Table of Contents

1.0.0 Introduction .................................................................................................................................... 2 2.0.0 Project procurement systems. ........................................................................................................ 3 2.1.0 Separated and Cooperative System ............................................................................................ 4 2.2.0 Integrated System....................................................................................................................... 5 2.2.1 Package Deal. ......................................................................................................................... 5 2.2.2 Turnkey. ................................................................................................................................. 6 2.2.3 Develop and Construct. .......................................................................................................... 6 3.0.0 Management Oriented Procurement Systems ................................................................................ 7 3.1.0 Management contracting ............................................................................................................ 7 3.2.0 Construction management.......................................................................................................... 7 3.3.0 Design and manage .................................................................................................................... 8 4.0.0 Form of contract ............................................................................................................................. 9 4.1.0 The Zambia Institute of Architects (ZIA) Standard Form of Contract. ..................................... 9 4.1.1 Articles of agreement ............................................................................................................. 9 4.1.2 Conditions of Contract. ........................................................................................................ 10 4.1.3 Appendix .............................................................................................................................. 11 4.1.4 The use of the form in the Zambian construction industry. ................................................. 11 4.2.0 The International Federation of Consulting Engineers (FIDIC). ............................................. 12 4.2.1 FIDIC Conditions of Contract for Construction, the (New Red Book) ............................... 12 4.2.2 FIDIC Conditions of Contract for Plant and Design/Build, the (New Yellow Book) ......... 12 4.2.3 FIDIC Conditions of Contract for EPC Turnkey Projects, the (Silver Book) ...................... 13 4.2.4 FIDIC Short Form of Contract, the (Green Book) ............................................................... 13 4.2.5 FIDIC Design-Build Operate Contract (DBO) Gold Book .................................................. 13 5.0.0 The difference between the ZIA Standard Form of Contract and the International Federation of Consulting Engineers (FIDIC). ............................................................................................................. 14

Construction project management, a critical analysis of procurement systems and forms of contract. June 4, 2012 6.0.0 References .................................................................................................................................... 16

1.0.0 Introduction
A project is made up of a group of interrelated work activates constrained by a specific scope, budget and schedule to deliver capital asserts needed for to achieve the strategic goals of an agency. This paper is intended to discuss the planning and organisation of construction projects specifically through procurement systems and forms of contracts both locally and internationally. Project procurement has been described as an organised method or procedure for clients to obtain or acquire construction goods or products. Apart from the traditional approach, there are now other innovative procurement systems used by the construction industry worldwide. The different procurement systems differ from each other in terms of distributing responsibilities, activities, sequencing, process and procedure and organisational approach in project delivery (Wan Ali et al). The forms of contract published by the Joint Liaison Committee through the Zambia institute of architects are documents in which there has been an agreement established with the various institutions representing contractors, specialist contractors and sub-contractors to use in the execution of project contracts (Zambia handbook for practice for architects, 2003). Thus, they have been made acceptable by those who do tender. The Zambia handbook of practice for architects furthermore, describes a contract as a term which signifies the binding together of two or more persons over a common intention. It further defines a contract as an agreement which is meant by the persons involved called the parties to the contract to give rise to obligations expected at law. Internationally, the International Federation of Consulting Engineers (FIDIC), has devoted itself to the compilation of management documents for all kinds of projects among which the Fidic conditions contractions are the most influential and of the highest application (AJ Clark, 2008).

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Construction project management, a critical analysis of procurement systems and forms of contract. June 4, 2012

