7CNMN01W
Procurement
Week 2 – Successful Procurement
This Week
• Procurement Cycle
• Project Success
• Value
• Sustainable Procurement
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The procurement cycle
The procurement cycle from: Mead and Gruneberg (2013)
A framework for procurement
Source: Circular economy procurement framework Ellen MacArthur Foundation
The Procurement Strategy
• The strategy that sets out the process for tendering and entering into a
Building Contract with the contractor. On certain projects, this will include
early contractor involvement.’ (RIBA plan of work, 2020)
• Procurement strategy should identify the best way of achieving the project
objectives, taking into account such things as
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Key objectives / Critical Success Factors
Constraints
Funding
Risk
Asset Ownership
• It is the optimum balance of these factors that we need to strive for!
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Procurement Strategy
The procurement strategy will influence:
• Who employs the design team, particularly during Stage 4 (technical design).
• When the construction team are appointed
• Who inspects the building works as they progress
• How the Project Programme is structured and how it manages risk
• Who is contractually responsible for Project Risks
• Who is responsible for the design
• When specialist subcontractors become involved in the design work
• What information is required for inclusion in the Building Contract
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The Procurement Route
Means of achieving the procurement strategy
• Traditional procurement
• Design and build
• Partnering / alliancing
• Collaborative management
• Construction management
• separate works packages employed by client, managed by a Construction Manager
• Contractor approved without any tender process
• Measured term
• PFI / PPP
• range of partnership where the public and private sectors collaborate for some mutual benefit.
• Cost plus
• Contractor’s costs plus %
• Management contracting
• Separate works packages employed by a Management Contractor
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The Contract Strategy
• Determines the level of integration of
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Design
Construction
Management
Maintenance
Operation
• Should support the main project objectives to
• Allocate risks
• Incentivise
• Deliver
• Developing an effective contract strategy that supports the client's objectives and
allocates risks to those best able to control them, is critical to delivering a project on
time, on budget, to the required level of quality and with the fewest possible
disputes.
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Project Success
• “The basis for success of a construction
project …. is laid at the start of a project and
during the planning stage.
• Anything that is left out or handled wrongly
during this stage can only be repaired to a
limited extent during building construction.”
• (Sommer, 2010)
Clients
• “Implementation begins with clients.
Clients are at the core of the process
and their needs must be met by the
industry”
• Sir Michael Latham in Constructing the
Team,1994
Client
• Stage 0 Strategic Definition – Clients Requirements
• Stage 1 Preparation & Briefing – Clients Brief
• Understanding the Client is rarely straightforward
• Construction clients have a key role as the initiators of projects
• The Intelligent Client
‘A client which has experience of and the necessary expertise to conceive,
develop and deliver a construction project for the optimum combination of
time, cost and quality.’
(Construction Procurement Handbook, Scottish Government, 2019)
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Client Details
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Site information
brand, culture and organisation.
vision, mission and objectives.
priorities and the criteria that will be used to
measure success.
Organisational structure and decision making
processes.
Changes to the client that the project will
bring about.
Interfaces with other projects.
Client policies that may be applicable to the
project (for example; transport policy, energy
policy, natural ventilation policy,
sustainability policy).
Client preferences for the project (for
example; image, use of local materials, use
of landscape, etc.)
quality expectations (including health and
safety, sustainability and design quality)
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Building surveys.
Site surveys.
Information about ground conditions.
The location and capacity of utilities.
Access and other constraints.
Legislative constraints.
Existing planning consents.
Component Requirements
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Specialist works
Long lead in times
Technical Requirements
Clients Brief
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Performance requirements
Structural strategy
Flexible space ….
Planning Requirements
Known risks
Financial Information
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Budget
Sources of funding
Programme Requirements
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Key milestones
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Why Procurement?
Grenfell, four years on
Procurement, the Hackitt review stated, “sets
the tone” for the relationship between
stakeholders and supply chain partners
including contractors, subcontractors,
designers and clients.
It continued: “The procurement process kickstarts the behaviours that we then see
throughout design, construction, occupation
and maintenance. Issues at this stage, for
example inadequate specifications, focus on
low cost or adversarial contracting, can
make it difficult (and most likely, more
expensive) to produce a safe building.”
Project Success
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What do you consider to project
success factors?
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Project success
Project Success Criteria (Source: Chan et al. 2002)
Project success
• Project success is best judged by the
stakeholders, especially the primary sponsor.
(Turner and Zolin, 2012; Serrador and Turner,
2014).
• As Shenhar et al (1997) note, reinforcing the
point that success is time-dependent:
• “As time goes by, it matters less whether
the project has met its resource
constraints; in most cases, after about one
year it is completely irrelevant. In contrast,
after project completion the second
dimension, impact on the customer and
customer satisfaction, becomes more
relevant.”
Project success
• Successful project?
