An Introduction to Building Procurement Systems

Jack Masterman

• Publisher: Routledge
• Year: 2003
• ISBN:
  9781134577743
• Edition: 2
• Topic: Architecture
• Subtopic: Méthodes et matériel d'architecture

First Published in 2003.Building procurement systems are the organizational structures needed to design and construct building projects. The intention of this guide is to provide the construction professional with sufficient information about building procurement systems to ensure an awareness of the main methods that are currently available, and their principal advantages and disadvantages.
Chapters 1 and 2 describe the concept and categorization of procurement systems and the evolution of the methods currently in use. The next four chapters deal with each of the various categories and the individual systems themselves. The needs of clients are examined in Chapter 7, in the context of project success. Chapter 8 investigates the way in which clients decide which procurement method to use. The author then identifies the principles governing the current choice and the various aids that are available to assist clients during this decision process. Finally, in Chapter 9, the author attemps to forecast the future of procurement systems and their use.
This clear, well-researched and well-structured guide will be invaluable to students and practising construction professionals alike as they work with a range of building procurement systems to choose the system most suited to their needs.

1
The project-implementation process

1.1
Introduction

Before examining the procurement process in detail, the latest philosophies adopted by major clients to implement their projects need to be considered because they are likely to affect substantially, at least in the immediate future, the project culture and the way in which clients manage their construction projects.

Traditional methods of implementing projects have been replaced over the past two to three decades by less conventional approaches, often incorporating more co-operative means of project implementation.

While much remains to be done to reach the level of co-operation between the demand and supply sides of the construction industry seen in other major industries, such progress as has been made is beginning to alter the management and culture of many major construction projects and is helping to build trust and increase co-operation between all members of a project team.

1.2
The project culture

Although the importance of central government as a major construction industry client has declined over the past decade, demand from this particular source remains substantial. Its construction procurement policies and concerted efforts to improve team relationships have considerable direct influence on local government as well as indirectly on the private sector and, of course, on its own considerable and varied activities.

The advent of the private finance initiative (PFI), market testing, contracting out and internal markets has meant that government departments are carrying out more of their business through procurement of goods and services rather than by direct provision. This has resulted in the devising of a new strategy to ensure that government achieves world class standards in its procurement activities ^[1].

In essence, the strategy consists of the following key elements:

• establishing best practice in procurement;
• achieving best value for money;
• defining departmental objectives and requirements and careful assessing of business cases, risks and contracts;
• emphasising integrated procurement processes, covering the whole cycle of acquisition and use, to ensure quality and economy over time and not just the lowest price;
• combining co-operation and competition into relationships with suppliers in order to promote continuous improvement and benefit sharing;
• the client and the industry working together to maximise the chances of project success and to enable government to help the industry to be more efficient and competitive.

Subsequent reports, such as the Cabinet Office Efficiency Unit’s paper Construction Procurement by Government^[2], have supported this new approach, having established that the construction industry was not matching best practice in other sectors of industry.

The approach adopted by the new strategy might be considered to be a restatement of guidelines which have been well defined in the past and will come as no surprise to those who have had experience on either the demand or supply side of the industry or to those who have read the Latham report ^[3] or earlier reports.

What is of interest, however, is the stated intention on the part of the major public client to change its relationship with the supply side of the industry by working with co-operative, competent and non-adversarial consultants and contractors in such a way as to improve the performance of all the participants in the process.

The government’s philosophy therefore now appears to be that, while still wishing to ensure that value for money is achieved, there will be a positive move towards the establishment of a more co-operative and non-confrontational environment in which to carry out, by use of best practice, project implementation.

This new policy may well have stemmed, at least in part, from the less overtly stated emphasis on government continuing to act increasingly as a facilitator of capital projects through the PFI, public/private-sector partnerships and other means, thus reducing the amount of direct implementation and funding of such projects.

In terms of the public sector, the reduction of capital expenditure on major building projects and the use of contractors and others to finance, build and operate such developments means that the level of co-operation between the client and the provider and operator must be improved. This heightened level of collaboration is necessary to ensure that the facility performs as required and that it is a commercial success for all those involved. It might, of course, be that this new approach is prompted as much by the need to make a virtue out of a necessity as for any improvement in the performance of the construction industry or any particular project.

Whatever the reason for the pursuit of this new policy by the major public-sector client, a large and rapidly increasing number of influential private-sector clients are also now carrying out their projects within a similar co-operative framework in which full and sustained collaboration with all the members of the project team is a major feature of the approach.

