CRITERIA OF CHOICE FOR PROCUREMENT METHODS

Prof. Peter Hibberd Dr Ramdane Djebarni Centre For Research In The Built Environment University Of Glamorgan, Pontypridd, Mid Glamorgan CF37 1DL, UK
1.

Introduction

Over the past fifteen years much work has been done on attempting to define procurement paths and Masterman (1992) provides a good background to some of this work. As the traditional procurement route came under closer scrutiny other procurement routes developed and consequently means for selection were considered. In 1985 NEDO set out general requirements for the selection of a procurement path and others including Skitmore and Marsden in 1988, Bennett and Grice in 1990 and ELSIE computer system in 1990 sought to assist in making the selection. More recently Morledge and Sharif (1996, a,b) have discussed procurement strategy, summarised procurement options and outlined a process to assist in the selection of the best procurement strategy. Gillespie (1994) questions the extent that rationality plays in procurement selection and suggest that other factors often influence choice. Some other researchers suggested the use of fuzzy logic to produce computerised systems to help practitioners (Peak et al., 1992; Russell, 1992). Turner (1990) provides an assessment of the risk inherent in procurement routes and it can be inferred that this is an important determinant in the route selected. It is known that procurement methods play a major role in defining and shaping contractual and work relationships between parties involved in the construction process. Therefore, a better understanding of those methods and criteria that practitioners use in their selection is a very important step in enhancing our understanding of the issue. This paper presents the results of a study into criteria of selection for procurement methods used in the construction industry in the UK, and investigates the issue of satisfaction with procurement methods. 2. 2.1 Background Procurement methods

A review of current practices in the UK shows different approaches to the procurement of building projects. A classification of these approaches is extremely complex because there are not clear and universally accepted definitions of what a particular procurement method is. This raises a major issue in that if there is no accepted definition of what comprises a particular procurement route, the possibility of establishing criteria to achieve specific objectives is problematic, if not remote. McCanlis (1967) pointed out the problems with the traditional descriptors of contractual arrangements but notwithstanding the acknowledged problems, ELSIE (1990) computer system and Masterman (1992) have defined the various procurement routes.

If the characteristics of a procurement route can be identified and the impact of these characteristics upon performance can be measured, then and only then, can the selection of a specific procurement path serve a purpose.

2.2

Procurement criteria for selection

The literature review on this issue reveals a wide spectre of reasons put forward for choosing a particular procurement method. Rowlinson & Newcombe (1984), in their research on the impact of procurement methods on performance, produced a table that provides a general overview of the respective characteristics of types of contractual arrangement (see table 1). This taken with Turners risk assessment and that set out in Latham (1994) provides a useful, albeit fairly crude tool. This paper describes research which has attempted to refine these issues and to provide a greater understanding of procurement decisions and needs.

Types of Arrangemen t Traditional Arrangemen t Design and Build Measureme nt Prime Cost

Price Certainty Fairly good Good Average to poor Poor

Level (inc. fees) Low

Design Parallel Working No

Changes Easy

Buildabilit y No

Time Before Start Slow

Medium Medium High

Yes Yes Yes

Difficult Easy Easy

Yes No No

MediumFast MediumFast Fast Fast

Average Medium Yes Easy Yes Separate to poor Mgt Function Table 1: Indication of Characteristics of Types of Contract Arrangement (Source: Rowlinson & Newcombe, 1984)

The variables used for selection in this study are: accountability, design input, dissatisfaction with previous process used, knowledge of the process, predictable cost, punctuality, speed of commencement, speed of completion, transference of risk, and working relationships. Respondents were also given the opportunity to add any further variables that they may see as important in their choice. 3. Methodology

A questionnaire was prepared with the objective of obtaining information relating to procurement choice and satisfaction with procurement methods used, among other things. A total of 122 questionnaires were mailed to both clients and consultants of which 64 responses were received, which is a good answer rate (52%). The data was analysed statistically using SPSS for windows.

4. 4.1

Results Procurement Selection Criteria

Respondents were asked to indicate on a scale from one to ten what they believe to be the degree of importance of procurement selection criteria mentioned earlier in this paper. The results depicted graphically in figure 1 shows the distribution of their answers. In order to find out how significant are these results statistically, 2 test was conducted and its results are presented in table 2. Selection Criteria 2 Accountability 52.34 Design input 06.78 Dissatisfaction with previous procurement 09.78 process Knowledge of process 15.50 4 Predictable cost 55.72 5 Punctuality 27.22 6 Speed in commencement 10.91 7 Speed in completion 29.66 8 Transference of risk 05.09 9 Working relationships 10.72 10 Table 2: Results of test for procurement criteria of selection No. 1 2 3
15 25 20 15 10 5 0 1 2 3 4 5 6 7 8 9 10 Accountablity 15 15 10 10 5 0 1 2 3 4 5 6 7 8 9 10 Working relationships 5 0 1 2 3 4 5 6 7 8 9 10 Previous dissatisfaction 0 1 2 3 4 5 6 7 8 9 10 Design input 10 5

p 0.00 0.03 0.01 0.00 0.00 0.00 0.00 0.00 0.08 0.01

20 15 10 5 0 1 2 3 4 5 6 7 8 9 10 Process knowledge

14 12 10 8 6 4 2 0 1 2 3 4 5 6 7 8 9 10 Punctuality

12 10 8 6 4 2 0 1 2 3 4 5 6 7 8 9 10 Speed in commencement

25 20 15 10 5 0 1 2 3 4 5 6 7 8 9 10 Predictable cost

15 10 5 0 1 2 3 4 5 6 7 8 9 10 Speed in completion

10 8 6 4 2 0 1 2 3 4 5 6 7 8 9 10 Transference of risk

Figure 1: Distribution of responses of criteria for selection of procurement methods The table shows that all procurement criteria for choice were significant except for transference of risk. Indeed, all the results are significant at = 0.05 except for reason 9 where p= 0.08 is bigger than , which means that there is no real difference between the order-ranking of respondents as can be seen in figure 1, that is to say that respondents in general do not see risk transference as an important criterion in making their choice of procurement method. In order to find out the ranking of these criteria, Friedman two-way Anova by ranks was carried out. The results presented in table 3 demonstrate that predictable cost comes first followed by accountability, while the bottom comes dissatisfaction with working relationships and transference of risk.