Project success
• The relative importance of the success dimensions is project dependent – the greater the
uncertainty and importance attaching to the project the more important it is to get the
product right (scope) than time and budget.
Relative importance of success dimensions is project dependent (Shenhar and Dvir, 2007)).
Value
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Project success
• A common misconception in the construction
industry is that value is synonymous with cost.
• The real value of a facility lies in its ability to
enhance the satisfaction and performance of
the users and, where applicable, financial
returns.
• For non-income producing buildings, a focus
on improving user performance and/or
satisfaction with the building will also optimise
value.
• After all, a building costs money but only its
function has value.
Project success
• Two levels of project success. Adapted from Samset and Volden (2014)
What do we mean by value?
• It is about more than money!
• CABE in their publication The Value Handbook:
Getting the most from your buildings and spaces
(CABE, 2006) identify value as having six dimensions:
1. exchange value
2. use value
3. image value
4. social value
5. environmental value
6. cultural value
Value Dimensions
• Exchange value
• Exchange value is the type of value with which we are most familiar.
• The building as a commodity to be traded, whose commercial value is measured by the
price that the market is willing to pay.
• For the owner, this is the book value
• For the developer the return on capital and profitability.
• It also embraces matters such as increased inward investment and economic
regeneration.
Value Dimensions
Use value
• Contribution of a building to organisational outcomes: productivity, profitability,
competitiveness and repeat business, and arises from providing:
• a place customers want to visit and spend time and money
• a working environment that is safe in use, that promotes staff health, well-being and
job satisfaction, that encourages flexible working, teamwork and communication, and
enhances recruitment and retention while reducing absenteeism.
Image value
• Contribution of the development to corporate identity, prestige, vision and reputation
• Demonstrating a commitment to design excellence or to innovation, to openness
• Part of a brand image.
Value Dimensions
Social value
• Developments that make connections between people, creating or enhancing
opportunities for positive social interaction, reinforcing social identity and civic pride,
encouraging social inclusion and contributing towards to improved social health,
prosperity, morale, goodwill, neighbourly behaviour, safety and security, while reducing
vandalism and crime.
Environmental value
• The added value arising from a concern for the protection of biodiversity and the
precautionary principle in relation to consumption of finite resources and climate change.
• The principles include adaptability and/or flexibility, robustness and low maintenance, and
the application of a whole life cost approach.
• The immediate benefits are to local health and pollution.
Value Dimensions
Cultural value
• Culture makes us what we are.
• This is a measure of a development’s contribution to the rich tapestry of a town or city,
how it relates to its location and context, and also to broader patterns of historical
development and a sense of place.
• Cultural value may include consideration of highly intangible issues like symbolism,
inspiration, local distinctiveness and aesthetics.
Project success - Remember
• The fundamental objective for a project is to achieve a business result
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improving effectiveness
increasing sales
improving services
making operations more efficient
• Delivering the project on time, to budget and to the required standard, is an important
factor in (but not always a necessary condition of) ultimate project success
• Decisions taken during the stages of the project cycle leading up to construction (RIBA
stage 0-4) have an impact on the phases that occur AFTER construction and thus an
impact on project success.
• Different project stakeholders have different views on success
• Relevant views need to be taken into account if the results from what has been termed
the delivery stage or micro level of overall project success are to be optimised.
Outstanding projects are characterised by ……
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End users expectations being met or exceeded
The client’s strategic and financial objectives being met
Project team members achieving their financial objectives
The project delivery team having enjoyed working together, and want to work
together again
• Community and stakeholder expectations of the project in terms of safety, design,
environmental outcomes, and social objectives, being met or exceeded; and
• Ongoing management of the asset is efficient, streamlined and cost effective
• Can you think of any others?
Sustainable Procurement
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Sustainability
• The famous 1987 Bruntland Commission definition:
• “Meeting the needs of the present without
compromising the needs of future generations”.
• Sustainability can be thought of as simultaneously
enhancing
• economic growth (economy)
• social progress (equity)
• environmental protection (ecology).
– sometimes referred to as the triple bottom line
What?: Sustainable Procurement
“a process whereby organisations meet their needs for
goods, services, works and utilities in a way that
achieves value for money on a whole life basis in
terms of generating benefits not only to the
organisation, but also to society and the economy,
whilst minimising damage to the environment”
(Sustainable Procurement Task Force 2006, p 10).
Using procurement to support wider social, economic and
environmental objectives, in ways that offer real long-term benefits,
is how the public sector should be spending taxpayers money
(Simms, 2006).
Sustainability – being an intelligent client
2013 Segro Project
Repurpose 3,320 m² steel structure from one site to
another
• Segro was developing a new industrial building in Slough
(UK). At the same moment, they were demolishing a 13year old building located a few kilometres away.
• The contractor was briefed to reuse as many elements
as possible from the original building in the new one.
The primary steel structure, precast floor slabs, raised
floors, staircases, curtain walls and glazing were all
successfully reused.
