Procurement in Construction Management Procurement Systems

Mohammed Elaida MCIOB

Definition

A management-oriented procurement system has existed for a considerable amount of time, but only in the late eighties that there has been a standard-form contract for this type of procurement. The increased use of this system was due to commercial clients and property developers’ aim to commence and complete their projects as early as possible. The system was introduced as a result of:

• The diversity, difficulty and standardisation of construction methods.

• The increasing importance of the sub-contractor.

• The construction projects increase in size, the requirement for stricter project duration and budget and a more integrated project management team.

In management-orientated procurement systems, the contractor is raised to the position of a consultant and special importance is placed on the integration of the management of both design and construction.

Types of Management Oriented procurement systems

1. Management Contracting:

Work packages are managed by the contractor. The latter is supported by and works hand in hand with the professional team while providing his management expertise to the design. The actual works are carried out by others. Management contracting system was the first fast delivery system to shorten the time allocated to the procurement process. The system permits the management contractor and the client’s consultant to develop a professional team dedicated to achieving the client’s objectives.

The main features of this procurement system are:

• The contractor is appointed on a professional basis as an equal member of the design team providing construction expertise.

• Reimbursement is on the basis of a lump sum or percentage fee for management services plus the prime cost of construction.

• The actual construction is carried out by works or by package contractors who are employed, coordinated and administered by the management contractor.

2. Construction Management:

The system was originated and popularised in the USA. It is, now, gaining popularity in the UK as well as in developing countries such as Malta. The client appoints a construction manager/project manager, as a professional consultant and on a fee basis, to plan, manage and coordinate the design, carry out construction site inspections, issue site instructions and ensure the smooth buildability of the project.

The system is comparable to management contracting in terms of the project’s division into work packages. However, the fundamental difference between Construction management and management contracting is twofold. First, the absence of sub-contracting practices under the former system. Second, the construction manager is appointed much earlier than the management contractor, even before the Architect/consultant. Moreover, the construction manager acts as a professional consultant to the client, as opposed to the commercial-oriented management contractor.

3.

Design and Manage:

In an effort to merge design-and-build and management systems, the client may choose this system by appointing a single organisation, a contractor or a consultant, who shall be responsible for the project's design and management by means of work packages.

While the project is carried out by works or package contractors, the reimbursement is generally fee-based or lump-sum.

Advantages:

Early involvement of the management contractor leads to problem-fee buildability, more realistic planning, better works packaging and better project team integration.

The management contractor and the architect are on the side of the client. Hence, there are no ‘them-and-us’ attitudes and hence no adversary relations.

The fast-track approach, buildability advice and better planning during the design stage, resulting in the early start of works on site, and hence early completion.

More flexibility during the construction phase.

Disadvantages:

The client cannot predict the project’s cost from the outset.

The management contractor’s obligation may not be well defined. As a result, the client may be subjected to greater risk from construction contractors.

The management contractor may exert some pressure on the architect. Hence, design quality may suffer.

Like traditional and design-and-build systems, works sub-contractors have no direct contractual relationship with the client. As a result, they may suffer late payments from the management contractor.