2.0.0 Project procurement systems.

The procurement of construction project is huge in extent because it involves the gathering and organising of countless separate individuals, firms and companies to plan manage and build construction projects for specific clients. Procurement is derived from the word procure which literally meaning the act of obtaining something. The term system entails an organised method of obtaining something. To flesh to the skeleton, project procurement is concerned with the organised methods of obtaining construction products such as a residential, commercial or industrial building. It also involves arranging and coordinating people to achieve prescribed goals or objectives. In this context, The Aqua Group (1999) described procurement as the process of obtaining or acquiring goods and services from another for some consideration. More also, project procurement is the organisational arrangement needed to design and build construction projects for a specific client (Masterman, 1996). It is in this very sense that the process of obtaining a building by a client involves a group of people who are brought together and organised systematically in terms of their roles, duties, responsibilities. Nowadays, there are several types of project procurement systems being widely used in the construction industry. These range from the traditional system to the many variations innovative systems such as turnkey, design and build, build-operate-transfer, management contracting, cost-plus contracting and the list goes on. The introduction of many project procurement systems was induced by the need for a more efficient project delivery system. Thus, these innovations to the traditional delivery method aimed at meeting the changing demand of clients or customers. The diverse project procurement systems give us different ways of planning projects for the client. This paper will divide into the following categories (Masterman, 1996): separated and Cooperative System Integrated System Management Oriented System

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Construction project management, a critical analysis of procurement systems and forms of contract. June 4, 2012

Figure 1.0- category of building procurement systems. Source-Masterman JWE(1996) Building Procurement Systems; An Introduction.

2.1.0 Separated and Cooperative System

Under this system, the tasks of designing and construction of the project are separated and are carried out by different independent professions to be exact the designers and contractors. Usually, the complete working drawings have to be prepared by the designers before tender and construction actions can occur. It is sub-divided into 2 sub-categories Traditional System and Variants of the Traditional Systems. The Variant System is further sub-divided into (i) Sequential Method, and (ii) Accelerated Method (2006:4). Under the sequential method the building owner will appoint a team of consultants to act on his behalf to produce construction drawings, specification and tender document and to administer the tendering processes to select a contractor. Upon being selected and awarded the contract, the contractor will perform based on the drawings and specification prepared by the clients consultants (2006:4). The accelerated method can be considered as a cutting edge approach to speed up the selection of contractor and the commencement of construction. The method can be divided into 2 sub-categories, two-stage and negotiated tendering methods. Both methods involve

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Construction project management, a critical analysis of procurement systems and forms of contract. June 4, 2012

preliminary discussion with selected few contractors, submission of fixed tender and/or cost negotiation.

The Traditional Procurement System. Source- Wan Ali et al, The Effect of Procurement Systems on the Performance of Construction Projects.

2.2.0 Integrated System

This scheme combines the tasks of design and construction teams of the project (Ashworth, 2001). Both design and construction are contracted out to a single contracting organisation. As such, it is known to be a system in which client only needs to accord with a single organisation for both the designing and constructing the proposed project. In other words, the contractor will have to engage both design and construction teams. The Design and build system falls under this category of project procurement system. Here, the client together with his consultants prepare bidding documents that include the project brief as well as give an invitation to a number of contractors to bid. at this time, the invited contractors allowed to produce their own design, construction and offer. The variations to this mode of project delivery systems include:
2.2.1 Package Deal.

Normally called the all in contracting. Here, a contractor is given the duty to do all that is required for the design, construction and delivery of the project. Therefore, the contractor will prepare the project brief, sketch and final working drawings, get all the approval from authorities, project money, construction, furnishing and commissioning of all equipments and passing on the project to the client.
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Construction project management, a critical analysis of procurement systems and forms of contract. June 4, 2012 2.2.2 Turnkey.

In Turnkey, a contractor is also commissioned to undertake the responsibilities for everything necessary and required for the construction, completion, commissioning and hand over the project. The word turnkey means that, upon completion, the client is given the key and he can then enter the project by turning the key (Allen, 2001).
2.2.3 Develop and Construct.

This is related to design and build. Here, the contractor is still given the responsibility for both the design and construction of the project. The difference is that, under this method the clients design consultants prepare the concept sketches or designs and passed them to the contractor who will develop them and produced the detailed working drawings. The contractor will then construct and complete the project based on what it has developed and produced. Here, the contractor does not need to look for a designer to do the job.

The Integrated Process of Project Designing and Construction in the Design and Build Procurement System. Source- Wan Ali et al, The Effect of Procurement Systems on the Performance of Construction Projects.

