EIABC
DEPARTMENT OF CONSTRUCTION TECHNOLOGY AND
MANAGEMENT
PROCUREMENT AND CONTRACT MANAGEMENT
CHAPTER TWO: PROCUREMENT & CONTRACT DELIVERY
SYSTEMS
2. Procurement and Contract Delivery
2
Procurement and Contract Delivery system is the way Project
Owners together with Project Regulators and Financiers
determine the assignment of responsibilities to Project
Stakeholders along the Construction Process.
A formalized contractual approach which allows an owner
to secure planning and design services and build a project,
assuring effective management throughout.
Procurement and Contract Delivery system is often
determined during the Basic Planning phase of Construction
Project.
2.1 Types & Development
3
Procurement Delivery method is an organizational
concept which assigns specific responsibilities and
authorities to people and organizations and which
defines relationship of the various elements in
construction of a project.
Methods of project delivery system
Force Account,
Design Bid Build (DBB),
Design Build (DB) or Turnkey,
Finance / Build Operate transfer System (BOT),
Construction/Facility Management Consultancy
Alliances.
1. Force Account
4
When the Project Owners engage themselves to
undertake the project, it is called a force account
delivery system. This system is promoted for
• Comparative advantage of cost, quality and time
• Scale of projects and technology (large, small)
• Remote projects
• Spatially scattered and maintenance projects
2. Design bid build
5
Merits of DBB
6
Contractors bid competitively, based on complete
design documents to maximize the built product for
the price
The owner selects the Designer on the basis of
qualifications or ability
The Designer is active in construction administration,
so design intentions are followed.
Design and construction roles are clearly defined,
and responsibilities and liabilities are also clear.
Owner is an active participant in design process.
Demerits of DBB
7
Fragmented contract for the project owner
Severe Adversarial relations between the
contracting parties, rather than foster a cooperative
atmosphere
Non - Impartiality of the Design and Contract
Administration services
Project owner responsibility for risks associated with
the design and contract administration
Design-Bid-Build construction phases are sequential
and may require more time
No built-in incentives for contractors to provide
enhanced performance (cost, time, quality, or
combination thereof)
Demerits of DBB
8
Owner is at risk for final construction cost. Actual
construction costs are not known until design and
bidding are complete.
The inability of design and contract administration
consultants to cope up with new construction
technologies and constructability issues of their
designs.
The indirect contractual obligation assigned for the
Design and Contract Administration consultants.
Often prone to adversarial positions that lead to
disputes and claims
3. Design Build/Turnkey
9
Design Build or Turnkey Delivery system is a
response to problems associated to the last two
types of delivery systems.
This system is common worldwide specifically for
Private projects.
This led lead contracting firms to form a team or
consortium of designers and specialty contractors who
work together to meet the entire demand.
3. Design-Build
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OWNER
DESIGN-BUILD
FIRM
design
subcontractors construction
design subcontractors
subconsultants
suppliers
Advantage of DB
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reducing fragmentation and adversarial relations
between designers and constructors;
minimizing Project owners’ risk transferable due to
Designers’ faults;
accountability and entire responsibility for both design
and construction is onto a single contractor;
employers’ responsibility to co-ordinate is avoided;
single point responsibility minimizes the opportunity to
claims
the client budget or financial requirement is defined
early enough
Earlier schedule and cost certainty
Disadvantage of DB
12
The General disadvantage of this delivery system
is
loss of control,
cost of tender and
cost of risks.
4. Build Operate Transfer
13
Build - Operate – Transfer(BOT) is a form of procurement
and contract delivery system that promotes Public Private
Partnership (PPP) in which a private company is
contracted to finance, design, construct, and operate for a
certain period (usually 10 years) and transfer.
the project owner is not responsible for any liability other
than force majeure and agreed upon claim adjustments.
The Operation period between completion and transfer
gives the contractor an opportunity to verify the quality of
the output of the services and works
BOT project involves a potentially complex contractual
structure
BOT Contractual Structure
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Advantages of BOT
15
It minimizes owners’ scarcity of financial resources;
It devoid of considerable risks from the project owners
the facility is well operated and transferred with free
of charge or minimum compensations to project
owners.
Integrates the process of design, construction,
operation, and maintenance.
Projects are likely completed faster
Disadvantage of BOT
16
Costs more in the long run
Longer tendering process
Costly tendering
No capable local contractors (for our case)
Contractors may not be interested in all works
5. Construction/Facility Management
Consultancy
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response to problems associated with DB and BOT
Construction management consultancy firm is used
to coordinate all activities from concept inception
through acceptance of the facility.
Facility management consultancy adds operation
of facility during operation and maintenance to
Construction Management Consultancy.
