Executive objective. Next, for the procurement strategy, we have

Executive summary

In this project, we are going to advice our client Mr Peter Lim on the best method to procurement and tender his project. He wants to build a new-3-storey detacher house with a total gross floor area of 650m2 located at 15 Oxley Walk, Singapore 238590 at a budget of $2.5 million.

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Since he is very particular with the design, and would like it to be finalized to his satisfaction before construction works commence, we have compared many procurement strategies and tender method to help him to choose the best one.

First part, we are going to talk about our assumption and his objective. Next, for the procurement strategy, we have listed 3 suitable methods which are traditional lamp sum, Design & build and Develop and construct and their advantages. Besides, project risk is also discussed.

After we studied client’s objective in detail and according to the rating system by Bennett & Grice, we calculate them and get the best choice which is develop and construction procurement method. Then, we talk about the Tendering plan and procurement contracts. In this stage, we listed 4 tender plans and compare them to find the best choice. At the time, Main contract and scope of work of each contract is also worked out.

Finally, we plan for the timeline of the Activities and their duration. In this case, a Gantt chart is prepared. Here, we will explain our work in detail.

1. Assumptions

1.1 Assumptions of client’s requirements

 To design and build a dreamhouse for Mr Peter Lim, we need to analyse the client’s specialised needs and unique requirements. Here, we need to make some assumptions which are:

     I.        The project is highly specialised, unique and technological advanced.

    II.        There is no similar project before.

  III.        Client is inexperienced and private, and it is built to use.

  IV.        Client is unable to give a comprehensive and wholesome brief on his own.

   V.        Client is willing to take some risks.

  VI.        Client is willing to complete the project early.

VII.        Client may be willing to take part in the design stage.

VIII.        Client cannot accept overbudget.

1.2 Category of the Client

The Client can be classified as a private, inexperienced client and project is developed for his own use. This is because the client does not have experience and knowledge of similar project.

2. Client’s needs and objectives

2.1 Primary objectives

2.1.1 Quality

     I.        Unique, modern

    II.        Nature

  III.        Safe to live

2.1.2 Cost

     I.        Budget of $2.5 million

    II.        Best value for money

  III.        High cost certainty

 

2.1.3 Time

     I.        Complete within 15 months from January 2018

    II.        Complete as early as possible

 

2.2  Other objectives

Client is very particular with the design, and would like it to be finalized to his satisfaction before construction works commence. This project must avoid any unnecessary abortive works and variation claims.

 

 

3.    Procurement strategies

The client’s project is to demolish the existing house, and develop it into a new 3-storey detached house with a total gross floor area of 650m2 at a budget of $2.5 million. He would like to incorporate natural elements, as well as environmental and eco-friendly features into the house design. His priority is the certainty of price before commencement of work, as it enables him to work out the most ideal financial scheme for his cash flow planning. The client wants to start the project as soon as the design is finalized, and the entire construction works shall be completed in 15 months from January 2018. So far, we think that the project risk is lack of construction time. Here, we come up with three possible procurement strategies which are traditional lamp sum, Design & build and Develop and construct. Now, we will explain our reasons.

 

 

 

 

 

 

3.1 

Contractual relationship

Traditional lamp sup:

 

To construct (Lump sum Contract)

To design & manage

 

 

General process

 

 

 

 

 

 

3.1.1        Advantages of traditional lump sum procurement method

Under a lump sum contract, a single ‘lump sum’ price for all the works is agreed before the works begin. And the contractor is able to accurately price the risk they are being asked to accept.
Client has high certainty of final price
All tender prices are based on same information making it easy to analyse and select the best value for money
Easy to assess variations based on agreed Schedule or rates
Tendering cost for contractor is lower than design and build
design must be completed mostly before tender is called.
Scope of work is clearly defined.

3.2   Design and build

 

 

Contractual relationship

 

 

The Bill of Quantities will be prepared by the Contractor to show the breakdown of Bid price

General process

 

3.2.1    Advantages of Design and build

 

I.        The Client engages a contractor to design and build the project to meet his specific needs;

II.        Integrated design and build: Have both in-house design and construction expertise but prepare to buy in external design expertise where necessary.

III.        Client – Contractor: most common is lump sum contract or sometimes a guaranteed maximum price contract;

IV.        The Client needs to prepare a comprehensive project requirement for the Contractor to propose a design and a cost.

