Judit Gyulay
Procurement Systems – an initial overview
Proper choice of delivery system can help to reduce conflicts on construction projects
05. 06. 2007

Building Procurement – Contract strategy
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Right Building
Right Time
Right Place
Successful Investment
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Budapest University of Technology and Economics Judit Gyulay
Department of Construction Technology and Management 05.06.2007

Building Procurement – Contract strategy
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Participants of a construction project have different interests
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Claims and litigations
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How to reduce conflicts/risk of construction projects
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One area, generate conflicts: Procurement system (project delivery system)
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Possibilities
Consequences
Of choice the procurement system
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Budapest University of Technology and Economics Judit Gyulay
Department of Construction Technology and Management 05.06.2007

Building Procurement – Contract strategy
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Idea
Investment Process
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Area
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Money
Initiation Hand-over and use
Civil Engineer/Architect is involved the process
 in different phases
 in different „roles”
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Budapest University of Technology and Economics Judit Gyulay
Department of Construction Technology and Management 05.06.2007

Building Procurement – Contract strategy
Common goal of participants to perform a building
Meeting the client’s requirements, ensuring completion
 On time
 Within cost
 To required quality standards
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Budapest University of Technology and Economics Judit Gyulay
Department of Construction Technology and Management 05.06.2007

Building Procurement – Contract strategy
Cost
Cheapest
Economical
Quality
Best
Adequate
Reasonable
Fastest
Time
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In addition: participant’s individual interest
(The incompatibility of cost, quality and time)
(Kharbanda et al. 1980.)
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Budapest University of Technology and Economics Judit Gyulay
Department of Construction Technology and Management 05.06.2007

Building Procurement – Contract strategy
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Directly involved
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External client, designer, contractor
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Indirectly involved advisor, project manager, supervisor bank, authority
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Budapest University of Technology and Economics Judit Gyulay
Department of Construction Technology and Management 05.06.2007

Building Procurement – Contract strategy
But
Conflicts, claims and litigation seems to be inevitable part of construction projects
Areas generate conflicts
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One-sided contract (Client drafted contract)
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Procurement system (project delivery system)
Site conditions
Site services, etc.
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Budapest University of Technology and Economics Judit Gyulay
Department of Construction Technology and Management 05.06.2007

Building Procurement – Contract strategy
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Not clear understanding peculiarities of that specific procurement and contracting system
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Responsible parties
Does not recognise or
Does not want to accept responsibility
Lack of identification of own interest leads to one-sided contract
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Budapest University of Technology and Economics Judit Gyulay
Department of Construction Technology and Management 05.06.2007

Building Procurement – Contract strategy
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Shares: activities responsibilities risks with the partners
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Will choose procurement system and contract form
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Budapest University of Technology and Economics Judit Gyulay
Department of Construction Technology and Management 05.06.2007

Building Procurement – Contract strategy
Idea  Hand-over and use
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Total management process used when obtaining a building
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System of contracting among client, designer, and contractor
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Budapest University of Technology and Economics Judit Gyulay
Department of Construction Technology and Management 05.06.2007

Building Procurement – Contract strategy
To produce /create/perform a building a bridge a road
P r o j e c t
Has to be managed
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Planning
Organising
Leading
Commanding
Controlling
Who will manage?
In which system ?
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Budapest University of Technology and Economics Judit Gyulay
Department of Construction Technology and Management 05.06.2007

Building Procurement – Contract strategy
Client
Project manager
Quantity surveyor
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Engineer Architect Contractor(s)
Typical management structure with project manager
Client
Project co-ordinator
Quantity surveyor Engineer
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Architect Contractor(s)
Typical management structure with project coordinator
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(Roger Waterhouse)
Budapest University of Technology and Economics Judit Gyulay
Department of Construction Technology and Management 05.06.2007

Building Procurement – Contract strategy
Client’s main decisions:
(Help: principal adviser)
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Organisation for the Management of the Project
In-house project manager
In-house and external project management team
External project management
Organisation for Design and Construction
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Traditional Design and build
Turnkey Package deal
Management
Construction Management
Management Contracting
Others
Budapest University of Technology and Economics Judit Gyulay
Department of Construction Technology and Management 05.06.2007