Selection Criteria Predictable cost Accountability Speed in completion Punctuality Dissatisfaction with previous proc. method (reversed) Knowledge of process 6 Speed in commencement 7 Design input 8 Working relationships 9 Transference of risk 10 N = 50 D.F. = 9 p= 0.00 Table3: Friedman One way Anova test results

No. 1 2 3 4 5

Mean Rank 7.08 6.99 5.82 5.79 5.58 5.37 4.98 4.83 4.44 4.12 2r = 47.31

4.2

Satisfaction with Procurement Method Used

Two questions were asked regarding satisfaction. The first question asked respondents to rate their satisfaction level, on a scale from one to five, with the procurement method currently used by them and the second asked them whether their answer would have been the same if they consider the previous five years. The answers to the first question show that more than half of respondents were satisfied with the procurement method currently used, one third were moderately satisfied and less than one tenth were dissatisfied (see figure 2).

42% 30%

6% 22%

highly satisfied moderately satisfied

satisfied dissatisfied

Figure 2: Satisfaction with procurement

The reply to the second question reveals that the majority of respondents were not satisfied with the procurement methods they had previously used.

To this effect, figure 3 shows that the overall majority were not satisfied with procurement methods they used.

previous

2 one-sample test was conducted to ascertain the statistical significance of these results. As shown in table 4 both answers are statistically significant.

Variable 2 16.30 Current satisfaction 36.21 Previous satisfaction 2 Table 4: test for current and previous satisfaction

D.F. 3 1

p 0.00 0.00

Interestingly, during the same five year period one has witnessed a rise in the use of design and build and a reduction in traditional procurement. This raises the clear possibility that design and build as a procurement method is providing greater satisfaction. But as many respondents were still using traditional methods it also indicates that the substantial change in satisfaction may also be accounted for by a refinement and greater understanding of procurement methods. Possibly, as procurement methods mature more users have adopted a particular approach, become more attuned to its usage and achieved higher satisfaction as a consequence.

89%

Yes

No

11%

Figure 3: Previous satisfaction 4.3 Problems with Current Procurement Methods

In a reply to a question on the most significant problems potentially arising during the procurement process, changing requirements and design team problems, followed by communication were considered as the most significant problems as indicated in table 5. More than half of the respondents see the solution of these problems in a change of the procurement method used.

No Variables Percentage Changing requirements 25 1 Design team 25 2 Communication 18 3 Cost control 6.3 4 Identification of responsibility 4.7 5 Supply of information 4.7 6 Quality 3.1 7 Design faults 3.1 8 Contract time performance 3.1 9 Other factors 1.6 10 Type of contract 0.0 11 Table 5: Ranking of problems with current procurement methods Notwithstanding, the fact that a substantial improvement in satisfaction in the use of procurement methods has been made, problems with those currently used still exist. The top three problems changing requirements, design team and communication can all be addressed by the use of design and build and hence we are likely to witness a continuing trend. Design and build alleviates changing requirements by restricting the ability to change and hence the nature of the problem shifts from that of disrupting the process to one of receiving a less than satisfactory product. Design team problems are also reduced from a clients perspective but the problems may still exist. The difference being that they become someone elses problem, i.e. design and build contractor. Communication should be improved as much of this occurs within one organisational unit but this is far from an inevitable consequence. 5. Conclusion

The results show that substantially more users are now satisfied with the current procurement methods, than they were with those they had used in the previous five years. A reduction from 89% to 6% of those not satisfied in the procurement method was indicated . Dissatisfaction with previously used procurement methods is shown to be a major factor in the selection of a subsequent procurement method. During the same period that satisfaction increased sharply, there has been a noticeable increase in the use of design and build and there is the clear suggestion that design and build was seen as a way to solve the problems being encountered. Hughes & Djebarni (u.p.) found that practitioners who worked on large projects sought a move away from traditional methods whereas those who worked on small projects were generally satisfied with the way things were. Although it was anticipated that the transference of risk would be an important criterion of selection, this is not supported. The criteria for selecting the procurement method were all significant except for transference of risk. It seems improbable if not implausible that the transference of risk is of such a low order and its explanation may lay in the fact that actual risk apportionment under the various procurement methods is not well understood. In respect of the potential problems that arise during the procurement process over onehalf see the solution in changing the procurement method. As the problems were identifiable and as optional procurement methods were available, it raises the question as to why they were not used.

It is possible, that an alternative was not considered but more likely it implies that the options did not offer a solution. Therefore, these users, may see the solution to these problems in new innovative methods of procurement. The evidence of this survey does suggest that although selection criteria are important there is not an abundance of confidence in the data relied upon to achieve ones objectives. Furthermore, many decisions are semi-automatic, being based upon general characteristics rather than specific evaluation against pre-defined criteria.

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Russell, J.S. (1992). Decision Models for Analysis and Evaluation of Construction Contractors Construction Management and Economics, 10, pp 185-202. Skitmore, R.M., and Marsden, D.E. (1988). Which Procurement System? Towards a Universal Procurement Selection Technique Construction and Management Economics, 6, pp71-89. Turner, A. (1990). Building Procurement. Macmillan, London.