V.        High certainty of final price

VI.        Lower final cost compared to traditional

VII.        Shorter project time

VIII.        Single point responsibility: design & build under one roof

IX.        Client’s brief: clear, comprehensive

 

 

 

 

 

 

3.3 Develop and construction

Contractual relationship

 

 

General process

 

3.2.1        Advantages of Develop and construction

I.        High certainty of final price

II.        Lower final cost compared to traditional but not as economical as design and build

III.        Design basis is similar, easier to compare between tender prices

IV.        Tendering cost still high but improved as compared to design and build.

V.        Project duration is overall shorter than traditional but not as fast as design and build.

VI.        Single point responsibility: design & build under one roof

VII.        Contractor’s inputs create more buildable and efficient design

VIII.        Client is able to give clearer briefs with designer’s helps.

IX.        Client is able to control the concept design to their likes.

X.        Client is easier to compare between contractors to select one best since there is a guideline design to develop on.

XI.        Dispute over responsibility of design.

XII.        Client has less control and influence over design matters, inflexible when client wishes to make design changes.

XIII.        Client may need engage other consultants to administer the contract and monitor works on site.

 

We believe these three procurement methods are the most suitable methods as they can meet the client’s requirements and objectives comparing to other methods.

 

 

 

 

 

 

 

 

4.    Recommendation

4.1 Client’s prioritized objectives

After we studied client’s objective in detail and according to the rating system by Bennett & Grice, we have listed and rate the client’s objective in a prioritized manner as below,

 

Objectives

Weighting

Quality &Others – 50%

High quality architecture and innovative design

30%

Flexibility to change design after work starting

5%

Complexity of the building

5%

Single point responsibility

3%

Direct professional responsibility

2%

Transfer of responsibility for consequences of hiccups

5%

Cost – 35%

Firm price before construction

20%

Final price within budget

15%

Time – 15%

Completion on time

10%

Compete early

5%

 

 

 

 

 

 

4.2 Project risk

Risk is the possibility of loss or injury. Project risk is an uncertain event or condition that, if it occurs, has an effect on at least one project objective. Risk management focuses on identifying and assessing the risks to the project and managing those risks to minimize the impact on the project. There are no risk-free projects because there are an infinite number of events that can have a negative effect on the project. Risk management is not about eliminating risk but about identifying, assessing, and managing risk. (source: https://pm4id.org/chapter/11-1-defining-risk/)

 

In this project, we have, inevitably, identified some major risks and responses to minimise its side effect. They are shown as below table.

No.

Major risk factors

Risk allocation / Response

1

Cost certainty

largest proportion included in contract. May change upon Client’s request to amend scope of work.

2

Time risk                                                      Tight project schedule, inappropriate time allocation, delay etc

Demolition can commence at designing stage to save time. Once awarded, contractor is responsible for adjusting project schedule, unless client request for scope changes. Include liquidated damages for delay.

3

Physical risk                                                Extremely incitement weather, fire, flood, earthquake, etc

Unforeseeable extreme weather is not the responsibility of any party, hence should be shared.

4

Personal risk                                             Risk due to the default of personnel including main contractor, subcontractors, architect, quantity surveyor, engineers, etc.

Client can request for performance bond, reiteration monies, payment by project phases, etc. To check contractor purchases necessary insurances.

5

Design and technical risk                             Risk caused by design, technique, materials, equipment, site conditions, etc.

Main contractor’s risk. Client is not able to fully control design quality once novated to contractor.

6

Contractual risk                                       Contract outline, contract documents

Architect to produce conceptual design, contractor to finish the detailed design and construction. Hire external consultants for advice, preparation of contract document and project management.

 

4.3 Rating outcome

By calculating the procurement methods which we have chosen, we get a table shown below.

Client’s objectives

Importance weightage of client’s objective

Traditional lump sum

Design and build 

Develop and construction

Utility

Score

Utility

Score

Utility

Score

Time                                                   Is early completion required?

0.05

10

0.5

90

4.5

100

5

Cost                                                      Is firm price needed before any commitment to construction is formed?

0.02

90

18

100

20

100

20

Flexibility                                    Are variations necessary after work has begun on site?

0.05

100

5

30

1.5

30

1.5

Complexity                                     Is the building highly specialised, technologically advanced or highly serviced?

0.05

40

2

10

0.5

30

1.5

Quality                                              Is high quality important?

0.3

100

30

40

12

40

12

Certainty                                          Is completion on time important?

0.1

40

4

90

9

90

27

Cost                                                      Is completion within budget important?

0.15

30

4.5

50

7.5

50

7.5

Division of responsibility        Is single-point responsibility wanted?

0.03

30

0.9

100

3

100

3

Is direct professional responsibility wanted?

0.02

100

2

10

0.2

10

0.2

Risk                                                     Is transfer of responsibility for the consequence of slippages important?

0.05

30

1.5

100

5

100

5

Results

 

 

68.4

 

63.2

 

77.7

 

 

4.4 Recommendation

After comparing their score, we find the Develop and construction has the highest score which means it is the best choice.

