Vergabeformen Building Procurement – Contract strategy Procurement Systems – an initial overview Proper choice of delivery system can help to reduce conflicts.

VergabeformenVergabeformenBuilding Procurement – Building Procurement –

Contract strategyContract strategy

Procurement Systems – an initial Procurement Systems – an initial overviewoverview

Proper choice of delivery system can Proper choice of delivery system can help to reduce conflicts on construction help to reduce conflicts on construction projectsprojects

Judit Gyulay

05. 06. 2007

Building Procurement – Contract strategyBuilding Procurement – Contract strategy

Budapest University of Technology and EconomicsBudapest University of Technology and Economics Judit GyulayJudit Gyulay Department of Construction Technology and ManagementDepartment of Construction Technology and Management 05.06.200705.06.2007

Right Right BuildingBuilding

Right TimeRight Time Right PlaceRight Place

Successful Successful InvestmentInvestment



Participants of a construction project have different Participants of a construction project have different interestsinterests

Claims and litigationsClaims and litigations

How to reduce conflicts/risk of construction projectsHow to reduce conflicts/risk of construction projects

One area, generate conflicts: Procurement system One area, generate conflicts: Procurement system (project delivery system)(project delivery system)

Possibilities Possibilities ConsequencesConsequences

ContentsContents

Of choice the procurement systemOf choice the procurement system



Civil Engineer/Architect is involved the processCivil Engineer/Architect is involved the process in different phasesin different phases in different „roles”in different „roles”

IdeaIdeaAreaAreaMoneMoneyy

Investment ProcessInvestment Process

InitiationInitiation Hand-over and useHand-over and use



Common goal of participants to perform a Common goal of participants to perform a buildingbuilding

Meeting the client’s requirements, ensuring Meeting the client’s requirements, ensuring completioncompletion

On On timetime Within Within costcost To required To required qualityquality standards standards



(T(The incompatibility of cost, quality and time)he incompatibility of cost, quality and time)(Kharbanda et al. 1980.)(Kharbanda et al. 1980.)

CostCost

CheapestCheapest

EconomicalEconomical

ReasonableReasonable

QualityQuality

BestBest

AdequateAdequate

TimeTime

FastestFastestIn In addition: addition: participant’participant’s individual s individual interestinterest



Directly involvedDirectly involved client, designer, client, designer, contractorcontractor

Indirectly involvedIndirectly involved advisor, project manager, advisor, project manager, supervisorsupervisor

ExternalExternal bank, authoritybank, authority

Participants of a construction projectParticipants of a construction project



Participants – common goalParticipants – common goal

Conflicts, claims and litigation seems to be Conflicts, claims and litigation seems to be inevitable part of construction projectsinevitable part of construction projects

Areas generate conflictsAreas generate conflicts One-sided contract (Client drafted contract)One-sided contract (Client drafted contract) Procurement system (project delivery Procurement system (project delivery

system)system) Site conditionsSite conditions Site services, etc.Site services, etc.

ButBut



AnalysisAnalysis

Not clear understanding peculiarities of that Not clear understanding peculiarities of that specific procurement and contracting systemspecific procurement and contracting system

Responsible partiesResponsible partiesDoes not recognise orDoes not recognise orDoes not want to acceptDoes not want to accept

Lack of identification of own interest leads to one-Lack of identification of own interest leads to one-sided contractsided contract

responsibilityresponsibility



The The CClientlient

Shares: Shares: activitiesactivities

responsibilitiesresponsibilities with the partnerswith the partners

risksrisks

Will choose procurement system and contract Will choose procurement system and contract formform



Procurement:Procurement:

Total management processTotal management process used when used when obtaining a buildingobtaining a building

System of contractingSystem of contracting among among client, client, designer, and contractordesigner, and contractor

Idea Idea Hand-over and useHand-over and use



PlanningPlanning OrganisingOrganising LeadingLeading CommandingCommanding ControllingControlling

PP rr oo jj ee cc tt

Has to be managedHas to be managed

Who will Who will manage?manage?In which system In which system ??

To produce To produce /create/perform/create/perform

aa buildingbuildingaa bridgebridgeaa roadroad



Typical management structure with project managerTypical management structure with project manager

ClienClientt

Project managerProject manager

Quantity surveyorQuantity surveyor EngineerEngineer ArchitectArchitect Contractor(s)Contractor(s)

Project co-ordinatorProject co-ordinator

(Roger Waterhouse)(Roger Waterhouse)

Typical management structure with project coordinatorTypical management structure with project coordinator

ClientClient

Quantity surveyorQuantity surveyor EngineerEngineer ArchitectArchitect Contractor(s)Contractor(s)



Client’s main decisions:Client’s main decisions:

In-house project managerIn-house project manager In-house and external project management teamIn-house and external project management team External project managementExternal project management

(Help: principal adviser)(Help: principal adviser)

Organisation for the Management of the ProjectOrganisation for the Management of the Project

Organisation for Design and ConstructionOrganisation for Design and Construction

TraditionalTraditional Design and buildDesign and build

Turnkey Turnkey Package dealPackage deal

ManagementManagement

Construction Construction Management Management Management Management Contracting OthersContracting Others



Need of change in procurement methodsNeed of change in procurement methodsTraditional Traditional Project ManagementProject Management

