Procurement Strategies: Advantages and Disadvantages

procurance Strategies Advantages and DisadvantagesThe Janus plc is a dynamic retail and leisure group in UK. The Janus group be unceasingly investing in their ventures and develop several propositions with get wordable facilities to expand their group forward. In UK the Janus group already consists of two other proposals which argon in operation. As a part of their plans the organisation has decided to make new development proposal at malchester. The organisation is planning to develop the new proposal in two phases.This report is an assessment of the procural strategies and options for selecting the procural strategies for visualise and reflection of the new proposal at malchester. The study on the procurement modes and strategies in this report tell us how to process the planning of the pop the question to achieve value for season, cost, quality and helps the nodes presidential term business to move forward. The report also suggests the beat out fit strategy with eff ective downation offers on time delivery, cost effective, specific quality and makes sustainable delivery of the pick up. As the selection of procurement makes the trim easier to the client in making the project successful and achieving the goals of the organization. It also makes the right decisions for avoiding the lay on the lines. So the selection of procurement order plays very important role in twistings.At last the report recommends and justifies the selected potential procurement mode for architectural plan and construction process with proper guide telephone wires for delivering the efficient project and also to meet the measure quality for service in attaining maximum profit which forget move the organizations business forward.IntroductionProcurement is also called as sourcing, which means gathering travel and goods from the preparation and of request through the approval of statement for payment. This involves purchase planning, financing, making the purchase, inventory restrain and stores, specific development, standard determination, supplier research and selection, supply rationalize administration, disposal and other related functions, value analysis and price negotiation. Procurement plays major role in work relationship between parties involved in the construction process.Identify the primary and secondary objectives of the projects, risk of infection innate in the proposal, Environmental determination, which it leave behind be implemented and selecting the appropriate procuring method for the proposed project. Procurement was non about a move oning, it was about entire project which includes obtaining goods and serve, also includes obtaining human recourses like, advisors, affirmers, sub- affirmers, suppliers and specialists for near purpose. It is the very important step which can show some satisfying impact on the project success.Critical analysisJanus leisure plc is leisure group which seeking to move its business fo rward. Janus leisure present operations having sextet racecourses which stage 20% of all racing fixtures held each year. Which makes them one of the UKs largest of horseracing. It also includes one of the oldest classic races in the world, the 5000 guineas stakes and also some high profile race meetings throughout the year.Conferencing and banqueting facilities willing be provided at all of Janus racecourses and making then capable to operate 365 days. Janus leisure offering 18 heap golf courses at two of their racecourses. One includes leisure club and an integrated, branded hotel at third racecourses.Now Janus proposing some improvements to their racecourses, which was hosting 5000 guineas stakes every year in malchester. The redevelopment consists of two phases.Client requirementsPhase 1Demolition of existing dreadfulstand.Construction of new 5-storey grand stand to include an extensive conference and expounding centre and associated external works (Budget 25m).Refurbishme nt of two existing stand circa 100 years old (Budget 5m).N.B to enable redevelopment during phase-1, the 2011 guineas stakes meeting and the 2012 5000 guineas stakes, scroll for mid-September must return to malchester.Phase 2Construction of a new 120-bed hotel facility and casino (Budget 12m) to be operational for the 2013 5000 guineas stakes meeting in mid-September.As Janus Leisure Company mentioned that they require finishing phase-1 by mid September 2012 for 5000 guineas stakes and phase-2 by mid-September 2013 for 5000 guineas stakes. As the company is trying to develop all their venues they will be having slight concentration on a single venue and also the client agnizes what they required and what they expecting from the contractor. This project also includes demolition of existing grand stand and refurbishment of two existing stands. Which means it includes mixture of different kind of construction process. The of import things in this project were time pattern and bu dget. end the project in budget and maintaining the quality of construction.Clients contain different needs and it is necessary to ensure satisfactory results to the development process by the contractor.There argon some procurement methods which meets our clients requirement.The main factors when trusting the appropriate procurement methodProject sizeBudgetComplexity of projectTimeProbability of change in object and construction phasesQuality importanceAbility of contractors to undertake the project (Organisation) proposeIn this project we decided to go with Design and built causa of procurement method which was suitable for this theatrical role of client. Our client needs racecourses by the 5000 stakes time, so its necessary for the contractor to complete the project by the time without delay.Price certainty The certainty of price for the total construction work period. Price certainty will change at the time of process of project. acquiring the firm prices in the