Procurement Methods and Roles in Project Management

Introduction

There have been several ways that have been used in the categorization of procurement methods. The amount of risk borne by the parties to the procurement contract for instance forms an approach for the formulation of procurement methods. The construction industry bears varying degrees of risk extending to liability and insurance. The parameters involved create categories such as high-risk low risk and medium risk contracts. The level of information available to the parties regarding the contract also offers another approach to the formulation of a procurement method. This goes to the availability of data regarding the chances of overlap between completion of the design and the commencement of the actual construction process.

The mode of reimbursement also offers a ground on which a procurement method may be built. It gives regard to the method of replenishment and specifically gives attention to the frequency and timing of these replenishments. The viability of this approach is questionable as far as individual method identification is concerned. This is because replenishment applies across all procurement methods and therefore makes little difference.

Finally, the management of the marriage between the construction plan and the actual construction process offers a conclusive approach in the creation of relevant viable procurement methods. It leaves enough room for the motivation of the relationship that exists between the main elements in the projects taking interest in the individual procurement methods in each category.

Feasible Procurement Methods

To aid in the selection of an appropriate procurement method, the following systems have been developed.

  • Separate procurement system.
  • Integrated procurement system.
  • Management oriented procurement system.
  • Discretionary systems of procurement.

Separate procurement systems are adopted where the main elements of the project such as the responsibilities in the implementation of the procurement process as well as the creation and formulation of the construction design accrue to separate organizations. An integrated system on the other hand best applies to a situation where the responsibility is borne solely but not exclusively by one contractor in so far as construction, as well as the creation of the design, is concerned.

Management oriented systems bring on board the input of the client where the client works alongside the contractor in the formulation of the design and other stages of the construction process. The discretionary system sets down a framework that supervises the overall administration of the project and allows the client the freedom to change procurement systems in the manner they deem fit in the circumstances.

As it were the majority of projects use one procurement system. However, the system may be changed to suit the various circumstances of the project and also to represent as far as possible, the interests of the client (Kwakye,1997).

The construction sector presents numerous difficulties that motivate the need for an appropriate procurement method that will aid in the acquisition of the large and diverse nature of building facilities. The following methods have attracted a sense of consistency in adoption and application.

  • Design bid –build
  • Design-build
  • Construction Manager/General Manager

Each of the above methods primarily requires the owner to prepare a budget and building criteria that are to be followed in the execution of the project. The adoption of either method attracts benefits and disadvantages. Industry experts differ in opinion as to the most appropriate and advantageous of the three methods in specific circumstances.

The Design and build method

The design and build method allow the client to select a team that will undertake in the design of the plan that will be followed in the completion of the project. The team will then undertake to advertise the design in the form of a bid to the open market for application. The team will then select the lowest bidder who is awarded the construction project. The selection criteria adopted could be based on any of the following approaches

  • Sole source selection- this method requires the client to select a team that will design and build the building without the consideration of a proposal. This method has gained little prominence over the years especially with public owners since it lacks a competitive edge. It however comes in handy in times when the procurement period is limited. It has the advantage of the speed and allows the completion of a project within a short time.
  • Qualifications-based selection- the method allows the client to select the most competent team to design and build the project. The client engages the public in the submission of qualifications for the design and construction of the project and on this basis they select the most qualified of the applicants. The evaluation of these applications will be based on parameters such as reputation, experience, capacity as well as history. This non-cost criterion will therefore form the basis of the selection criteria. The client will then negotiate with the selected applicant at a reasonable price for the completion of the project. This method has been said to be more productive in ensuring that the customer’s requirements are met (Chitkara, 2005).
  • The best value selection-this method requires the applicants to submit proposals that will be evaluated on the primary basis of technical compliance and the cost involved. The client selects the cheapest option that offers the best quality. The weighted approach is adopted in the identification of the design and building team after which negotiations occur. The advantage of this method is that it allows the client to evaluate the technical aspect before the final selection criteria that are based on cost competitiveness.
  • Other methods available to the client include the fixed budget selection method that requires the client to prepare a fixed budget within which the best criteria must fall within. The low bid selection method is also open to the client by offering them a 90% cost criteria for the evaluation of the best design and build team.

The Design-Build method

This method seeks to reduce the procedures involved in the procurement process. The parties to the construction project are chosen at the same time. They are therefore required to operate and control the project from its commencement till the end. The owner in this case sets the criteria that will be adopted in the selection of the project team.

The Construction Manager/General Manager method

This method begins by requiring the owner to select the architectural team that will be responsible for the creation of the design during the preliminary stages of the design the owner selects a construction company that assists the architectural firm in the completion of the design. The plan is then advertised in the form of a bid by the combined tea (Masterman,1996).

The role of the owner’s project manager will be affected by each procurement method

The objectives of procurement are straightforwardly simple: to develop a methodology and criteria for the evaluation and subsequent selection of one or more of completive alternatives in the acquisition of goods and services and the allocation of the risks involved to the participants in the procurement process. The general notion has bent towards assuming the importance of considering the various methods of procurement that are open for consideration.

