Types of procurement.

Roles and responsibilities in traditional (Lump Sum) contracts.

Types of procurement
In the British construction industry acquisition or ordering of properties or their elements is defined as "procurement". It refers to a wide array of strategies, rules, forms of procurement and responsibilities arising from material, services and construction equipment. In Great Britain there are several forms or methods of property procurement. Each of those involves a different type of contract, contractual relationships, information flow, roles and responsibilities within a planning team. Available procurement forms are: Traditional (lump sum) -traditional system, used at 43% of construction projects (according to RICS 2003 data). This method is the most popular among small and middle sized construction projects. Those rules have been formed in the beginning of 20th century (hence the name, traditional). The constructor works according to a detailed plan provided by the investor. Design & Build (D&B) - this method is becoming more and more popular in middle sized and larger projects. It has been first introduced in the 1980s and is now applied at 42% of projects. It obliges the contractor to undertake a large part of project works (preparation of a detailed project), while the investor provides only an outline of a project. This method is rarely used in smaller investments, below 250 thousand pounds. Construction Management - this method has been developed in the US, where it initially gained popularity in the 1930s. It is still commonly applied, especially in technologically complex projects, where fast completion is crucial. It first appeared in the UK in 1980s. The contractor acts as a consultant, and even though they manage the construction works undertaken by subcontractors, they are not directly responsible for subcontractors. Management Contracting - - a hybrid form being a fusion between traditional method and construction management. Private Finance Iniciative (PFI) - D&B form used at large projects, where the contractor provides an investment in return for licence to charge fare for using it in a designated period of time, e.g. Queen Elizabeth II Bridge in Dartford. It has a very complex settlement structure, applied only to multimillion public use projects. Public-Private Partnership (PPP) - a form of long-term cooperation between government and private organisations, e.g. modernisation and maintenance of London underground. Framework Contracting -methods used at large projects, where the contractors are chosen following selective criteria and not only the prices. It is usually connected with long-term cooperation contracts including many different projects. It was first introduced in the 1990s when the Terminal 5 of Heathrow airport was built. Prime Contracting - an expanded traditional form including long-term partnership. The contractor is usually obliged to undertake construction works and further building maintenance. It is commonly used by governmental institutions, such as NHS and the army.

Lump Sum contract basics

Most of small projects (below 250,000 in value) are carried out under traditional form of procurement, Lump Sum. Most importantly, such approach divides the design and construction functions. A detailed plan should be provided by the investor or their planning team and supplied to the contractor prior to cost estimate preparation. In practice it happens rarely. Often, some elements of the project are not finalised and the details are provided to the contractor at latter date. It is important that all doubts and errors in documentation are identified by the contractor at the time of preparing the tender. In this procurement form, investor is fully responsible for all planning matters. The contractor should not make any decisions regarding the project, since it puts him at risk of having to redo the works if the client does not approve their decision. On the other hand, all additional works arising from changes of faults on behalf of client have to be paid for by the client. There is a possibility to partially transfer of design duties to the constructor. It can be done by using adequate contract form. It often happens in case of technologically advanced elements, e.g. Air Conditioning installation etc. It

is associated with additional responsibility, and costs, to the contactor.

Roles in traditional procurement

Individuals or organisations involved in supplying the project in traditional system can be divided into the following groups: Client

Client Their employees and representatives

Design Team Architect team leader Structural Engineer Mechanical Engineer Quantity Surveyor Other designers Construction team Main contractor Subcontractors Suppliers There is also a role of contract administrator, that is usually carried out by the architect t and it involves dispute resolution, certifying payments and changes to the project. This role should be performed separately from design functions and the decisions made by contract administrators should be objective.

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Procurement routes and the information flow.

In traditional contract form relationship is separate to information flow. All members of design team have direct contract with the client even though they are supervised by architect. This offers them a lot of independence and limited contractual responsibility. On the other hand, in the construction team all members are contracted to main contractor, who, in turn has access to the client. Such structure makes main contractor liable for performance of all subcontractors and suppliers. Every exchange of information between construction and design teams should take place via main contractorarchitect. This means, that legally, requests made by clent should not be implemented until they are confirmed in adequate form by the contract administrator (architect).

Theory versus practice

The above mentioned information refers of course to contractual theories. Reality can often be very different. One has to bear in mind that in case of disputes it is the fundamentals and contract terms will be taken into consideration not common sense or good will of the parties. Following the contractual procedures it to contractors best interest, especially if JCT, which are usually drawn in favour to investor, not contractor. We have often aided contractors who have not been paid at the completion of the contract only because they have failed to follow the procedures. For instance, client requested the partition to be moved, which was not approved by the architect. As it turned out later on, this caused the previously ordered wardrobe not to fit. Client denied ever giving the instruction and architect,

according to contact, deduced 12 thousand pounds of the final pay to cover the additional cost of moving the partition back. Following the contractual procedures and detailed organisation of contract documentation protects the contractor against wrongfully imposed penalties and problems with payment. An adequate contract strategy allows maximising profits and minimising the risk of construction works.

Procurement Methods
I. Requesting competitive quotations Competitive quotations are requested when an intended commitment to a single supplier is less than 20,000. Quotations will normally be requested from several firms or organizations. Quotations shall be submitted in writing. II. Requesting competitive proposals/inviting competitive bids Calling for competitive proposals/bids is used when an intended commitment to a single supplier from 20,000 and higher; applying either of the two formal procurement processes: Invitation to Bid (ITB), which is used for procurement of goods, services and work of standard and firm specifications (very clearly defined or continuously used deliverables), and Request for Proposal (RFP), which is used for procurement of deliverables that cannot be quantitatively or qualitatively expressed in sufficient details to allow use of ITB at the time the solicitation documents are issued, such as for professional services, combination of complex technical services and equipment, etc. Competitive proposals/bids for intended commitments in value from 70,000 up to 300,000 shall be submitted in a sealed envelope and for intended commitments in value from 300,000 or higher, in two sealed envelopes, one of which is a technical offer, and the other, a commercial offer. Competitive proposals/bidsare normally invited using open international solicitation . In such cases solicitation documents are placed on the external Websites of UNIDO, UNGM (UN Global Market Place), other Websites as may be relevant, requesting qualified suppliers to submit their offers. Procurement may be limited to one or more countries if such limitation is stipulated in the agreement with the donor of funds or is attached to funds made available for a particular project by an international development organization. III. Direct Contracting(Fin. Rule 109.5.5 Exception to competition) Direct contracting (waiver of competition) may be used when: There is sufficient evidence that no competitive market exists for the requirement, such as where a monopoly exists, where prices are fixed by legislation or government regulation, or where the requirement involves a proprietary product or service; A standardization of supplies or equipment has been approved on the advice of the Procurement Committee, which renders competition impracticable; The proposed contract relates to obtaining services that cannot be evaluated on the basis of objective criteria; The proposed contract is the result of cooperation with the other organizations of the United Nations system;

There is a genuine and documented exigency of the activity concerned that does not permit the time required for the issuance of invitations to bid or calls for proposals; The proposed contract is for purchase or rental of real estate; The Managing Director/PSM may give written authorization to the Procurement Services Unit/OSS/PSM, at his or her discretion, to complete the acquisition process without formal solicitation, provided that the Managing Director/PSM, specifically determines through a due process that a formal solicitation shall not be applied ((Financial Rule 109.5.5 (a) (viii)). In such cases a written record shall be made providing appropriate reasons for such determination.