first pla ce the construction of the project, this enables approximate estimates for the client. The cost of the project will be within fiscal budget. globe employers consider less important in price certainty. And they focus on quality and the functionality of the work do. For private client it is important to control their financial budget by obtaining the price certainty.Dead line The majority of clients will make the decision and want to complete the project as quick as possible. Here our client need our project in time to extent and start his business soon in malchester. Time availability also influences the project to choose the construction techniques. The implication is under some part such as time, cost and quality.Design Design and embodiment is the only method which likes into account Buildability, and produces a design in terms of construction. handed-down procurement method of contract was failed id design aspects. Some bedment contracting instance of procurement processes take a leak a grip on the design. If the client was been approach a single contractor for a long time, it was beneficial to the clients. The main design factors considered areFunctionMaintenanceBuildabilityStandard designDesign before build upDesign prototypesProcurement methodsThere are several ways to categorised procurement methods.Risk taken by each party entropy availability at the time of distributing contracts.The way of design and construction is ordered and maintained.Choosing the procurement systems is risk decision. The main risks obtained at the time of project to clients, contractors, sub-contractors, design group and suppliers are in period deadlines, construction cost, design adequacy, liability or defects, safety, quality, workmanship etc.,.Source Turner (1997) Building Procurement (2nd Ed)Source Smith (1999) Managing Risk in ConstructionThe contractors or consultants are selected by some competition or negotiation with a single organisation. In short listing f ond(p)s the billets to consider were,Financial standing and recordsExperience in similar contracts in recent periods.Capable concern.Capacity.Time, cost and Quality of construction are the different options used to deal out the clients objectives.There are many different procurement methods available. Some have a long life which was continued till now. Some are disappeared. It depends on the results of the past projects. Some systems are in extensive use. Some will suite for the contractor. Some will be suitable for the clients.Procurement typesLump centerfield or traditional procurementDesign and buildManagement contracting retchwork obligationPublic private partnershipsConstruction management1. Traditional procurementThis is most common method of procurement. It is suitable to all clients, including in experienced clients and it is time predictable and cost certainty. It is suitable for fast track projects. In this method client appoints a team of consultants to prepare draw ings and also tender documents. The client appoints building contractor as well, to build the structure as per design with completion date as per approved rates. Most work will be distributed to the sub-contractors and the contractor remains responsible. Client appointed consultants administrates the project and advise the aspects associated with progress, design and payments. This is commencement risk option for the clients to downplay the delays, design failures etc. But some times the risk will increase, when the design phase is rushed and also when tender documents are non fully completed. The two stage tendering is referred as the accelerated traditional method. By this design and construction process will at the very(prenominal) time for a while.2. Design and BuildIn design and build procurement system a single contractor or single consultant will be appointed for both design and build or management of construction operations. Subcontractor will be appointed by the main contractor or consultant.The main characteristics of this procurement method areSingle organisation will be appointed for both build and construction of project.It may be contractor or consultant.The construction works will be carried out by subcontractors when handled by the contractor when the project is given to contractor. Client will manage subcontractor when the project is given to the consultants.The design and build procurement system is defined asDesign and built organisation behaves as consultant with direct sink in with client for design and building of project. All packaging works are between designs and build organisation.Diagram Flow chat of Design and Build procurement methodUsing this contract design and build system, clients obtain single or two competitive bids. The suitable contractor who contains the clients requirements and design will be issued the contract. Tender requires stating lump sum management present and also offers a guaranteed maximum price in the bids. The contract awarded is chiefly based on financial level. The GMP approach will also sometimes considered by the client at the time of management contracting. Management procurement systems are undetermined by sheath of GMP involvement with agreement between contractor and employer. This is not demanded in design and builds type of procurement system.The design of project will be carried out by in-house designers, external consultants or by both of the in-house designers and external consultants. Whatever is the source of the design, the total responsibility is on the design and build contractor.There is a constrictive contact with clients, designers and subcontractors. This will make the project quite easier. Whatever the problem occurs i.e. in design, packaging works and price issue, he can approach everything and everyone straight off in this design and build method of procurement.Construction work is carried out by means of trade. Work packages and it enable to every wherelap