The client will at all costs be looking to obtain value in monetary terms while still ensuring that the project is completed on time. They will select the option that offers durability and a guarantee of a satisfactory job. The project manager, therefore, must ensure that these interests are met to the client’s satisfaction. He administers and mitigates procurement systems to ensure that they fulfill this cause.

There has been extensive debate as to the role of the project manager in as far as the agency is concerned. The project manager is not necessarily an agent of the manager. He is more of an advisor than an agent of the person or firm that engages his services to the extent of his professional and in-house knowledge.

As it were the project manager’s role persists across the various methods strategies and approaches. At the preliminary stages of the project, the owner or client will not need these services since the procedures and activities involved are easy to understand. However, as the project grows in implementation and the process becomes more complicated the need for a project manager becomes more and more imminent. However, the relevance of the manager will depend greatly on the method of procurement that the owner adopts (Ashworth, 2001)

Design/bid and build method

If the client adopts the traditional design bid and builds method, for instance, he will be in direct contact with the parties to the procurement contract such as the architect and the contractor. As it is the role of the project manager looks very minimal. It is however important that the client prepares a well-forecasted plan for the administration of the project activities

At the planning stage, the manager will provide the owner with a feasible plan for the formulation of the project budget, schedule performance requirements, and the scope that is to be covered. He will put to the table all the angles that must be covered in the criteria for the selection of the project team. He provides advice on the strategic concerns that are to be considered as well as ways to hedge against them. He will provide important advice on the most appropriate timing schedules in as far as opening and closing dates of bids are concerned.

The pre-construction period of the project should be kept at a reduced proportion to the total project time. The manager, therefore, offers the owner information on the actual timeline that is most appropriate for the completion of the project. He also goes as far as offering information on market analysis. Some products are price-sensitive and therefore require a repurchasing key to ensure that they are available and cost-effectively acquired (Lam, Albert, and Chan, 2003).

The adoption of this method has its advantages and disadvantages. The method begins with a reasonably low price but has an indefinite final price since the variables involved are numerous. It however has gained prominence over the years and is the most commonly used by the public. It is quite simple and is easy to understand. It offers the owner the benefit of the competitive selection basis. It also reduces the chances of design errors since it allows for the completion of the design before the engagement of the contactors. It however has the disadvantage of limiting the owner’s freedom since the major decisions are made based on the competitive bidding. Important aspects of the owner’s requirements stand to be compromised.

The Design-Build method

If the customer adopts this method he will be in direct contact with the designer and builder or construction manager. The two parties will oversee the creation of the design that will then be followed by the builder. The project manager will assist the customer in the planning stages by creating a contingency plan that will be turned to in case the mainstream plan does not receive the intended attention. He will play the proactive role of dealing with schedule delays and ensure that the contingency plan I adequately funded. He represents a third party opinion to avoid the conflict of interest in the monotony given to a single entity in running the project.

At the procurement stage, he will play the role of ensuring that the resources in the dispose of the project are utilized to the maximum. He will ensure the sustained use of the factors of production such as labor materials and equipment in line with the schedule and plan. He will provide advice concerning the reputation of the experience and expertise of the parties that are engaged in the design and building processes. He may be allowed to administer the bidding process and represent the customer’s interests over and above the competitive selection criteria.

The Construction Manager/General Manager method

This method establishes a strong financial ground by setting up a guaranteed maximum price policy at the beginning before the bidding process. The owner selects a contractor who aids the completion of the design. It offers the owner active involvement in the design process through the project manager. Unlike the above two methods, the manager gets to participate in the design process by representing the specific attributes of the customer. In effect, there are few design changes once the plan and design get to the construction stage.

The method allows the managers to engage in competitive bidding before the completion of the design and therefore saves time and money. The manager will also participate in the implementation of the project plan as well as the coordination and oversight of the various processes in the project plan.

He will actively be involved in the administration of the budget and the creation of cost controls. He will mitigate the conflict s that arise when there is a conflict of interest. At the close of the project, he will assist the owner in the review of the project on a timely basis to ensure that it progresses well.

Conclusion

The role of the project manager presents a creative debate as to the relevance of his/her role in the various methods. It is indisputable that he is introduced in an already saturated and crowded operation. It will therefore seem like the introduction of more bureaucracy and complication. However, as we have exemplified above he performs a very important role that is relevant in all methods.

References

Ashworth, A. (2001). Contractual Procedure in the Construction Industry, UNITEC, New Zealand.

Chitkara, K. (2005). Project Management Planning, Scheduling and Controlling – Tata New Delhi. McGraw Hill.

Kwakye, A. (1997). Construction Project Administration In Practice – Longman, London.

Lam, E W M, Albert, P. C and Chan, D. W. M. (2003). Is Design and Build the Preferred Option to Procure all Projects? Research Fellow, Department of Building and Real estate, The Hong Kong Polytechnic University.

Masterman.J W. E. (1996). Building Procurement Systems; An Introduction, E & FN Spon, London Engineering, Construction and Architectural management.