Judit Gyulay Vergabeformen Building Procurement Contract strategy Procurement

Judit Gyulay Vergabeformen Building Procurement – Contract strategy Procurement Systems – an initial overview Proper choice of delivery system can help to reduce conflicts on construction projects 05. 06. 2007

Building Procurement – Contract strategy Right Building n Right Time n Right Place n Successful Investment Budapest University of Technology and Economics Judit Gyulay n Department of Construction Technology and Management 05. 06. 2007 n

Building Procurement – Contract strategy Contents n Participants of a construction project have different interests n Claims and litigations n How to reduce conflicts/risk of construction projects n One area, generate conflicts: Procurement system (project delivery system) Possibilities n Consequences n Of choice the procurement system Budapest University of Technology and Economics Judit Gyulay n Department of Construction Technology and Management 05. 06. 2007 n

Building Procurement – Contract strategy n. Idea Investment Process n. Area n. Money Initiation Hand-over and use Civil Engineer/Architect is involved the process § in different phases § in different „roles” Budapest University of Technology and Economics Judit Gyulay n Department of Construction Technology and Management 05. 06. 2007 n

Building Procurement – Contract strategy Common goal of participants to perform a building Meeting the client’s requirements, ensuring completion § On time § Within cost § To required quality standards Budapest University of Technology and Economics Judit Gyulay n Department of Construction Technology and Management 05. 06. 2007 n

Building Procurement – Contract strategy Cost Quality Cheapest Best Economical Adequate Reasonable Fastest Time (The incompatibility of cost, quality and time) (Kharbanda et al. 1980. ) n. In addition: participant’s individual interest Budapest University of Technology and Economics Judit Gyulay n Department of Construction Technology and Management 05. 06. 2007 n

Building Procurement – Contract strategy Participants of a construction project n Directly involved client, designer, contractor n Indirectly involved supervisor advisor, project manager, n External bank, authority Budapest University of Technology and Economics Judit Gyulay n Department of Construction Technology and Management 05. 06. 2007 n

Building Procurement – Contract strategy Participants – common goal But Conflicts, claims and litigation seems to be inevitable part of construction projects Areas generate conflicts n One-sided contract (Client drafted contract) n Procurement system (project delivery system) n Site conditions n Site services, etc. Budapest University of Technology and Economics Judit Gyulay n Department of Construction Technology and Management 05. 06. 2007 n

Building Procurement – Contract strategy Analysis n Not clear understanding peculiarities of that specific procurement and contracting system n Responsible parties Does not recognise or Does not want to accept responsibility Lack of identification of own interest leads to one-sided contract Budapest University of Technology and Economics Judit Gyulay n Department of Construction Technology and Management 05. 06. 2007 n

Building Procurement – Contract strategy The Client n n Shares: activities responsibilities risks with the partners Will choose procurement system and contract form Budapest University of Technology and Economics Judit Gyulay n Department of Construction Technology and Management 05. 06. 2007 n

Building Procurement – Contract strategy Idea Hand-over and use Procurement: n Total management process used when obtaining a building n System of contracting among client, designer, and contractor Budapest University of Technology and Economics Judit Gyulay n Department of Construction Technology and Management 05. 06. 2007 n

Building Procurement – Contract strategy To produce /create/perform a building a bridge a road Project Has to be managed n n n Planning Organising Leading Commanding Controlling Who will manage? In which system ? Budapest University of Technology and Economics Judit Gyulay n Department of Construction Technology and Management 05. 06. 2007 n

Building Procurement – Contract strategy Client Project manager Quantity surveyor n Engineer Architect Contractor(s) Typical management structure with project manager Client Project co-ordinator Quantity surveyor n Engineer Architect Contractor(s) Typical management structure with project coordinator (Roger Waterhouse) Budapest University of Technology and Economics Judit Gyulay n Department of Construction Technology and Management 05. 06. 2007 n

Building Procurement – Contract strategy Client’s main decisions: (Help: principal adviser) Organisation for the Management of the Project In-house project manager n In-house and external project management team n External project management n Organisation for Design and Construction Traditional Design and build Turnkey Package deal Management Construction Management Contracting Others Budapest University of Technology and Economics Judit Gyulay n Department of Construction Technology and Management 05. 06. 2007 n