the design and construction. This conditions do the design and build contractor to provide site establishment works. The surmount example of using the design and build procurement method is construction of 25 trillion Nissan car plant complex at Washington in 1984 to 1985.This approach highlights the difficulties that can cause by all of the management oriented methods to cope the client decision till last moment. Apart from difficulties this method provides accurate final cost of the project. Any late changes are likely to be a underway or complete work may delay the entire process of the project. Late changes are agreed by such alteration, if something necessary can be allowed. In most projects the client will appoint the financial consultants, unremarkably quantity surveyor to give advice on financial and contractual aspects of the project. Once the design and build contractor appointed, the formulation of work packages, financial monitoring and control of project i s subject of joint management and lies between two parties.Design and build usually compensate sum ofManagement feeDesign feeNet cost of site establishmentFinal accounts of all the subcontractors to the GMP.When GMP is in corporate in contract it is accordance with the tender documentation. If the contractor do savings against GMP will be penalises when sum exceeds as a result of mismanagement.Payments will be made on net cost of work contractors. Open book method accounting will be done in designing and build method to make the financial records available for the clients or financial advisor, to verify the actual cost of the project with records.The quality control will be problem with the responsibleness for functions allowed to the design and build contractor. But exploitation quality control was done by form of inspectors, which were appointed by the client. The contract is an initiative to the contractor to minimise the costs and also need him act as an independent consultan t. In this circumstances the quality may drop down, unless additional care was taken is all oversight of specification of materials and equipment. Employing and managing the supervisory staffs are must undermine the relationship between design build contractor and the client who indented to form fundamental basis for the success of project where design and build type of procurement method is used. When consultant led design and built is a practical and commercial approach to implement the project. The system creators belief that the most construction projects suffer as a result of poor communication and unwanted large and complex management hierarchy, over planning and lack of commitment to the clients cause by most participants in the project.The principles for management of project wereDrawing and documentation is not a product by means o communicating the clients requirements to the construction tutor.Communication between the employees is as direct as possible.As we expecting changes in construction field, full preplanning is not the best control and more flexibility and less detailed short term planning should be adopted.The interest of client is best served to participant to the project objectives not individual aspirations.3. Management contractingManagement contracting is one of the most common methods of procurement. In this client appoints consultants to prepare drawings and project details. The management contract was selected by tendering, paid bases, prime costs and management fee. The main role of management contract is to manage the execution of work. The main contractor does not involve in any kind of construction work directly. It will be done by packages which were undertaken by sub-contractors, which were appointed by management contractors. In some cases the management contractors also agree design liabilities. In this the works contracted were directly and contractually responsible to the management contractor. The management contractor s obligation is to accept responsibility for design and construction means. It referred as Design, Manage, Construct it is called as featured as contractor-led procurement. In this the led designed responsible for overall design and animal trainer was responsible for coordination of work. It is suitable for fast track projects, complex buildings and developing brief. It is not suitable for inexperienced clients. Cost certainty, and not possible to transfer the total risk to contractor. This approach will overlap design and construction progress. The payment is made on the basis of cost of work with agreed fee by the managing contractor. Success of project is mainly depends on the contractors team. Price certainty is less because the construction starts before completion of all design works. This means many of packaging works to be tendered later(prenominal) in the construction stage. Means the design and work packages are adjusted properly to keep the project within the budget. De sign and construction tends to be less than design and build methods.4. Framework agreementFramework agreement is established with limited number of suppliers or single suppliers. It will allow suppliers bring unitedly with relevant experience which will save both the parties when more projects involved. This method of procurement includes all forms of procurement methods. Like traditional, design and build etc. the developing installwork agreements for consultancy service will be done by LSC (Learning and skill council).Reduced execution costsContinuous improvement within long-term relationshipsFrame work agreement with number of suppliers or single supplier can result in significance savings to both parties. No need for constant re-tendering at call of stages. When the contract conditions are unchanged for all projects, there will be substantial gains from continuous improvement. When the term changed, small competitions with in ready work will takes place. Client may have mor e framework