More More complex complex projectsprojectsLack of timeLack of time

ClientClient

DesignerDesigner

ContractorContractor

ClientClient

Project Project ManagemeManagementnt

Preparation Preparation DesignDesignTender/biddingTender/bidding

ConstructionConstruction

DesignerDesignerContractorContractor

PreparationPreparationDesignDesignTender/biddingTender/bidding




Procurement/project delivery systemProcurement/project delivery system

„„Improper choice or misunderstanding generate Improper choice or misunderstanding generate conflicts”conflicts”

Traditional procurement systemTraditional procurement system Design and build, turnkey or othersDesign and build, turnkey or others Management typeManagement type



Traditional procurement system Traditional procurement system characteristicscharacteristics

Long construction periodLong construction period Consecutive organisationConsecutive organisation Clear contracting relationsClear contracting relations



Innovative Project delivery systemsInnovative Project delivery systems Construction managementConstruction management Management contractingManagement contracting Project or management service contract and Project or management service contract and

other variationsother variations

General characteristicsGeneral characteristics An organisation is employed to manage An organisation is employed to manage

the project the project the constructionthe construction

To coordinate the design with constructionTo coordinate the design with construction Overlapping between design and constructionOverlapping between design and construction Series of tenders: work packagesSeries of tenders: work packages



Client needs representation/protection by neutral Client needs representation/protection by neutral expertexpert

Traditional Traditional deliverydelivery Design and buildDesign and build systemsystem Turnkey, Package dealTurnkey, Package deal

ClientClient

DesignerDesigner


ClientClient

DesignerDesigner


InspectoInspector r

SupervisSupervisor Q.S.or Q.S.

Inspector Inspector SupervisorSupervisor

SubcontractorsSubcontractors



Design and build turnkey/package dealDesign and build turnkey/package deal

CharacteristicsCharacteristics Single point Single point

responsibilityresponsibility Can be overlappedCan be overlapped Client can be sure of Client can be sure of

maximum cost before maximum cost before final commitmentfinal commitment

Integrated design and Integrated design and constructionconstruction– Improves buildabilityImproves buildability– Fits to constructor’s Fits to constructor’s

expertise, working expertise, working condition, condition, organisationorganisation

PreparatioPreparationn

DesignDesign

TenderTender ContracContracttConstructionConstruction

CostCost

costs should be costs should be lower shorter time lower shorter time on siteon site

ThusThus

(Savings are not passed to the client in lower prices)(Savings are not passed to the client in lower prices)



Construction Construction Management CMManagement CM

Management Management Contracting MCContracting MCClientClient

DesignerDesigner

ContractorContractorss

ClientClient

DesignerDesigner


ConstructioConstructionnManageManagerr

ManagemeManagementnt



ContractorContractorss



Management contracts (CM, MC…)Management contracts (CM, MC…)

CharacteristicsCharacteristics

Management team is involved at early stageManagement team is involved at early stage Design can be influenced (buildability)Design can be influenced (buildability) Claims can be solved, delays reducedClaims can be solved, delays reduced Save time – series of tenders, work packagesSave time – series of tenders, work packages Flexibility in design Flexibility in design to suit the client to suit the client

to suit the budgetto suit the budget More risk in design – higher requirement in More risk in design – higher requirement in

designdesign No assured final cost at the start of constructionNo assured final cost at the start of construction



Comparison of procurement systems, Comparison of procurement systems, source of risks and conflictssource of risks and conflicts

Responsibility for decisionResponsibility for decision

Constriction is Constriction is started without started without knowing the knowing the construction costsconstruction costs

PreparationPreparation DesignDesign

TenderTender


CostCost

StartStart

Modern Modern managerial managerial

typed typed systemsystem

Construction is Construction is being started being started knowing the knowing the construction construction costscosts

PreparationPreparation DesignDesign

TenderTender


CostCost

StartStart

TraditionTraditional systemal system



ConsequencesConsequences

Use of non-traditional delivery system can create Use of non-traditional delivery system can create greater risk of misunderstanding Scope of work / greater risk of misunderstanding Scope of work / compensation are changing continuouslycompensation are changing continuously

Innovative project delivery systems can blur the Innovative project delivery systems can blur the traditional roles and responsibilities of traditional roles and responsibilities of participantsparticipants



One step towards a successful projectOne step towards a successful project

To choose appropriate procurement system and To choose appropriate procurement system and appoint the manager as early possible for appoint the manager as early possible for maximum benefitmaximum benefit

Characteristics of the delivery system have to be Characteristics of the delivery system have to be understood by the participantsunderstood by the participants

Contract has to contain reasonable allocation of Contract has to contain reasonable allocation of activities, responsibilities and riskactivities, responsibilities and risk

All the participants have to recognise responsibilities, All the participants have to recognise responsibilities, act in partnershipact in partnership



ProcurementProcurement

Can help to reduce conflicts on constructionCan help to reduce conflicts on construction projectsprojects

Proper choice and fully Proper choice and fully understanding of delivery systemunderstanding of delivery system

Vergabeformen Building Procurement – Contract strategy Procurement Systems – an initial overview Proper choice of delivery system can help to reduce conflicts.

Documents

construction project

procurement system slide

specific procurement

construction projects

right building

building meeting

project manager

authority participants