing a delivery structure to meet the project needs;

Allocating responsibilities within the project structure; and

Establishing a method of appointing for the various participants involved.

230px-Project_development_stages.jpg

Figure 8.1- The role of the project management in the procurement process

According to Morledge.R (2006) the potential contribution from a project manager in a project should be

Developing the project execution plan and acknowledging project objectives and constraints and recognise their priorities.

Identifying and appointing the right project team for the project to carry out the plan and successful completion of the project.

The development and implementation of the appropriate procurement strategy.

Funding is an important requirement of the project and by the time procurement strategy is finalised, sufficient funds must be planned to be available at appropriate times in the pre-construction and construction process. The modes by which the funds would be available should also be planned carefully.

A large number of projects fail because of poor management of human resources both the individuals and groups. Understanding and communication agendas and requirements help to build a level of trust and openness necessary to ensure the client receives a successful and complete project.

Physical resources such as land, buildings, plant, machinery and materials are needed for project completion. At an early stage it is necessary to identify who is responsible for making these available and when and where.

The project manager heads the ‘temporary organisation’ for the project which exists only for the life of the project. The role of this temporary organisational structure is to enable effective communication and decision-making, management of client input, coordination of functional and administrative needs and resolution of conflicts.

The project manager has to give advice to the client for the appropriate contractual arrangements.

The project manager is responsible for implementing the procurement process and manage the necessary project control systems like

Financial systems for ensuring that payments are made in accordance to the contractual agreements.

Decision systems for ensuring decisions being communicated at the right time to the right authority.

Design change systems

Cost and time monitoring systems

The time management or the time plan of the activities involved in the project should be developed by the project manager at a early stage in the procurement cycle.

The responsibility of achieving a successful design solution to the client’s requirements lies chiefly with the architect but the project manager has the responsibility of design management by ensuring the fulfilment of the client’s needs and impact of the project on the local environment is acceptable.

The project manager also needs to manage design risks by informing the client when they appoint consultants and constructors to design projects the risk is safely transferred.

The project manager must ensure that cost management is properly followed in the project as clients don’t understand that the estimates are unlikely to be accurate unless cost control is exercised.

The project manager should help the client in the appointment of a quality inspector so that the desired quality standards/quality control is maintained.

The project manager should ensure that client avoids making changes to ‘signed-off’ and agreed designs as these can be the cause of significant extra costs and delay by implementing strong change control mechanisms.

The project manager should ensure that commissioning is complete as it is facilitated and must be complete before any building can function effectively and handed over.

The project manager should ensure the appropriate occupation and take-over of the project at the design brief itself.