Building Procurement – Contract strategy More complex projects
Lack of time
Need of change in procurement methods
Traditional Project Management
Client Client
Designer
Contractor
Project
Management
Preparation Design
Tender/bidding
Construction
Designer
Contractor
Preparation Design
Tender/bidding
Construction
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Budapest University of Technology and Economics Judit Gyulay
Department of Construction Technology and Management 05.06.2007

Building Procurement – Contract strategy
„Improper choice or misunderstanding generate conflicts”
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Traditional procurement system
Design and build, turnkey or others
Management type
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Budapest University of Technology and Economics Judit Gyulay
Department of Construction Technology and Management 05.06.2007

Building Procurement – Contract strategy
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Long construction period
Consecutive organisation
Clear contracting relations
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Budapest University of Technology and Economics Judit Gyulay
Department of Construction Technology and Management 05.06.2007

Building Procurement – Contract strategy
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Construction management
Management contracting
Project or management service contract and other variations
General characteristics
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An organisation is employed to manage the project the construction
To coordinate the design with construction
Overlapping between design and construction
Series of tenders: work packages
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Budapest University of Technology and Economics Judit Gyulay
Department of Construction Technology and Management 05.06.2007

Building Procurement – Contract strategy
Client needs representation/protection by neutral expert
Traditional delivery system
Client
Designer
Contractor
Inspector
Supervisor
Q.S.
Design and build
Turnkey, Package deal
Client
Inspector
Supervisor
Contractor
Designer
Subcontractors
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Budapest University of Technology and Economics Judit Gyulay
Department of Construction Technology and Management 05.06.2007

Building Procurement – Contract strategy
Preparation Design
Tender Contract
Construction
Characteristics
Cost
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Single point responsibility
Can be overlapped
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Integrated design and construction
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Client can be sure of maximum cost before final commitment
– Improves buildability
– Fits to constructor’s expertise, working condition, organisation
Thus costs should be lower shorter time on site
(Savings are not passed to the client in lower prices)
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Budapest University of Technology and Economics Judit Gyulay
Department of Construction Technology and Management 05.06.2007

Building Procurement – Contract strategy
Construction Management
CM
Client
Inspector
Supervisor
Management Contracting
Client
MC
Inspector
Supervisor
Designer Construction
Manager
Management
Contractor
Contractors Designer
Contractors
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Budapest University of Technology and Economics Judit Gyulay
Department of Construction Technology and Management 05.06.2007

Building Procurement – Contract strategy
Characteristics
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Management team is involved at early stage
Design can be influenced (buildability)
Claims can be solved, delays reduced
Save time – series of tenders, work packages
Flexibility in design to suit the client to suit the budget
More risk in design – higher requirement in design
No assured final cost at the start of construction
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Budapest University of Technology and Economics Judit Gyulay
Department of Construction Technology and Management 05.06.2007

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Building Procurement – Contract strategy
Responsibility for decision
Preparation Design
Traditional system
Tender
Cost
Construction is being started knowing the construction costs
Construction
Start
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Preparation Design
Cost
Modern managerial typed system
Tender
Construction
Constriction is started without knowing the construction costs
Start
Budapest University of Technology and Economics Judit Gyulay
Department of Construction Technology and Management 05.06.2007

Building Procurement – Contract strategy
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Use of non-traditional delivery system can create greater risk of misunderstanding Scope of work / compensation are changing continuously
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Innovative project delivery systems can blur the traditional roles and responsibilities of participants
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Budapest University of Technology and Economics Judit Gyulay
Department of Construction Technology and Management 05.06.2007

Building Procurement – Contract strategy
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To choose appropriate procurement system and appoint the manager as early possible for maximum benefit
Characteristics of the delivery system have to be understood by the participants
Contract has to contain reasonable allocation of activities, responsibilities and risk
All the participants have to recognise responsibilities, act in partnership
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Budapest University of Technology and Economics Judit Gyulay
Department of Construction Technology and Management 05.06.2007

Building Procurement – Contract strategy
Proper choice and fully understanding of delivery system
Can help to reduce conflicts on construction projects
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Budapest University of Technology and Economics Judit Gyulay
Department of Construction Technology and Management 05.06.2007