suppliers for different requirements. The resource implications for client should be decided whether they need one frame work supplier under one frame work agreement are not.Frame work agreement may be used for design and build and primary contracting procurement methods. Frame work agreements also suitable for maintenance requirements. Client with small and rare project will consider collaborating with similar type to share frame work agreement. Every frame work agreement completed and advertised with procurement rules. There must not be any commitment to the frame work agreement contractor for any other kind of business until the first contract completes.The savings in cost and time will come from the followingNot necessary to rebid for every individual project.Continues development will earn by transferring from one project to another.Working relationships will be improved.Continues work flow.Speed of procurement.Public private partnershipPublic private partnership is a partnership between semipublic and private sector means the government and private parties carried out the project together on the agreed division of tasks and risks. Each party keeps its own individuation and responsibilities. The public private partnership is growing due to demand in infrastructure. The limited fund in the public sector leads to join with private sector, in this provision of infrastructure. The principle believes PPPs is that the public sector is responsible for the proper delivery of service and it is not responsible for actual providing service.Major public sector projects have always undertaken by private sector contract. The major difference between all the procurement methods and this method was, private sector regarded as a fully fledged performer.The essential characteristics wereResponsibility and risk is transferred from public sector to private sector.The contractual agreements were made to perform based outcomes.Long term contractual agreements. re cognitionOption analysisPlanning and approvalImplementationPost-transactionPolitical riskConstruction managementIn construction management procurement the total services were been between the package contractors and clients. This will show the difference between management contracting. In this approach the client will contact directly with sub-contractors. Here the construction handler acts as an employee agent. When dealing with sub-contractors.The main points in this system areConstruction manager was appointed as consultant at initial stages and have equal status as design team members.Payments are made by lump sum or percentage fee to construction manager.The main works in the projects are carried out by sub-contractors. The role of construction manager is to supervise, co-ordinate and administrate.The role construction manager is defined as consultant role and responsible to the client. The construction manager work for a safety and all works are carried out by sub-contractor, between client and sub-contractor.This type of procurement method was first started in US during 1960s. They usually called this method as construction project management. This procurement method was started to use in UK in 1970s. This was needed to control the risk, cost and time in large projects. After the uncertainty in the worlds economy takes place the higher interest rates made commercial builders to large financial risks. From that stage this method was used in major projects.There are variations in construction management procedures. The construction manager has the equal level as designers. The both designer and construction manager have a direct contact with clients.In construction management method the involvement of client is more than the other methods. Thus this method will be taken by the entrepreneurial clients, who have ability and resources, unless they must be ready to appoint construction manager to protect their interest. Tough process will takes place to appo int a construction manger.The main roles of construction managerPlanning and managementInception and completionDesign to ensure built ability.Value for money and economy.Advising the client of their time and cost.Safety policy for the site.Division of work to appropriate sub-contractors.Interim payments and final accounts with work contractors (sub-contractors) and advising client with proper documentation.Before starting of the project construction manager also involves in preparation of project cost budget. Also involves in preparation of tender documents and solution of potential subcontractor and managing tender documents, evaluation and recommendations in acceptance of tenders were also done by the construction manager.Construction manager will not do any construction work by his own. Construction manager was responsible for control and co-ordination of subcontracts. Programme control and time management. Applications for the payment to the subcontractors were examined by const ruction manager. The manager will submit the applications to the client with appropriate member of design team.Advantages and disadvantagesTraditional methodAdvantagesDesign was fully developed and cost is detailed before the building contractor organism signed.This method will give clients very customised building.The design and construction was split into fragment sections will give clear responsibilities.DisadvantagesIts difficult to fine the responsibility for errors and omissions.Different parties involved in the contract can create climate antagonistic.Unexpected circumstances will change the final cost of the project than original tendered amount. But proper planning keeps this under control.Design and Build methodAdvantagesSingle point of Responsibility the manager is responsible for design and construction. The client should have single point of responsibility. This method is more advantageous than other, where the client employee separate designers and construction agreem