Procurement Methods in Construction

In this article we are discuss about construction procurement, separated system, the major types of contracts under procurement methods in construction such as lump sum contract, measure & pay contract, cost reimbursement contract and management oriented system's, integrated system, collaborative System, partnering, joint venture, procurement selection criteria, conclusion and recommendation, etc.

A most important job role of quantity surveyor as a procurement manager is selecting a most appropriate construction procurement method. There are different construction procurement in construction industry. Selecting a wrong construction procurement system usually leads to client dissatisfaction and project failure. Therefore, to accomplish client target, Quantity surveyor should select a best and suitable construction procurement in a realistic and systematic methods. The appropriateness of construction procurement system relies on the duration, size, quality, complexity and other essential factors.

Construction Procurement

Basically construction procurement system mentions to the procedure of obtaining or acquiring property of goods or services, and starts with the willpower of a necessity for a service or property and finishes with the completion & closeout of a contract. An organizational structure which organizes particular authorities and responsibilities to participants and describes the connection of the various components in the construction projects.

types of construction procurement system

Separated System

Separated System also knows as "Traditional System". in this approach. the procurement traditional structure is viewed as a progressive method due to the employer. He takes his arrangement to an advanced phase with his expert team before assigning a contractor. The designer is hired to guide the employer/client.
The designer will design and make sure that the project is kept within the budget and fulfills the required standards. A Quantity Surveyor can be engaged to provide supervision on design cents and budgets, preparation of Bill of Quantities, tender evaluation, preparation of interim valuations and advising on the variation values. The contract amount generally relies on a Bill of Quantities issued by the Quantity Surveyor that calculates, so far as possible, each and every part of the works. Consultant structural and services engineers may be hired by the employer's advisers or directly by the employer to design the special components of the project. The contractor only has responsibility for construction and not for design.


There are three major contracts under this procurement such; Lump Sum Contract, Measurement Contract, and Cost Reimbursement Contract, which illustrated below;

Lump Sum Contract

Here the contract amount/ price is decided before starting the construction, and the price/ amount is stated in the agreement. The contracts "with quantities" are priced according to firm bills of quantities and drawings. The contracts "Without quantities" are estimated according to drawings and other documents.

Measurement Contract

Here the contract amount/ price is accurately recognized on accomplishment and after re-measurement to do few on agreed basis. It provides a smaller amount risk to client perhaps based on drawings, schedule of rates and rough quantities.

Cost Reimbursement Contract

It is also known as cast plus contract, here contractor can reimbursed the actual costs they gain in carrying out the works, plus an extra fee. Contract amount/ price is arrived based on actual casts of manpower, material and plant, to which is added a fee to cover profit and overheads. The amount/ costs for which the contractor is permitted to be reimbursed should be set out in the contract very clearly.


Advantages and disadvantages of Separated System are listed below,

Advantages and disadvantages of Separated procurement System

Integrated System

Integrated system also knows as "design and build", in this approach, main contractor is appointed to design and construct the works. The main matador may possibly use their own internal designers to design, the construction project or they can hire design consultants or the client's design consultants can be hired by the main contractor to finish the project design. If the contractor is employed at the inception of the construction project, so which they can contribute their support to the improvement of the design from the commencement, they can be employed through a two (2) phase procedure. In the initial phase, the contractor is carefully chosen on the basis of a fee, preliminaries, profit and overhead. Then they work with the design team, who might be hired either by the employer/ client or by the contractor at this phase to improve the design, on the base of that a fixed amount is negotiated for the second phase; construction, when the design team may substitute a new contract for an old one to the main contractor if the main contractor does not already hire them.

relationship of parties for integrated system

Advantages and disadvantages of Integrated System are listed below,

Advantages and disadvantages of Integrated System

Management Oriented Systems

Management Oriented Systems which provide great importance of the management and the combination of the design and construction of projects. Under this procurement system, the management function from the design and construction of a project is contracted out to a contractor who perform as a management consultant in support of the employer/ client. The construction itself is particularly made to many subcontractors or experts who enter into a contract with the employer/ client or management contractor. This procurement method was presented, based upon the outset which a contractor has more proficiency to manage and control the design part and construction part of a project. As a management consultant, the hired contractor does not itself, carry out the design part or construction part of the project. Its key obligation is to manage the design and construction by the deign consultants and the several expert contractors, respectively. This procurement system is recommended for large scale and complex construction projects.

Advantages and disadvantages of Management Oriented Systems are listed below,

Advantages and disadvantages of management oriented systems

Collaborative System

The collaboration among two or more than two ponies to accomplish fruitful project goals by mutual commitment, fair dealing and shared investments. Launching collaborative practices is of certain significance in building design & construction projects, as they are to be expected to be involve getting together a huge number of various disciplines. Partnering and the joint venture is the example for collaborative systems.

Advantages and disadvantages of Collaborative Systems are listed below,

advatages and disadvantages of collaborative systems

Partnering

Collaborative partnerships are actions and agreements prepared by consenting organizations to share resources to achieve a common objective. It relies on involvement by minimum two parties who agree to shove resources, knowledge, such as finances, and people. Organizations in a collaborative partnership shore mutual objectives. The spirit of collaborative partnership is for all parties to commonly benefit from working together.

Joint venture

A joint venture (JV) is a contractual agreement in that the parties mutually reach a decision to improve, for a limited time, a new asset & entity by contributing equity. They isometrics control over the enterprise and accordingly expenses, share revenues and asses. There are other categories of companies suds joint venture limited by guarantee, joint ventures limited by guarantee with associates obtaining shares.

Procurement Selection Criteria

Selection of a most appropriate procurement system based upon the employer/ client project duration, cost and finality. It can make a clear path for the decision maker to basic understanding to choose a most suitable procurement system and which helps to find out the project complexity with client's requirements. This procedure must be done in the primary stage.

When choosing the most appropriate procurement system mentioned below as table and these details should be kept in your mind.

factors affecting during procurement selection

Conclusion and Recommendation

The construction procurement system essentially encompasses with a selection of contractual framework which classifies the structure of participant's responsibilities and powers that be within the project.

It provides for complete satisfaction of the employer/ client and project success. Therefore, it is essential to develop effectiveness. Even though there are various construction procurement system, each method delivers not the same contractual arrangements. Generally the selection of construction procurement is influenced by the employer/ client's desires, including time, cost, quality, responsibility, certainty of construction project goals and market situations. Therefore, attention on these significant factors supports to develop effectiveness. Though attention on an extensive range of influence more than employer/ client's desires, which guides to develop the efficiency of construction procurement greatly, to gain a better productivity through appropriate choice and use, because construction procurement effectiveness is affected by many different factors. Therefore, proper attention must be taken on the following factors in the selection and application to develop the effectiveness of procurement system which making a clear path for success of the project.

Below mentioned are the ways to develop procurement system effective in the construction sector.


Seminars: - when seminars ate conducted for people in the construction sector, regarding the importance of construction procurement system, selection process, the application process and etc. Ultimately, it will make a clear path for people and it will increase the effectiveness.

Publication: - It is another route for construction industry people and others to know clearly about construction procurement system.

CPD Courses: - Continuous Professional Development (CPD) it is another route and it is important for construction experts, inclusion of lesson on construction procurement system will develop effectiveness.

Media methods: - It is another route and it is more effective as it can reach the people within a short time period. When instruction and implication matters are specified about construction procurement system, ultimately it will lead them to improve effectiveness.


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construction procurement, separated system, types of contracts, lump sum contract, measure & pay contract, cost reimbursement contract, management oriented system, integrated system, collaborative system, partnering, joint venture, procurement selection criteria, conclusion and recommendation