Construction projects – part 10 - Procurement
Quality / cost / time
These principles of procurement will apply equally to projects other than Construction but in some instances may be more applicable to the Construction industry.
Procurement is obtaining resource, usually at a cost.
This will include sourcing, identifying quality, cost and quantity requirements together with any contractual arrangements.
Procurement will cover personnel, materials, plant and equipment.
Procurement cost is not the only factor, quality and making sure the materials and equipment arrive on time also needs consideration.
Evaluating options
Within this the Project Manager should research viable options against suitable criteria for further evaluation.
In terms of supporting a Quality Plan and under PRINCE2® [see ‘The Complete Project Management plus PRINCE2’] it would be useful to record the details of these suppliers.
Contract type (e.g. purchase, lease, hire)
Also, the Project Manager should consider, where necessary, what type of contract, for procuring resources, is required.
For example, purchase, lease or hire, whether loan or exchange is feasible.
Local input
The Project Manager may wish to consider local issues for procurement.
For example, use of local contractors, materials and possible training opportunities for one’s own staff.
Government input
For some government contracts the government ministries may wish to supply the contractor.
For example, if they do not have the resource then the ministry may obtain them privately.
Appointment of consultants / contractors
Consultants provide advice for the project.
When the consultants and contractors are appointed they can define the strategy of the construction project.
There are advantages and disadvantages in the timing.
- Standard
The consultant is appointed ahead of the designing stage and working drawings and production information is completed before the tendering phase to appoint the contractor.
This approach helps the tendering process and preparation of the contract but may require modification if time is at a premium.
- Early
The consultant is appointed as in the standard approach.
The contractor is appointed before the design phase is complete.
This approach may have a disadvantage in that the potential cost put forward by the contractor may be less accurate due to being based upon incomplete information.
This may make contract clarification with the contractor more difficult.
This approach may prove useful for a series of similar projects.
- Combination
Prior to the design phase starting, a company is appointed to coordinate both the design and the construction phase.
This may well improve the planning and general flow of the project but may encounter problems with competition at the tendering stage.
- Divide
The consultant is appointed as in the standard approach.
Contractors are then appointed for specific parts of the construction.
This will allow the early activities to be started early.
This approach has a disadvantage in that it is very likely to be more difficult to manage as responsibility for the construction phase is split between more than one contractor.
- Direct
For technically simple projects in developing countries direct labour is often used.
Larger projects may suffer from a lack of competent skills.
When appointing a consultant one might consider:
- The size of the firm to take on the contract
- References and previous experiences
- A review of their methods of construction, control and general management
- Proposed project organization and identification of key personnel
In addition, when appointing a contractor one might consider:
- Prequalification should be used
- If those applying are well known it is normal to accept the lowest tender
- Government tenders are usually via a Tender Board
- Quality of past work
- Completion time
- Any cash advances required
- Check the information supplied for errors
Subcontractors
Whether these are appointed by the client or the contractor the contractor is responsible for their contracts and activities.
Nomination by the client may suffer from non competitive tendering.
Cost and price
Any contractor submitting a tender will have a cost in mind for which he can carry out the construction.
However, he will submit a higher price for the tender that, he will believe, is the lowest price that will secure the contract.
This price will become the ‘cost’ to the client.
The cost of the project as seen through the client’s eyes will be less accurate during the ‘briefing’ phase, more so as the Project Manager firms this up during the design phase and modified again once the contractor examines the tender documents.
Having calculated all of the project costs, it is wise for the Project Manager to indicate a degree of accuracy when submitting these costs.
The degree of accuracy may well have been set by the client (Project Sponsor) who may well have a personal preference when procuring any resource.
There should be procedures in place for procuring resources.
If this is not the case, for certain areas, then one should be proposed with appropriate justification for agreement by the Project Sponsor.
When obtaining resources you may also need to consider other aspects such as:
- Limits to liabilities
- The availability of service
- Handling, storage, protection and deterioration
- Health and safety
- Operation and maintenance
- Insurance and warranties
- Payments, discounts, rebates and penalties
It’s worth bearing in mind that any information that is obtained may well be confidential and should be treated as to the wishes of the provider.
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