Procurement management and
contract administration
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Chapter 1. Introduction
1.1 General Description
Procurement:
procurement can be defined as the
purchase of goods and services at the
best possible prices, delivery dates and
legal terms.
Procurement is a process used to
select the lowest competitive and
qualified bidder for procuring
services or works or goods from
potential competitors based on
reasonable relevant criteria.
2 That is competitive procurement
1.1 General Description
Why Procurement & Contract
management ?
It ensures:
Fair competition and
Fair distributions of obligations and rights
among stakeholders
Fair competition helps
To acquire the rights the owner is entitled
to
To value market principles & effective
utilization of finance
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to get impartial and neutral opportunity for
1.1 General Description
Fair distributions of obligations and rights
helps:
To allocate appropriate risks among
contractual parties
To entitle remedial rights to contractual
parties
In general the following things determine
the construction process involved and the
relationships and roles of stakeholders
along the process.
The delivery system chosen
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1.2 Contract and procurement
management
Procurement and Contractbasics
Management
involves three major processes:
• Contract Planning,
• Procurement Management and,
• Contract Management which in turn consists of
the following
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1.2.1 Contract Planning
Procurement and Contract Management
processes shall be based upon the
approved contract planning provisions; that
is,
the contract delivery system,
the procurement method and
contract types decided upon .
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1.2.1 Contract Planning
The approved contract provisions can only
be changed following the change process
stated in the contract planning document
and if and only if:
the Environment and Context
considered are not correctly analyzed
or changed,
their application can remarkably affect
the objective of the project, and
procurement management process
justifies change of the Contract Types.
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1.2.2 Procurement
Management
Procurement Management is a process of
selecting individuals or organizations to
carry out the intended services and / or
works. It is based on provisions made on
contract planning phase.
It involves
the preparation of procurement
documents
invitation and submission of tender
proposals
Opening and Evaluation of tenders
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Procurement
Management
The following issues are necessary for a
successful Procurement Management phase:
knowing and ensuring the
implementation of procurement related
National and International laws, rules and
regulations,
adherence to the provisions made during
the contract planning phase including
their change processes,
establishment of a flexible procurement
team, and
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adhering to the principles of Proof of
competition, Impartiality, Neutrality,
1.2.3 Contract
Management
Contract Management: is a process of
reaching contractual agreement for
implementation, its administration and
finally concluding the contract. It based on
provisions made on contract planning
phase.
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Contract Management
The following issues are necessary for a
successful Contract Management phase:
knowing and ensuring contract related
National and International laws, rules and
regulations,
adherence to the provisions made during
the contract planning phase including
their change processes,
identifying, recognizing and involving all
potential or key stakeholders to form a
contract team,
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understanding, mapping and monitoring
all contract conditions agreed upon, and
Chapter 2: Procurement and Contract
Delivery
2.1 Types, Definition & Development
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.
12 Procurement and Contract Delivery system
2.1 Types & Development
Project 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),
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Construction/Facility Management
2.1.1 Force Account
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
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2.1.2 Design-Bid-Build
(Two Separate Contracts for Design & Construction)
Owner
General
A/E Contractor
Responsible for Design Responsible for
15 Costs & Schedule
Design bid build
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Typical Design-Bid-Build Process
(The five Phases)
NEED
Planning Design Bid Constructio Occupancy
Typical
n
Design-Bid-
Build
Process
Design Contractor
Team
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Merits of DBB
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
clear.
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Owner is an active participant in design
Demerits of DBB
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
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provide enhanced performance (cost, time,
Demerits of DBB
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
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lead to disputes and claims
2.1.3 Design Build/Turnkey
DB approach
Enhance the Force Account System
Reducing fragmentation, adversarial
relations and Project Owners’ risk
Employ only one procurement process
Single contractor to provide the entire
Construction Process (Design and
Construction Implementations)
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Design-Build (Turnkey)
Owner
Design-Build
Firm
Designers and Consultants Subcontractors and Suppliers
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Design-Build
OWNER
DESIGN-BUILD
FIRM
design
subcontractors construction
design subcontractors
subconsultants
23 suppliers
Typical Design/Build Process
(The Four Phases)
NEED
Typical Planning
Design/ Design
Build Construction
Process Design/Build
Team Occupanc
y
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Design Build/Turnkey
A design-build contract may also include
responsibilities that extend beyond the
design and construction phases of a
project, shifting more performance risk to
the private sector. These have include
Design-Build-Warranty
Design-Build-Maintain
Design-Build-Operate
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Advantage of DB
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
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defined early enough
Advantage of DB
Accelerated project delivery by:
Fast-tracking design and construction
Close coordination between designer and
contractor
Early contractor involvement to enhance
constructability of plans
Innovation and quality improvements
through:
Alternative designs and construction
methods suited to the contractor’s
capabilities
27 Flexibility in the selection of design,
Disadvantage of DB
The disadvantage of this delivery system is
loss of control,
cost of tender and
cost of risks.