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Construction project management, a critical analysis of procurement systems and forms of contract. June 4, 2012

3.0.0 Management Oriented Procurement Systems

It is a system that gives greater emphasis on the management and integration of the design and construction of projects. Under this system, the management of the design and construction a project is contracted out to a contractor who acts as a management consultant on behalf of the client. The construction itself is commissioned to many specialists or subcontractors who enter into the contract with either the management contractor or the client. This procurement approach was introduced based on the conception that a builder or contractor has more expertise to manage the design and construction of a project. As management consultant, the appointed contractor does not himself carry out the design or construction of the project his main responsibility is to manage the design and construction by the design consultants and the many specialist contractors, respectively. There are three types of procurement method that fall under the category of Management Oriented Procurement Systems, they are:

3.1.0 Management contracting

Management contracting and construction management contracting are forms of innovative procurement approach whereby a contractor is contracted and paid a fee to manage, procure and supervise the construction of a project rather than to build the project. The actual construction works are contracted out to many package or specialist contractors. Under this arrangement the management contractor is employed as a construction consultant to be part of the clients team.

3.2.0 Construction management

The main difference between contract management and construction management contracting is that in the former, the package contractors are in contract with the management contractor. In the latter, the package contractors (specialist sub-contractors) are in contract with the client or building owner.

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Construction project management, a critical analysis of procurement systems and forms of contract. June 4, 2012

- The Process of Project Designing and Construction in the Management Contracting & Professional Construction Management Procurement System. Source- Wan Ali et al, The Effect of Procurement Systems on the Performance of Construction Projects.

3.3.0 Design and manage

In the design and manage system, a single organisation or firm is commissioned to be responsible for designing the project and managing its construction. The firm carries out the work itself, but it is contracted out to a number of specialist sub-contractors or package contractors, who enter into contract with the client. A design and manage firm or company is engaged as a consultant for the client and become a member of the project team.

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Construction project management, a critical analysis of procurement systems and forms of contract. June 4, 2012

The Process of Project Designing and Construction in the Design and Manage Procurement System. Source- Wan Ali et al, The Effect of Procurement Systems on the Performance of Construction Projects.

4.0.0 Form of contract

A form of contact is basically a document showing the agreement between the client ant he contractor in which both parties agree on how to conduct or carry out the project.

4.1.0 The Zambia Institute of Architects (ZIA) Standard Form of Contract.

This form is an agreement and schedule of building contract between the client also known as the building owner or employer and the contractor. It was issued by the Joint Liaison Committee (JLC) of the Building Industry and Allied Professions under the sanction of the Zambia Institute of Architects. It is divided into three parts which are as follows:
4.1.1 Articles of agreement

This is a section of the ZIA standard form of contract which includes details of the client called the employer and those of the contractor such as their physical addresses. In it is also describes the type of structure the client wants to be built. In it is also specified the place where the building is to be built. In it is a further indication that the client has sourced the drawings and bills of quantities showing and describing that the works to be done are to be prepared under the direction of the Architect (s). The article of agreement is detailed as follows: The contractor is expected to carry out and complete the works. The employer would pay the contract sum payable in away specified according to what the parties agree. It also includes an instance that in the event that that the project architects dies the client should nominate another person to replace the deceased architect of which the contractor should not object. In addition, the new architect is entitled to disregard any certificate, opinion, given by the architect for the time being. This also applies to the quantity surveyor.
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Construction project management, a critical analysis of procurement systems and forms of contract. June 4, 2012

Lastly, the article of agreement ends with details of the witness of the contract who signs the form in the presence of the client and contractor and any relevant personnel present.

4.1.2 Conditions of Contract.

In this section it is where the most bulk of the ZIA standard form of contract is because it is in this section that what everyone involved in the project is supposed to perform is in print to the detail. it includes the following: Contractors obligation. The basis of the agreement is that what is included in the Tender Documents is what the Contractor agrees to build, and the Contractor must be careful at the time of tendering his price, that there are no anomalies and ambiguities in what he understands as the scope of the Works. This is why it is so important that the description of the works included in design drawings, schedules and specifications are specific and fully described. Architect instructions. Contract documents. Royalty and patent rights. Foreman in charge. Access for architect to the works. Variations, provisional and prime cost sums. Contract sum of the project. Materials and goods unfixed off-site. Practice completion and defects liability. Sectional completion. Insurance of the works against fire. Possession completion and postponement of the site. Damages for non-completion. Extension of time. Nominated sub-contractors. Fluctuations. Outbreak of hostilities.