Construction Management consul..
18
CM is involved in the whole construction processes where as
all the others involve only during the implementation phase
after major decisions was made during the Basic planning
phase
Construction Management Consultants then represents
Project Owners to carry out the following services:
Feasibility studies of Construction related services
Plan and Monitor the Triple Constraints of Project
Performances
Lead and Organize regulatory systems of the
Construction Industry
Valuation, Quantity Surveying and Procurement and
Contract Management Services
Construction Management
19
Construction management is a broad term covering a
variety of project delivery scenarios in which a
construction manager becomes an integral part of the
team, at early stages in the project, to oversee such
elements as schedule, cost, and construction
methodologies and procurement strategies.
The general Construction Management variations are
Construction Management-for-Fee (CM for-Fee)
and
Construction Management-at-Risk (CM-at-Risk),
CM for-Fee
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CM-for-fee is a delivery method similar to the DBB
In CM-for-fee method,
the construction manager is responsible for project and site
management,
but is not involved in actual construction work.
The construction manager monitors cost, time, quality and safety,
but does not take responsibility for them.
The construction manager is paid a fixed or time based fees
for services provided
The construction management organization takes an advisory
role or role of an agent to the client
The CM has limited risk because construction contracts are
between the owner and individual contractors.
Construction Management-for-Fee
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(CM for-Fee)
Owner
Agency
CM
A/E
GC
Designers and Consultants
Subcontractors and Suppliers
Advantages of CM for-Fee
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Managing and administering all phases of a
project.
Treats Planning, Construction and Design, as
an Integral Task.
Cost and Schedule Control
Constructability input at design stage
Disadvantages of CM for-Fee
23
No contractual relationships with trade
contractors
No contractual responsibility for outcomes of a
project
Client retains the risks
Additional cost for the Construction Manager
CM at-Risk
24
In CM-at-risk, the construction manager, apart from
providing constructability inputs at the design stage, is
also responsible for construction means and methods and
delivery of the completed work, including quality and
performance of the asset
All procurement in the project is done by the construction
manager,
owner contracts with the designer and the construction
manager-at-risk,
construction manager-at-risk contracts with the
subcontractors.
But, still, the client retains the final decision in
project delivery
Construction Management-at-Risk
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(CM at-Risk)
Owner
Agency
CM
A/E
GC
Designers and Consultants
Subcontractors and Suppliers
Advantages of CM at-Risk
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Good for clients with insufficient staff
Owner flexibility
Responsible for cost and time overruns
Holds and manages trade contractors
Constructability design review
Legal position as a General Contractor
Works closely as a teaming effort and encouraging
trust and partnering
Phased construction (fast tracking) possible
Disadvantages of CM at-Risk
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Lack of capable construction managers
Demanding work organization
Lack of cost certainty for each work packages
Lack of contractors who can provide both
construction management and construction services
Fragmentation, as compared to DB& BOT
No exactly defined work packages (bill of
quantities)
6. Partnering, Alliances, Outsourcing and CE & JIT
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It focuses most on management of relationships
and value adding to ensure quicker, cheaper and
quality services and products with less disputes
This is a method where an owner/developer and
a contractor agree to work together by freely
sharing resources, risks and knowledge during the
course of the project
These systems require to overcome cultural and
behavioral barriers among interest groups and
control motivated performance based
management
Partnering, Alliances, Outsourcing and CE & JIT
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This type of project procurement can be
distinguished from others by
collective performance of obligations by
the owner/developer and contractor,
decision-making by consensus,
commitment to resolve disputes without
resort to litigation
Consideration in Selecting Project
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Delivery Methods
Choice of project delivery methods can be pictured in a
different context, which displays the project delivery
methods viewed by means of two criteria. This is based
on whether the project delivery methods are based on:
approach (segmented or integrated), and
Source of finance (direct or indirect funding)
If the goal is to seek traditional or segmented delivery
methods, then the client would consider the following
delivery methods.
Design-Bid-Build (DBB)
Construction Management (CM) at fee.
Some Considerations
31
If the goal is to seek integrated delivery methods, then
the client would consider the following delivery
methods.
Design-Build (DB)
Construction Management (CM at-Risk)
Design-Build-Operate-Transfer (BOT)
And if the intention is to seek direct project funding, the
owner may consider the following options:
Design-Bid-Build (DBB)
DB (Design-Build)
Construction Management (CM) at fee and at risk.
Some Considerations:
32
If the goal is to seek external financing (indirect
funding), then the client would consider the build-
operate-transfer (BOT ).
Note: It is worth mentioning that the
above division is based on the normal
procedure or the usual practice. It may
vary as agreed up on.
