There are various methods of procurement which can be broadly classified under the following headings:
- Design and Build
- Two Stage Tendering
- Public Private Partnerships / Private Finance Initiative
- Management Contracting
- Construction Management
- Framework Agreements
Each method has different aspects of risk transfer and no one method can be classed as best overall.
In this method the Contractor builds to a defined scope of works for a fixed price lump sum. The client retains the responsibility for the design and the project team. The contractor will be appointed normally following a tender process or negotiation and will sign up to a contract for the works. There are a number of standard forms of building contract available for this purpose.
The Client appoints a building contractor, as before standard forms of contract are available for this purpose to provide a completed building to an agreed cost and programme. The Contractor is responsible for design and construction. The Contractor can be chosen through a tender process or through negotiation. The Client can appoint a consultant to oversee the works. Maximum risk is transferred following this method of procurement, although a commercial response to design in order to address contract conditions can result.
An alternative is to appoint a contractor when designs have been developed in order to retain control of the important elements of design and specification. The Design Team can then transfer their contractual obligations to the contractor and complete the designs on behalf of the Contractor. This process is called Novation.
In this process, the Contractor is appointed on the basis of a first stage tender which determines the level of overhead and profit for each Contractor. The Contractor then works with the Project Team during the second stage to develop the designs and establish detailed costings for separate project work elements. This process will provide for a fixed price on a detailed design basis. The provider can then enter into a contract on this fixed price basis and also pursue the opportunity to novate the Design Team as with the Design and Build Procurement route as previously noted. This process requires a long second stage period in which to design and tender the different work elements and therefore a start on site would occur later than normal.
Public Private Partnerships (PPP), particularly Private Finance Initiatives (PFI) projects are created for the provision of services and not specifically for the exclusive provision of capital assets such as buildings. It is therefore preferable to investigate PPPs as soon as possible after a user need has been identified rather than leaving it until a conventional construction project has been selected as the solution. It should be noted that the tendering process in this procurement route is expensive and requires negotiation rather than competitive tendering. In comparison with other procurement routes the time from commencement of the project to attaining a start on site is substantially longer.
This is a fast track strategy which overlaps the design and construction stages and allows early elements of the construction process to be commenced before design has been completed. The Management Contractor is engaged to manage the overall contract in return for a fee. The Management Contractor can therefore be appointed early in the design and can advise on buildability and programming. In addition to the contract with the Management Contractor, the contracts for the individual work packages are between the Management Contractor and the individual sub-contractors. A cost plan is utilised to control the development costs although actual costs cannot be obtained until the final work package has been awarded.
This is also a fast track strategy where individual elements of the project are let before the design of later work packages or elements have been completed. The provider will appoint a Construction Manager to manage the overall contract in return for a management fee as with Management Contracting. Also, as before, the project can benefit from early involvement of the Contractor. In this process the contracts for the sub-contractors are placed directly between the Client and the sub-contractor and the Client will need to have a high level of involvement during the design development and the construction phases of the work. As with Management Contracting, the final costs will only be known once the final work elements have been awarded.
Framework Agreements can be established with single suppliers or with a limited number of suppliers. Frameworks can allow suppliers to be brought together with the relevant expertise and experience which can result in savings to both parties where a number of projects are involved. These agreements can cover different forms of procurement including Design and Build, Traditional, etc. The LSC are currently developing framework agreements for consultancy services accross the country. These should be available for use by colleges by early 2008. Following on from this, the LSC will also be working on developing a contractors framework.
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- Pre Construction Stage in Projects
- Engage the Client Early in Issues Management
- Design and build procurement – the way forward?
- What should Clients do when dealing with one tenderer only?
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