Building Procurement – Contract strategy More complex projects Lack of time Need of change in procurement methods Traditional Project Management Client Designer Contractor Project Management Designer Preparation Design Tender/bidding Construction Contractor Preparation Design Tender/bidding Construction Budapest University of Technology and Economics Judit Gyulay n Department of Construction Technology and Management 05. 06. 2007 n

Building Procurement – Contract strategy Procurement/project delivery system „Improper choice or misunderstanding generate conflicts” n Traditional procurement system n Design and build, turnkey or others n Management type Budapest University of Technology and Economics Judit Gyulay n Department of Construction Technology and Management 05. 06. 2007 n

Building Procurement – Contract strategy Traditional procurement system characteristics Long construction period n Consecutive organisation n Clear contracting relations n Budapest University of Technology and Economics Judit Gyulay n Department of Construction Technology and Management 05. 06. 2007 n

Building Procurement – Contract strategy Innovative Project delivery systems n n n Construction management Management contracting Project or management service contract and other variations General characteristics n An organisation is employed to manage the project the construction n To coordinate the design with construction n Overlapping between design and construction n Series of tenders: work packages Budapest University of Technology and Economics Judit Gyulay n Department of Construction Technology and Management 05. 06. 2007 n

Building Procurement – Contract strategy Client needs representation/protection by neutral expert Traditional delivery system Client Design and build Turnkey, Package deal Inspector Supervisor Q. S. Client Contractor Designer Contractor Inspector Supervisor Designer Subcontractors Budapest University of Technology and Economics Judit Gyulay n Department of Construction Technology and Management 05. 06. 2007 n

Building Procurement – Contract strategy Design and build turnkey/package deal Preparation Design Tender Contract Construction Cost Characteristics n Single point responsibility n Can be overlapped n Client can be sure of maximum cost before final commitment n Integrated design and construction – Improves buildability – Fits to constructor’s expertise, working condition, organisation costs should be lower Thus shorter time on site (Savings are not passed to the client in lower prices) Budapest University of Technology and Economics Judit Gyulay n Department of Construction Technology and Management 05. 06. 2007 n

Building Procurement – Contract strategy Construction Management CM Inspector Supervisor Client Designer Management Contracting MC Client Construction Manager Contractors Inspector Supervisor Management Contractor Designer Contractors Budapest University of Technology and Economics Judit Gyulay n Department of Construction Technology and Management 05. 06. 2007 n

Building Procurement – Contract strategy Management contracts (CM, MC…) Characteristics Management team is involved at early stage Design can be influenced (buildability) Claims can be solved, delays reduced Save time – series of tenders, work packages Flexibility in design to suit the client to suit the budget n More risk in design – higher requirement in design n No assured final cost at the start of construction n n Budapest University of Technology and Economics Judit Gyulay n Department of Construction Technology and Management 05. 06. 2007 n

Building Procurement – Contract strategy Comparison of procurement systems, source of risks and conflicts n Responsibility for decision Preparation Design Traditional system Cost Tender Construction is being started knowing the construction costs Construction Start Preparation Modern managerial typed system Design Cost Tender Construction Constriction is started without knowing the construction costs Start Budapest University of Technology and Economics Judit Gyulay n Department of Construction Technology and Management 05. 06. 2007 n

Building Procurement – Contract strategy Consequences n Use of non-traditional delivery system can create greater risk of misunderstanding Scope of work / compensation are changing continuously n Innovative project delivery systems can blur the traditional roles and responsibilities of participants Budapest University of Technology and Economics Judit Gyulay n Department of Construction Technology and Management 05. 06. 2007 n

Building Procurement – Contract strategy One step towards a successful project To choose appropriate procurement system and appoint the manager as early possible for maximum benefit n Characteristics of the delivery system have to be understood by the participants n Contract has to contain reasonable allocation of activities, responsibilities and risk n All the participants have to recognise responsibilities, act in partnership Budapest University of Technology and Economics Judit Gyulay n Department of Construction Technology and Management 05. 06. 2007 n

Building Procurement – Contract strategy Proper choice and fully understanding of delivery system Procurement Can help to reduce conflicts on construction projects Budapest University of Technology and Economics Judit Gyulay n Department of Construction Technology and Management 05. 06. 2007 n