Designing flexible procurement systems

The systems used for the procurement of buildings are organizational systems. They involve people in a series of strategic decisions, and a pattern of roles, responsibilities and relationships that combine to form the organizational structure of the project. To ensure effectiveness of the building team, this organizational structure needs to be contingent upon the environment within which the construction project takes place. In addition, a changing environment means that the organizational structure within a project needs to be responsive, and dynamic. These needs are often not satisfied in the construction industry, due to the lack of analytical tools with which to analyse the environment and to design appropriate temporary organizations. This paper presents two techniques. First is the technique of "Environmental Complexity Analysis", which identifies the key variables in the environment of the construction project. These are classified as Financial, Legal, Technological, Aesthetic and Policy. It is proposed that their identification will set the parameters within which the project has to be managed. This provides a basis for the project managers to define the relevant set of decision points that will be required for the project. The Environmental Complexity Analysis also identifies the project's requirements for control systems concerning Budget, Contractual, Functional, Quality and Time control. The process of environmental scanning needs to be done at regular points during the procurement process to ensure that the organizational structure is adaptive to the changing environment. The second technique introduced is the technique of "3R analysis", being a graphical technique for describing and modelling Roles, Responsibilities and Relationships. A list of steps is introduced that explains the procedure recommended for setting up a flexible organizational structure that is responsive to the environment of the project. This is by contrast with the current trend towards predetermined procurement paths that may not always be in the best interests of the client.

Identifying appropriate construction procurement strategies

The origins of the various procurement methods in construction are considered, followed by a discussion of the circumstances for which each procurement system is best suited. The likely future development sin management-based methods are discussed in the context of current research, showing that co-ordination of trade and specialist contractors , more flexible contracting, constructive conflict management and a potential polarization of views about project management in the industry are likely.

A preliminary survey of attitudes to UK construction procurement practice

Although much literature on construction procurement is based on personal experiences, there is little data available to undertake realistic comparison between regions or from one year to another. A survey was undertaken in the UK to examine the feasibility of developing a replicable survey technique that will enable longitudinal studies and international comparisons. The survey showed that a majority felt traditional procurement methods were inappropriate. However, traditional general contracting is still the most common form of procurement. There was strong agreement that economic muscle compels weaker contracting parties to accept onerous contractual terms. There is no relationship between the size of a project and its procurement method, contrary to popular belief. The findings indicate that wider surveys would generate useful data about attitudes.

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.

Understanding construction consortia: Theory, practice and opinions

Firms form consortia in order to win contracts. Once a project has been awarded to a consortium each member then concentrates on his or her own contract with the client. Therefore, consortia are marketing devices, which present the impression of teamworking, but the production process is just as fragmented as under conventional procurement methods. In this way, the consortium forms a barrier between the client and the actual construction production process. Firms form consortia, not as a simple development of normal ways of working, but because the circumstances for specific projects make it a necessary vehicle. These circumstances include projects that are too large or too complex to undertake alone or projects that require on-going services which cannot be provided by the individual firms inhouse. It is not a preferred way of working, because participants carry extra risk in the form of liability for the actions of their partners in the consortium. The behaviour of members of consortia is determined by their relative power, based on several factors, including financial commitment and ease of replacement. The level of supply chain visibility to the public sector client and to the industry is reduced by the existence of a consortium because the consortium forms an additional obstacle between the client and the firms undertaking the actual construction work. Supply chain visibility matters to the client who otherwise loses control over the process of construction or service provision, while remaining accountable for cost overruns. To overcome this separation there is a convincing argument in favour of adopting the approach put forward in the Project Partnering Contract 2000 (PPC2000) Agreement. Members of consortia do not necessarily go on to work in the same consortia again because members need to respond flexibly to opportunities as and when they arise. Decision-making processes within consortia tend to be on an ad hoc basis. Construction risk is taken by the contractor and the construction supply chain but the reputational risk is carried by all the firms associated with a consortium. There is a wide variation in the manner that consortia are formed, determined by the individual circumstances of each project; its requirements, size and complexity, and the attitude of individual project leaders. However, there are a number of close working relationships based on generic models of consortia-like arrangements for the purpose of building production, such as the Housing Corporation Guidance Notes and the PPC2000.

The impact of procurement method on costs of procurement

Collaborative working methods offer the hope of reduced waste, lower tendering costs and improved outputs. The costs of tendering may be influenced by the introduction of different working methods. Transaction cost economics appears to offer an analytical framework for studying the costs of tendering, but it is more to do with providing explanations at the institutional/industry level, not at the level of individual projects. Surveys and interviews were carried out with small samples in UK. The data show that that while tendering costs are not necessarily higher in collaborative working arrangements, there is no correlation between costs of tendering and the way the work is organized. Practitioners perceive that the benefits of working in collaborative procurement routes far outweigh the costs. Tendering practices can be improved to avoid waste, and the suggested improvements include restricting selective tendering lists to 23 bidders, letting bidders know who they are competing with, reimbursing tendering costs for aborted projects and ensuring that timely and comprehensive information is provided to bidders.