Developing a system for assessing the costs associated with different procurement routes in the construction industry

In developing techniques for monitoring the costs associated with different procurement routes, the central task is disentangling the various project costs incurred by organizations taking part in construction projects. While all firms are familiar with the need to analyse their own costs, it is unusual to apply the same kind of analysis to projects. The purpose of this research is to examine the claims that new ways of working such as strategic alliancing and partnering bring positive business benefits. This requires that costs associated with marketing, estimating, pricing, negotiation of terms, monitoring of performance and enforcement of contract are collected for a cross-section of projects under differing arrangements, and from those in the supply chain from clients to consultants, contractors, sub-contractors and suppliers. Collaboration with industrial partners forms the basis for developing a research instrument, based on time sheets, which will be relevant for all those taking part in the work. The signs are that costs associated with tendering are highly variable, 1-15%, depending upon what precisely is taken into account. The research to date reveals that there are mechanisms for measuring the costs of transactions and these will generate useful data for subsequent analysis.

Developing a system for assessing the costs associated with different procurement routes in the construction industry

In developing techniques for monitoring the costs associated with different procurement routes, the central task is disentangling the various project costs incurred by organizations taking part in construction projects. While all firms are familiar with the need to analyse their own costs, it is unusual to apply the same kind of analysis to projects. The purpose of this research is to examine the claims that new, ways of working such as strategic alliancing and partnering bring positive business benefits. This requires that costs associated with marketing, estimating, pricing, negotiation of terms, monitoring of performance and enforcement of contract are collected for a cross-section of projects under differing arrangements, and from those in the supply, chain from clients to consultants, contractors, subcontractors and suppliers. Collaboration with industrial partners forms the basis for developing a research instrument, bused on time sheets, which will be relevant for all those taking part in the work. The signs are that costs associated with,with tendering are highly variable, 1-15%, depending upon what precisely, is taken into account. The research to date reveals that there are mechanisms for measuring the costs of transactions and these will generate useful data for subsequent analysis.

Comparative costs of the commercial process in different construction procurement methods

The commercial process in construction projects is an expensive and highly variable overhead. Collaborative working practices carry many benefits, which are widely disseminated, but little information is available about their costs. Transaction Cost Economics is a theoretical framework that seeks explanations for why there are firms and how the boundaries of firms are defined through the “make-or-buy” decision. However, it is not a framework that offers explanations for the relative costs of procuring construction projects in different ways. The idea that different methods of procurement will have characteristically different costs is tested by way of a survey. The relevance of transaction cost economics to the study of commercial costs in procurement is doubtful. The survey shows that collaborative working methods cost neither more nor less than traditional methods. But the benefits of collaboration mean that there is a great deal of enthusiasm for collaboration rather than competition.

A regime-dependent balanced control variable based on potential vorticity

In this paper it is argued that rotational wind is not the best choice of leading control variable for variational data assimilation, and an alternative is suggested and tested. A rotational wind parameter is used in most global variational assimilation systems as a pragmatic way of approximately representing the balanced component of the assimilation increments. In effect, rotational wind is treated as a proxy for potential vorticity, but one that it is potentially not a good choice in flow regimes characterised by small Burger number. This paper reports on an alternative set of control variables which are based around potential vorticity. This gives rise to a new formulation of the background error covariances for the Met Office's variational assimilation system, which leads to flow dependency. It uses similar balance relationships to traditional schemes, but recognises the existence of unbalanced rotational wind which is used with a new anti-balance relationship. The new scheme is described and its performance is evaluated and compared to a traditional scheme using a sample of diagnostics.

Estimating uncertainty in terrestrial critical loads and their exceedances at four sites in the UK

Critical loads are the basis for policies controlling emissions of acidic substances in Europe and elsewhere. They are assessed by several elaborate and ingenious models, each of which requires many parameters, and have to be applied on a spatially-distributed basis. Often the values of the input parameters are poorly known, calling into question the validity of the calculated critical loads. This paper attempts to quantify the uncertainty in the critical loads due to this "parameter uncertainty", using examples from the UK. Models used for calculating critical loads for deposition of acidity and nitrogen in forest and heathland ecosystems were tested at four contrasting sites. Uncertainty was assessed by Monte Carlo methods. Each input parameter or variable was assigned a value, range and distribution in an objective a fashion as possible. Each model was run 5000 times at each site using parameters sampled from these input distributions. Output distributions of various critical load parameters were calculated. The results were surprising. Confidence limits of the calculated critical loads were typically considerably narrower than those of most of the input parameters. This may be due to a "compensation of errors" mechanism. The range of possible critical load values at a given site is however rather wide, and the tails of the distributions are typically long. The deposition reductions required for a high level of confidence that the critical load is not exceeded are thus likely to be large. The implication for pollutant regulation is that requiring a high probability of non-exceedance is likely to carry high costs. The relative contribution of the input variables to critical load uncertainty varied from site to site: any input variable could be important, and thus it was not possible to identify variables as likely targets for research into narrowing uncertainties. Sites where a number of good measurements of input parameters were available had lower uncertainties, so use of in situ measurement could be a valuable way of reducing critical load uncertainty at particularly valuable or disputed sites. From a restricted number of samples, uncertainties in heathland critical loads appear comparable to those of coniferous forest, and nutrient nitrogen critical loads to those of acidity. It was important to include correlations between input variables in the Monte Carlo analysis, but choice of statistical distribution type was of lesser importance. Overall, the analysis provided objective support for the continued use of critical loads in policy development. (c) 2007 Elsevier B.V. All rights reserved.

The impact of contractor selection method on transaction costs: a review

The basic premise of transaction-cost theory is that the decision to outsource, rather than to undertake work in-house, is determined by the relative costs incurred in each of these forms of economic organization. In construction the "make or buy" decision invariably leads to a contract. Reducing the costs of entering into a contractual relationship (transaction costs) raises the value of production and is therefore desirable. Commonly applied methods of contractor selection may not minimise the costs of contracting. Research evidence suggests that although competitive tendering typically results in the lowest bidder winning the contract this may not represent the lowest project cost after completion. Multi-parameter and quantitative models for contractor selection have been developed to identify the best (or least risky) among bidders. A major area in which research is still needed is in investigating the impact of different methods of contractor selection on the costs of entering into a contract and the decision to outsource.

What are the costs of procurement and who bears them?

The costs of procurement are transaction costs which are separate from the direct costs of a project. In this paper discussion is concentrated on costs of tendering. Types of cost, including money costs and opportunity costs, short-term and long-term costs, private and social costs are defined and examined in relation to various types of product and methods of procurement. The costs of the contractor and of the client are considered and tentative conclusions drawn as to who bears these costs in the short-run and in the long run. They may fall on the parties to the process for the particular project, on other contractors and clients or on society as a whole.

The impact of market and supply configurations on the costs of tendering in the construction industry

The cost of tendering in the construction industry is widely suspected to be excessive, but there is little robust empirical evidence to demonstrate this. It also seems that innovative working practices may reduce the costs of undertaking construction projects and the consequent improvement in relationships should increase overall value for money. The aim of this proposed research project is to develop mechanisms for measuring the true costs of tendering based upon extensive in-house data collection undertaken in a range of different construction firms. The output from this research will enable all participants in the construction process to make better decisions about how to select members of the team and identify the price and scope of their obligations.