Accelerated construction can potentially
overextend the workforce.
Traditional funding may not support fast-
tracking construction or may require
accelerated cash flow.
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2.1.4 Build Operate
Transfer
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
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opportunity to verify the quality of the
BOT Contractual Structure
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Advantages of BOT
This delivery system is advantageous
because of
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,
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construction, operation, and
maintenance.
Disadvantage of BOT
Disadvantages of BOT are:
Cost more in the long run
Longer tendering process
Costly tendering
Future political change may disrupt
prior agreement
No capable local contractors
Contractors not interested in all works
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2.1.5 Construction/Facility
Management Consultancy
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 to
Construction Management Consultancy.
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OWNER
ARCHITECT
LIMITED
CONSTRUCTION
ADMINISTRATION
DESIGN
DATA DETAILED
CONSTRUCTION
COORDINATION
FEASIBILITY
+COST
DATA
Architect’s
design GENERAL
consultants CMa CONTRACTOR
subcontractors
Construction Management: materials suppliers
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“Agency” Form
Construction Management
consultancy
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
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Lead and Organize regulatory systems of
Construction Management
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-at-Fee (CM at-
Fee) and
Construction Management-at-Risk (CM-
36 at-Risk),
CM at-Fee
CM-at-fee is a delivery method similar to the
DBB
In CM-at-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 for services provided
37 The construction management organization
Construction Management-at-
Fee
(CM at-Fee)
Owner
Agency
CM
A/E
GC
Designers and Consultants
Subcontractors and Suppliers
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Advantages of CM at-Fee
Advantages of CM at-Fee:
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
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Disadvantages of CM at-Fee
Disadvantages of CM at-Fee
No contractual relationships with trade
contractors
No contractual responsibility for
outcomes of a project
Client retains the risks
Additional cost for the Construction
Manager
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CM at-Risk
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
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the general contractors.
But, still, the client retains the final
Advantages of CM at-Risk
Advantages of CM at-Risk
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
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Disadvantages of CM at-Risk
Disadvantages of CM at-Risk:
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
43 (bill quantities)
2.1.6 Partnering, Alliances
which focuses most on management of
relationships and value adding to ensure
quicker, cheaper and quality services and
products with less disputes are recent
developments.
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
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based management
Partnering, Alliances
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
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Partnering, Alliances
The advantages of partnering are
increased opportunities for cost saving by
continual improvement,
lack of an adversarial atmosphere,
cultivation of good public relations and
increased prospects of repeat business,
incentives for innovations and improved
cost, time and quality outcomes.
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Partnering, Alliances
However, partnering is not an easy
solution. It requires commitment, discipline
and trust and can demand significant
adjustments in the relative, traditional
positions of an owner/developer and a
contractor.
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Choice of Project Delivery
Methods: Some
Considerations
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
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segmented delivery methods, then the
Some Considerations
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)
D-B (Design-Build)
Construction Management (CM) at fee
49 and at risk.
Some Considerations:
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.
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Chapter 3. Procurement
Management
3.1 Introduction and purpose
Procurement is a process used to select the
lowest competitive and qualified bidder for
procuring services or works or goods from
potential competitors based on reasonable
relevant criteria
Physical infrastructures are cost extensive
and appropriate savings obtained through
competition are the main factor behind the
procurement process
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3.1 Introduction and purpose
An effective and efficient procurement
method ensures the following rights called
the "Five Rights". These are
The Right Quality,(technical
expectation and economic consideration)
The Right Quantity, (Take-off-Sheet
Measurements and Resources Allocations)
The Right Cost / Price /,(quality related
and the right cost is nearby cost,
achieved mainly through competition)
The Right Counterpart (to guarantee
that the parties shall be fit to the job) and
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The Right Time. (scheduling with
regard to right timing is essential)
3.1 Introduction and purpose
The purposes of a Procurement Management
System can be summarized into two major
points:
To satisfy the need for economy and
efficiency,
To provide equal opportunity to
competitive bidders.