ents. If the produce is done, the contractors, designers and architects blame each other of their responsibility.Price certainty Design and build gets more price certainty than other forms of procurement methods. Many of design and build contractors include guaranteed maximum price (GMP). Design and build contractor cant claim for loss and expenses for late instructions from architects. This kind of claims can be done under traditional form of procurement method. The fee paid for the professionals is also less and depends on the roles of the professionals.Speed It can be easily achieved from design and build method, by starting the work at site earlier than the traditional forms of contract. The contractor is not relaying on design and supply information, this is called single point of contract. This type of method will allow budget and programmes level of control to the contractor. So the construction process is likely to be quicker.Buildability The contractor is responsible for d esign and construction, so the project is more likely to be buildable than other procurement methods.Claims Its not easy to claim because its a single point of responsibility.DisadvantagesDesign quality Design and build method is not an exact procurement method where high priority of design quality is not given because of certainty among the architects.Additional design fee If the client likes to take independent advice on design matters where the building contractor involved, then this will cost the client to pay additional fee to the design team of the contractor.Inflexibility Once the contract proposal is agreed, the scope for client to make changes in his requirement is less otherwise the cost consequences will be prohibitive.Management contractsAdvantagesThis system enables client to obtain Guaranteed Maximum Price (GMP) for the construction element of project from the management contractor.It is used to accelerate the project process. The risk of delay will be overcomes by tim ely targets.DisadvantagesProject cost incurred in this system is higher, when compared with design and build system.When guaranteed maximum price (GMP) achieves, the management contractor position with clients as consultants will be at risk.Framework agreementAdvantagesSingle tendering for the life of the framework agreement.Reduction of cost and administrative efforts.Initial tendering allows contractors to know competitive supply and should offer competitive prices for expected value of business.The range of supplies will be provided is short time by contracting authority, it reduces the stock place for goods and also reduces time and equipment maintenance and repairs.Long term working relationship can be established with the supplier.DisadvantagesThis is a closed system, once the framework agreement is established then new suppliers cannot be admitted.Competitive reopen can be considered onerous, if its structure is not planned properly in framework agreement.Public private part nershipsAdvantagesValue for moneyRisk transferLong term nature of contractPerformance measurement of contracts.Private sector management skillsCost efficiencyTime to delivery savingReduction on the public treasuryBoard supportImproved cost calculationsDisadvantagesInsecurityHigher transaction costHigher capital costInefficienciesCulture gapShort term rigiditiesConstruction managementAdvantagesPositive attitude and more constructive being exhibited at all levels. i.e. management, supervising and operative level.The proper using of value engineer by construction manager.Clients involvement is a bit higher when compared when compared with be procurement methods. It will promote better working relationship with project team.In this method the clients will direct contact with subcontractors, which will improve subcontractors currency flow. Means direct payments from the clients.DisadvantagesClient must involve deeply into all course of works. He must also able to manage construction ma nager and design consultants.The fee to the construction manager will vary from project to project it will depend on the size of the project and roles of the construction manager.Procurement strategyThe customized nature of construction project increases inborn risks. These risks include the work which was not exactly required in the project completion. This includes late delivery or costs more than the client pay. These kinds of risks will impact clients core business. The procurement strategy should balance these situations at early stages. The main points which are co-dependent and frequently in tension areTime Speed and certainty of completion as per deadline.Cost Level of price and certainty in cost.Quality As per work and functionality.Procurement strategies will accomplish,Cost and time certainty for the design is developed by an architect. This consequently slow process. Also know as traditional procurement process or design-bid-build process.In cost certainty and relative speed, the design is responsibility of a contractor. Gradually client will lose the control over the design process in design and build procurement.Virtual speed for the design developed by an architect and cost is uncertain till completion called as management contracting or construction management.After careful analysis of the project brief it is clear that the main factors essential for the project are time, cost, quality and reputation of the organization. In time, cost and quality the top priority goes to time and then followed by cost and quality. So the procurement method which is spillage to be selected should be very efficient and fulfil all requirements and objectives of the project. The selection of procurement system depends upon the nature and objectives of the project. After careful considerations of all the above factors and objectives of the clients organization the design and built contracting procurement method is suggested as it is best suitable for the client