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Construction project management, a critical analysis of procurement systems and forms of contract. June 4, 2012

War damage.

4.1.3 Appendix

The appendix gives specific details of the contract in the following areas: Defects liability, usually six months. Percentage to cover professional fees. Date of possession. Date for completion. Liquidated and ascertained damages at a given rate per day. Period of delay by: Reason of lose or damage caused by any one of the contingencies. For any reason other reason. Prime cost sums the contractor desires to tender. Period of interim certificates. Period of honouring of certificates. Percentage of certified value retained. Limit of retention fund. Name of bank or Building Society. Period of final measurement and valuation.

4.1.4 The use of the form in the Zambian construction industry.

According to the times newspaper article on Zambia: Building Contract, a Way to Avoid Unforeseen 'Sandy Grounds'. The officially recognised and widely used Standard Form of Building Contract (With or Without Quantities) used in Zambia was last revised in 1972 but has more recently been ignored by some and replaced with various contracts mostly devised for general one-off use rather than tailored to our particular needs in Zambia. Contracts are normally entered into willingly by parties who want to state in advance how the contract will be executed and agree in advance how disputes will be resolved and who want to make sure, so far as possible, that their interests and objectives will be served and not frustrated by the agreement.

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Construction project management, a critical analysis of procurement systems and forms of contract. June 4, 2012

Most building works undertaken in Zambia are only described on basic drawings, being the minimum that the Planning Authority requires for granting a Building Permit, and they do not describe the works completely. The ZIA standard form is contracts is limited to be used only for major projects and those in which a registered architect has been engaged by a client to do his work. In other words there no proper agreement if a building owner engages a builder to do his work.

4.2.0 The International Federation of Consulting Engineers (FIDIC).

During the past half century, the International Federation of Consulting Engineers (FIDIC) has dedicated itself to the collection of management documents for all kinds of projects, among which the FIDIC Conditions of Contract are of the highest influence and are the most popular application. Now, the FIDIC condition of contract has been applied worldwide, especially in the projects invested by World Bank, Asia Development Bank, Africa Development Bank. Variants of the FIDIC contracts The new models include:
4.2.1 FIDIC Conditions of Contract for Construction, the (New Red Book)

This can be used in any kind of Engineering Construction Contract. Conditions of Contract for Construction are recommended for building or engineering works designed by the employer or by its representative, the engineer. Under the usual arrangements for this type of contract, the contractor constructs the works in accordance with a design provided by the employer. However, the works may include some elements of contractor-designed civil, mechanical, electrical and/or construction works.
4.2.2 FIDIC Conditions of Contract for Plant and Design/Build, the (New Yellow Book)

Conditions of Contract for Plant and Design-Build are recommended for the provision of electrical and/or mechanical plant, and for the design and execution of building or engineering works. Under the usual arrangements for this type of contract, the contractor designs and provides, in accordance with the employers requirements, plant and/or other works, which may include any combination of civil, mechanical, electrical and/or construction works.
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Construction project management, a critical analysis of procurement systems and forms of contract. June 4, 2012

This is applies to the lump sum contract project where the Contractor takes participation in the design work.
4.2.3 FIDIC Conditions of Contract for EPC Turnkey Projects, the (Silver Book)

Conditions of Contract for EPC Turnkey Projects are recommended where one entity takes total responsibility for the design and execution of an engineering project. Applied to the turnkey are projects of infrastructures or large-scale factories, where the Contractor takes on more work and risk while the Employers participation is small (private financing or government financing), but it is strictly defined upon the investment and construction period.
4.2.4 FIDIC Short Form of Contract, the (Green Book)