The successful achievement of these purposes
requires the following seven characteristics
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3.1 Introduction and purpose
Figure : Seven Characteristics of Tendering
Notice of
Advertisemen
t
Avoidance of Proof of
Subjectivity Competition
Characteristic
s of
tendering
Accessibility Impartiality
Formality Neutrality
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Characteristics of Tendering
Notice of advertisement:
Through an official newspaper, mass
media, and notice boards etc. which can
enable the advertisement to reach wide
range of competitors.
Proof of Competition:
tenders should be unlimited competition,
unless otherwise conditions such as
complexity and specialisation of projects
require restriction to open competition.
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Characteristics of Tendering
Neutrality: care shall be taken When
The specifications are prepared
To avoid preference to limited
alternatives
The bidding documents (contract
conditions) shall be balanced
Not to cause disruption of the task
to be accomplished.
Accessibility:
The place where bid documents are
purchased shall be clearly indicated
The place, dates and time for
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submission shall be notified
Characteristics of Tendering
Impartiality: During tendering if clarification
is requested, do so accordingly to all bidders
Often Pre-Bid Submission Meeting is
used for this purpose.
Negotiation is not allowed during tender
period.
Formality: Strict adherence to formality
shall be taken to all tenders like
the submission & opening of bids (place,
date and time)
rejection of late and non-responsive bids
57 the bid security condition shall also be a
Characteristics of Tendering
Avoidance of subjectivity:
Criteria for evaluation shall be strictly
set out in the instruction to bidders’
part of the bidding document and all
evaluations shall be carried out
accordingly.
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3.1.2 Procurement cycle
Before we go to the discussion on
procurement method and procurement
management process, we have to oversee
procurement where to where.
It include the time frame between the
identification of requirement and the ultimate
award of contract. The followings are
fundamental steps, to accomplish the
ultimate goal of procurement cycle.
A. Requirement identification
The procurement cycle begins with
identification of need
which creates a requirement.
59 E.g. a need to cross a body of water
3.1.2 Procurement cycle
B. Procurement Planning:
once requirements are defined and approved,
procurement
planning begins. At this phase determine the
following;
i. What is needed, when and what is the
relationship to other requirement?
ii. Is the requirement dependent or
independent of other requirements?
iii. if dependent, what is the relationship to
other dependent requirement
iv. When is the dead line to fulfilling the
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requirement.
3.1.2 Procurement cycle
C. Procurement requisition processing:
The first step here is to determine what the
requesting entity
wants. This is done by reviewing
specification or description of
goods or services or works required.
D. Determine procurement method:
One must determine the appropriate
procurement method to fulfill the requesting
entity's need in most expeditious and cost-
effective manner. This should ideally be done
during procurement planning stage.
61 However, if this was not the case, at
3.1.2 Procurement cycle
E. Prepare and publish bidding document:
Bidding process to begin after procurement
method determined
F. Pre-bid / meeting and site visit:
Pre-bid meetings are held alone or in
conjunction with a site visit.
Pre-bid meetings are held primarily for
complex requirements.
The purpose of pre-bid meeting is to clarify the
bid documents.
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3.1.2 Procurement cycle
G. Bid submission and opening:
During the opening event the following needs
to be determined
Is the bid received in a sealed envelope?
Is the bid form completed and signed?
Is the bid received on or before the
submission date and time?
Is there a power of attorney mandating
the authorized representative to sign the
bid?
Is the bid security ( if any) in the form and
amount stipulated in the bidding
63 document?
3.1.2 Procurement cycle
H. Bid evaluation: before the bid evaluation
takes place, an evaluation panel is formed and
approved.
Initial examination is done during the bid
opening: circumstances that could lead to the
rejection of bid at this stage are
Compliance of documents received with
the submission requirements.
Late bids
Preliminary examination of the bid
The responsiveness of the bid to the bid
documents
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Detailed examination of the bid
3.1.2 Procurement cycle
I. Award recommendation:
the contract award recommendation
resulting from evaluation of bids lead to a
request for clearance/ no-objection to award
contract.
If no-objection, the contract award
recommendation will be published and
noticed.
If there is any claim received, it will be
reviewed and investigated to determine
validity.
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A valid claim may result in suspension
of the intent to award, in order to
3.1.2 Procurement cycle
J. Contract negotiation:
Contract for goods or works procurement are
not a usually negotiated except under special
circumstances the details of which must be
specifically stipulated in the bidding
document.
K. Contract award:
For goods and works procurement, contract
award takes place with the notification of the
responsive bidder with lowest evaluated
price.
Such notification is done by the way of a
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formal letter of acceptance to which the
3.1.2 Procurement cycle
Post contract award considerations:
After contract signing,
unsuccessful bidders have the
right to request debriefing by
the procurement entity. The
debrief can be done orally or
in writing.
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