• Results
• 70% (in mass) of the original building could be reused
• 40% cut in the CO2 emissions
• Build cost reduced by 25%
Sustainability – setting targets and requirements
• No matter what type of construction project is being undertaken, the final result
achieved will greatly depend on the targets and requirements set by the client, and how
effectively these are defined and communicated to those carrying out the work.
• It is important to consider not only which target or standard to aim for, but also how
this is effectively integrated within the procurement process.
• What type of target?
• BREEAM
• LEED
• Passive House
• Client’s own targets
Sustainability – working with the market
• Inform the market of the intention to reward
sustainability and innovation sufficiently in advance of
tendering.
• Early market engagement (EME)to capture intelligence
on innovations, new processes, project feasibility and
market capacity/capability which can then be factored
into options appraisal, specification and procurement
of a construction project.
• Remember to offer assurances that suppliers’
intellectual property rights will be protected during an
EME exercise.
• When tendering, clearly state the desire for a
sustainable outcome and the openness to innovative
solutions.
Sustainability – Incentives
• Construction contracts can be prepared in a way that incentivises suppliers to go beyond
the initial design targets.
• Some examples:
• Performance payments for key performance indicators (e.g. energy efficiency, use of
recycled products, minimising waste and transport movements).
• Incorporate a gain share clause into contracts whereby savings on initial project cost
estimates are shared between the client and contractor
• Guarantee that designers and contractors will be featured in any publicity done for
buildings which meet high performance standards, or entered for awards.
• Include a ‘technology refresh’ clause. This may require the company to upgrade to
best available technology (BAT) for lighting, heating, ventilation or other systems at
regular intervals or when new solutions emerge. It may be linked to incentives or
penalties and can also help ensure BAT is applied initially.
• ‘Innovation pot’ which allows the savings which would be generated by an innovation
(e.g. introduction of LED lighting system) to be shared between the owner and the
operator.
Sustainability – choosing the procurement model
• Consider the level of separation/integration of design and construction works, how these
services are procured, and who is responsible for contract supervision.
• Major challenge – the final result meets the standards set in the initial design. Split
responsibilities and a lack of co-operation between the design and construction teams can
increase the risk of targets not being achieved.
• Effective integration between these teams improves the quality and practicability of the
design, allow the effective identification of issues related to supply chain availability and
reliability, and generally identifying and managing risk.
• Applying a procurement model which best integrates the design and construction work is
therefore an important factor in determining success.
Underlining the change in approach
Construction Playbook
 Sets out 14 key policies for how the government
should assess, procure and deliver public works
projects and programmes
 All central government departments and their arms
length bodies are expected to follow on a ‘comply or
explain’ basis.
A “compact” between industry and government, to create the environment which will:
▪ Improve building and workplace
safety
▪ Build Back Greener - take strides
towards 2050 net zero commitment
▪ Promote social value – particularly
to help local communities recover
from COVID-19
Playbook Principles
Change of approach – right from the start:
 Outcome based specifications
 Longer-term contracting across portfolios
 Standardisation
 Drive innovation and MMC
 Sustainable “win-win” contracting arrangements that incentivise better outcomes
 Financial robustness of suppliers and resolution planning
 Increased speed of overall delivery
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Implementation – actions
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Further information sources
• Constructing Excellence website on the topic:
• http://constructingexcellence.org.uk/category/sustainability/
• The work of the World and UK Green Building Councils may be viewed respectively at:
• https://www.worldgbc.org/
• https://www.ukgbc.org/
• European websites of interest:
• http://www.sci-network.eu/
• http://www.procuraplus.org/
• http://www.smart-spp.eu/
• https://www.bamb2020.eu/
• https://www.uia-initiative.eu/en/uia-cities/kerkrade
• https://www.uia-initiative.eu/en/uia-cities/lappeenranta
• Other sources of information:
• https://www.ellenmacarthurfoundation.org/
• https://www.wbcsd.org/
• https://vlaanderen-circulair.be/en/cases-in-flanders
• https://sdgcompass.org/
Directed Study
• Watch lecture recordings by Chris Pittman in week 2 folder on Bb
• Read ‘The Construction Playbook’ – wk 2 Bb folder
• Morledge, R. et al. (2021) Building procurement. Third edition. Hoboken, NJ:
Wiley-Blackwell. Chapter Chapter 5 & 6
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Coming up …….
Week
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Date
Subject area
11/10/2022 Ethics and Public Procurement
18/10/2022 Pre-qualification / Short listing
25/10/2022 Assignment Preparation & Guided Independent study
01/11/2022 Tendering
08/11/2022 Tendering
15/11/2022 Tendering
22/11/2022 Assignment Preparation & Guided Independent study
29/11/2022 Open book in class test
06/12/2022 Tender Evaluation and appointment
13/12/2022 Procurement and innovation
Coursework submission date Tuesday 3rd January 2023 1300hrs
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