It can be used in all kinds of small-scale projects. These Conditions of Contract are recommended for engineering and building work of relatively small capital value. However, depending on the type of work and the circumstances, the Conditions may be suitable for contracts of considerably greater value. They are considered most likely to be suitable for fairly simple or repetitive work or work of short duration without the need for specialist subcontracts. This form may also be suitable for contracts which include, or wholly comprise, contractor-designed civil engineering, building, mechanical and/or electrical works.
4.2.5 FIDIC Design-Build Operate Contract (DBO) Gold Book

The DBO approach to contracting combines design, construction, and long-term operation (and maintenance) of a facility into one single contract awarded to a single contractor (who will usually be a joint venture or consortium representing all the disciplines and skills called for in a DBO arrangement. Public private partnerships, PPPs, are this arrangement). Basically the success of a true DBO contract depends on the commitment of the Contractor to the complete project and the best way to do that is to cover the whole design-build and the operation elements in a single contract. That is why FIDIC chose a single long term Performance Security with a substantial reduction in value on completion of the designbuild but with an on-going commitment by the Contract to perform and complete the operation service.

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Construction project management, a critical analysis of procurement systems and forms of contract. June 4, 2012

The format of a DBO arrangement can be based on either a green field scenario (D-B-O), or on a brown field scenario (O-D-B). Either is quite common, however the contractual requirements and procedures are quite different. The other important factor considered in DBO document is the length of the operation period, since the conditions suitable for long-term operation are not necessarily suitable for a shortterm operation. From the experience of the DBO members it was decided that the most useful period to consider was 20 years operation again giving guidelines in the Guide if a shorter period would be required Risk control in DBO contract DBO can be viewed as a complete method in PPPs. This method is a long-term process including procurement, construction, operation, and transfer, in which high risk should be pay the most attention to.

Employer Represent at ive Cont ract or

Employer, Requirement s, Contract Dat a, Representat ive t o Administ er the Cont ract .

Contractor, Design, Complet e, Remedy Defects,opereat ion Service.

5.0.0 The difference between the ZIA Standard Form of Contract and the International Federation of Consulting Engineers (FIDIC).
From the above mentioned detailed description of the two forms of contacts (that is the ZIA standard form of contract and FIDIC) it can be noticed that they have different approaches towards contract management.

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Construction project management, a critical analysis of procurement systems and forms of contract. June 4, 2012

To start with the ZIA form of contract is not designed for civil engineering contracts; there is a lot that can be learnt from the differences between these two standard forms. The FIDIC contracts provide a central role for the Engineer in the certification process during the performance of the works. It is the Engineer who performs the certification process that in other contracts is performed by a role described as the Superintendent, Architect or similar. While in the ZIA form this is done by an Architect.

The FIDIC form of contract can be used for almost any situation. For example The Construction Contract is based on the Employer providing the design with help from the independent consultants. The other FIDIC contracts contemplate the design being performed by the Contractor. The EPC/Turnkey Projects Contract is used when the Contractor not only takes most of the risk in design and construction, but it also has to hand the project over to the Employer in a fully operational state.

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Construction project management, a critical analysis of procurement systems and forms of contract. June 4, 2012

6.0.0 References
1. Dr. Mirosaw J. Skibniewski, (2008) Introduction to FIDIC Conditions of contract, PDF document accessed from www.e-construction.com on 28/6/2012. 2. Masterman J W E (1996) Building Procurement Systems: An Introduction, E & FN Spon, London 3. Nael .g banny,(1998) The fidic form of contract-4th. Edition Blackwell Science, London. 4. Philip Jenkinson (2003) FIDIC Conditions of Contract Overview of the FIDIC FORMS OF CONTRACT, 5. Rosli Abdul Rashid et al, (2007) EFFECT OF PROCUREMENT SYSTEMS ON THE PERFORMANCE OF CONSTRUCTION PROJECTS, 4. The Aqua Group (2001) Tenders and Contract for Building- 3rd. Edition Blackwell Science, London. 5. Zambia Institute of Architects, (2003) ZAMBIAN HANDBOOK OF PRACTICE FOR ARCHITECTS, Royal Institute of British Architects. London. FIDIC standard form contracts, http://www2.fidic.org/resources/contracts accessed on 28/06/2012.

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