Assuming that the demand side of the industry continues increasingly to adopt such an approach, and that the supply side responds positively, this change of attitude could ensure a gradual change from a philosophy of confrontation to one of cooperation on many major projects, with a consequent improvement in project performance.

However, such a state may only be achieved where clients have a consistent and long-term demand for construction services and where there is a coincidence of interest among the participants within the supply chain. It has been suggested ^[4] that only one-quarter of construction projects are likely to fall into this category and that the remainder will still need to be managed by traditional commercial methods.

Despite this stricture, it is possible that—in time—a co-operative approach, using partnering, strategic alliances and serial contracting for example, may well persuade both sides of the industry to move away from the single-project approach to building and fostering relationships to a philosophy based upon long-term programmes of construction and the adoption of wider perspectives ^[5].

1.3
Project implementation

Much has been written concerning construction project management and project implementation, and it is not the intention here to add to the large amount of literature that illuminates the general principles of this subject but rather to concentrate on that part of the implementation process that deals with the management of the choice of the most suitable method of procuring the project. Although the project culture and the spirit in which the project participants approach their individual tasks will affect the outcome of the implementation of the process, the overall management of the project will still need to be carried out in such a way as to ensure that the client’s objectives are met by the most effective means.

Morris ^[6] proposes a model for the management of projects which takes into account past experience of managing major schemes in different industries, many of which are considerably more sophisticated than construction, and suggests that adopting a wider approach to the management of projects than that usually found in traditional literature and teaching will increase the chances of success.

This wider approach, while incorporating the classic methods and techniques for managing and controlling projects, stresses the need to take into account—particularly when defining the project objectives, strategy, standards, technology and design—the effect that the external environment has on these elements. There is also the need to ensure that the attitudes of all of the parties are positive and supportive and that they are motivated, treated as team members and have experienced and strong leaders.

The need for all the parties to have positive and supportive attitudes, to be well motivated and led and to work together as a team echoes the latest client philosophies, and the arguments for the adoption of such an approach in order to maximise the chances of success are irrefutable.

The effect of the external environment on the activities of organisations has been well established in management literature, as has the need for this phenomenon to be managed, but this does not detract from the importance of its application to the specific area of project management. Matters such as local community, politics, the economic environment, the timing and nature of the funding of the project, its location and physical characteristics are identified in Morris’s model as being of particular importance to the successful implementation of projects.

The basic task of defining the project remains fundamental to its successful outcome, and it is contended that this can only be achieved in the case of building projects by the formulation of a project strategy which will set out the client’s intentions with regard to the management of all of the activities necessary for the efficient implementation of the project.

1.4
The project strategy

The project-implementation process is usually complex, expensive and lengthy and is often carried out in a hostile environment by means of a temporary multiorganisation (TMO), i.e. the project team, the members of which are frequently unknown to each other.

Walker ^[7] maintains that it is the relationship between team members and their subsequent performance that is the most significant factor in determining project success not the prescribing of a specific method of procurement chosen to suit a particular set of project conditions.

Under perfect conditions this may well be true, although there will always be other factors which affect performance to a lesser or greater extent than such relationships and performances. However, most projects are not carried out under ideal conditions or with a team that will have had any previous opportunity of establishing good working relationships.

Indeed, Liu and Fellows ^[8] suggest that the presence of many individual organisations within a TMO leads to the ‘… magnification of organisational complexities…’ and that this state then needs to be carefully managed to ensure good project performance.

Projects will always be subject to many uncertainties and risks—even when good relationships exist between members of a TMO—that can be reduced or increased by the use of the correct or incorrect project strategy for dealing with these inherent difficulties. The formulation of the most appropriate strategy is one of the most important tasks that the client has to undertake during the project’s life.

The project strategy consists of a number of substrategic areas, which need to be examined in detail by the client so that appropriate decisions can be taken as to which substrategy should be adopted.

Based upon Morris’s work ^[6], these areas should include:

• the roles of the client and third parties;
• the client’s project objectives;
• environmental issues;
• quality;
• safety;
• financial objectives, funding and cost planning;
• legal and insurance issues;
• technical and design philosophy;
• project/work breakdown structure;
• milestone schedule;
• risk management;
• project constraints;
• the method of organising the design and construction of the project;
• logistics;
• employment and industrial relations;
• public relations/communications;
• information technology.

Although most of these substrategies will affect, to varying extents, the choice of the method used to procure the project, it is intended to examine only those which are fundamental to that part of the project-implementation process which identifies, examines and eventually selects the most appropriate method of procurement.

These will be discussed in the following chapters and are:

• the roles of the client and third parties;
• the clie...