 

 

 

 

 

5.    Tendering plan and procurement contracts

There are four tendering methods can be chosen: open tender, selective tender, limited tender, and negotiated tender respectively.

5.1 Tender methods

5.1.1 Open tender (mostly for Public):

In an Open Tender, all suppliers may participate by responding to Tender Notices. No pre-qualification exercise is done. It’s important that tenders are publicised widely for many suppliers. Open tender can promote fairness. (source: notes)

5.1.2 Selective tender:

For a Selective Tender to be used, a pre-qualification of interested suppliers is carried out first so as to exclude suppliers who do not meet the minimum requirements. Suppliers qualified in this process are then invited to submit tenders. (source: notes)

5.1.3 Limited tender:

In a Limited Tendering procedure, tenders are invited from only a few suppliers, or from one pre-identified supplier. This may be used when it is not feasible/practical to call for open and selective tenders. (source: notes)

 

5.1.4 Negotiated tender: (for Private only)

This is used when the client selects a preferred contractor, get his quotation then negotiate to achieve his target price without comparing with another contractor’s price. If not successful, the client will select another one to negotiate. This is only used for Private sector. (source: notes)

 

 

 

 

5.2 Recommendation

As this is a small private project, obviously, the open tender is not suitable as it is mainly for public project and it takes a long time for contrctor to preapre tenders. In view of the fact that the client is experience, so he does not have the experience to work with a contrctor. In the case, the limited tender cannnot be used. For the selective tender, since it requires to have a pre-qualified process before the tender, it may take more time to complete the project. This is not what the client wants. However, for the negotiated tender, we believe it is the best choice. This is because when invited to tender the contractor submits his prices, and if there are any queries these are discussed and usually settled without difficulty. Thus mistakes in pricing can be reduced, so that both the engineer advising the employer and the contractor are confident that the job should be completed to budget. If no unforeseen troubles arise, overall this method saves time and cost,and the quality will not be bad because everything is negotiable.

 

 

 

 

5.2.1 Contratuctual relationship of Develop and construction method

 

           

 

 

 

 

5.3   Main contract and scope of work of each contract:

 

5.3.1    Main contract: lump sum contract

 

5.3.2    Scope of work between client and main contractor

                     I.        To complete the work by date for fractional/substantial completion.

                    II.         To comply with required materials and workmanship.

                  III.        Statutory requirements: e.g. Occupation Health and Safety Act, etc.

                  IV.        Co-ordination and management: to programme the overall project and coordinate various parties, comply with instructions, etc.

                   V.        Insurance and bonds: to provide performance bond, contractor’s all risks insurance, worker compensation, etc.

 

 

5.3.3    Scope of work between client and consultant

                     I.        Project description

                    II.        Basic and other additional services fees

                  III.        Additional reimbursable allowance

                  IV.        Project schedule

                   V.        Other general requirements

 

 

 

 

6.    Time line

6.1 Activities and duration

Here are our all our activities and their time required.

 

 

duration

week

Demolish

8days

1

Preparation

14days

2

Concept design

22days

3

Tender document

33days

5

Pre-qualification(optional)

5days

1

Invitation for tender

8days

1

Tender query addendum

37days

5

Tender submission

50days

7

Tender evaluation

58days

8

Tender negotiation(optional)

20days

3

Tender award

5days

1

Detailed design

56days

8

Construction

120days

17

Hand over

21days

3

 

 

 

 

 

 

6.2 Gantt chart

Shown on the Annex A

 

 

 

 

 

 

 

 

 

 

 

Conclusion

All in all, there are many procurement strategies and tender plans client can choose. However, every construction project is not the same, different contractors may have different option. Therefore, it is hard to say that there is best procurement strategy for any project. In this case, we must study the client’s requirement, condition and objective carefully to find the most suitable strategy and plans in order to meet client’s need. In this project, after studying the client, we find he is an inexperienced, private client and it is for himself to use. Meanwhile, as he has his own design idea and limited budget as well as the project duration is limited to 15 months, both management procurement and collaborative procurement and package deals/turnkey procurement cannot be used. For the rest, by using the rating system by Bennett & Grice, we find develop and construction procurement is the most suitable choice that will fulfil his objectives. For the tender plan, it does not much choice as it is a small private project.

In this project, we have learnt a lot of things. We not only have a better comprehension of what we have learnt in the class, but also understand the importance of choosing the right method for both procurement and tender.

 

 

Annex A

PROCUREMENT MANAGEMENT

2017/18 Semester 2 Group Project

 

Procurement and tender activity timelines

Group name:

161MEA2 GROUP 3

Group Leader:

Zhang Song

 

 

 

 

 

 

 

 

 

 

Reference link

1.    DEFINING RISK   https://pm4id.org/chapter/11-1-defining-risk/

 

 

 

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