Procurement in Construction Projects; Best Industry Method by Using Design-Traditional Management Contracts
Procurement is an important aspect of construction project before the commencement of any activity is initialized. A plethora of methods are available that can be employed to have a secure procedure, which is devoid of magnified errors. Building materials are expensive to procure and therefore adopting the right procedure could safe the owner a substantial amount of money. Deciding the right method to employ is faced with risks of integrating the requirements of the project manager and what is available in the market. Before any procurement method is appreciated, thorough evaluation is required to determine the possible risks which could come along with the same. Considering the process is lengthy, it is the work of the managerial staff to come up with succinct ways to project the possible repercutioms which might occur. The main idea is to seal any loophole where mistakes are identified. Construction industry impact a large proportion of the market in the world. It contributes to around 9% of the Gross Domestic Product of the country. The type of procurement adopted by the project owners greatly affects various economic players in construction industry. Additionally, construction industry affects the environment, health and safety of individuals. Having materials which meets the required standards is core for any construction project. According to the bodies which regulate the quality of construction materials, the owners are required to ensure every element used meet the minimum requirement stated. The experts in the site are required to maintain the ethics in this form of work. Construction industry has faced criticism from the consumers due to increased costs of services, poor output in terms of services and prolonged time to finish up the work. This has necessitated in evaluation of procurement methods which suffice the industry, to mitigate the negative feedbacks given by the customers. A comparison of traditional methods and management contacting system. The two will provide the essential which are needed to improve the services for the final benefit of the user. The main objective of this paper is to evaluate the design-Build procurement as the current method of procurement in construction industry. The method to be adopted will involve searching for literature based on construction procurement. Peer reviewed journals written in English will be evaluated to get the glimpse of various authors and get their views. Research gaps will be identified to add to the body of knowledge. The findings will be shared to the various stakeholders to improve the various sectors in the construction industry.
Management of the construction projects have evolved from the traditional recognized ones. The project t owners select the client to manage the work on their behalf, in order to monitor daily work done (Beiske, 2003). Traditionally, the work was performed in phases. On stage of work was to be completed before the next step could be taken. This necessitated more work wasted and also prolonged the time which was taken to accomplish the same. The complexity of the construction industry has added more pressure on the side of the project owner (Davis et al., 2008). It encompasses details such as financial projection as well as managing the human resource requirement. The two are paramount before any work is initiated. The dissatisfaction by the client of lack of high quality work has resulted to seeking for better methods which can be employed to give more appreciable work (Eriksson & Westerberg, 2011). There has been innovative and creative ways to achieve the objectives. Notably, the market is becoming more complex and competitive. It has fuelled the industry to deconstruct itself from the internal environment so as to satisfy the customers. Construction industry in increasing tremendously (Ghadamsi & Braihah, 2012). The number of tasks required in the future dates is more sought more than before. The increased demand has therefore called for proper procurement method to be embraced.
Construction management is one of the method which is used in the current times by most of the clients. It is used to source for external clients and assign them required project requirements. They are tasked to ensure every step is well actualized (Hammer, 2017). The first important point of consideration for the project owner is quality work from then side of the client. The role of appointing an external expert is to facilitate quality products and services are brought on board (Beiske, 2003). With that in place, the external provider can be held accountable for any error that might arise. Strategies for procurements methods have not changed significantly. The most crucial elements which are considered paramount are time and cost. Ways to reduce the charges that occur in running the projects is the most aspect which the clients care about (Lam&Chan, 2000). Understanding every type of construction procurement helps the advisors in recommending the best choice. Not all methods are applicable to various clients. They invariable differ depending with the taste and even the capability of the project owner. A study conducted by (Hammer, 2017) revealed that most of the construction projects overruns the estimated cost due to misappropriation of materials. This suggest that the method used to estimate the cost fail to strike the balance between cost and efficiency. Priorities of the client should be aligned with the chosen method. Beiske (2003) asserts that poor choice of the procurement method affects the owner.
South Wales Government affirms that the procurement system should follow certain procedures (Naoum & Mustapha, 2001). One, the overall arrangement. This is whereby the owner is supposed to contract the right people to do the task. Getting the right people in the market requires an evaluation process with one main idea of efficiency. For a good procedure of procurement to thrill, a well concerted and guided effort is needed to ensure the experts are engaged (Ojo & Adeyeni, 2009). Second, it involves planning on the ways to manage the entire project. The advisors should have a clear picture on the construction project before any ground work starts. Understanding the cost and materials required could safe the owner much. This is well gotten by conducting critical analysis to estimate on labor and other costs of materials(Westerberg & Eriksson, 2010). Moreover, it is the best chance for the advisors to determine the suitability of measuring the ability of available service providers. Furthermore, it also involves determining suitable methodology to employ in different package of the work(Ozbeck & Garza, 2006). Construction encompasses various activities such as electricity installation, installation of water and other minor works. They are normally split into different packages and classified in different levels (Bacon, 2009). Clients always like to dispatch the work to different contractors to increase the chances of efficiency and reduce on cost. Essentially, the work is completed at high level turnaround as opposed to trusting one contractor with the entire work.Bacon (2009) further notes some of the considerations that are necessary before any projects commences. One is identification of the principal advisor. This is a person with expertise in project management who controls everything that happens within the site (Okunlola & Yakeen, 2011). He or she liaise with the client to communicate every progress on daily basis or any time requested. Second, timing the work is key.
An estimate of finalizing the work is important in planning for requirements (Naoum & Egbu, 2016). Moreover, choosing the organization to work with should be the primary focus because poor choice are spelt over to the client in form of increased costs. Risk identification is also in the list. A project is surrounded by immense number of cons before it comes into completion (Fernando, 2009). The most prevalent one is underestimation which cost the client more. The issue of not meeting the compliance standards also haunts the project owners which lead stoppage. Addressing the statedproblems separates the project from impossibilities. The rationale for conducting this research is attributed to critique which has been given to the construction industry (Yescombe, 2007). Critiques are of the view that the management employed does not guarantee efficiency in terms of cost and time. This shifted the attention to entirely look at various procurement procedures employed and contrast them with the traditional methods. The clients in the field have argued that lack of competency in background stages of purchasing materials and services affects the whole projects (Park et al., 2015). Mistakes performed at strategizing stage are transferred to the rest phases of construction. Compliance with the state regulations is an important act which every contractor should adhere to. In recent studies conducted by Love (2002), he discovered that contractors violate the ethics of work by providing low quality products. Moreover, the clients also demand for low cost materials, which are inferior in quality. This is against the set policies hence endangering the work.
The main aim of this dissertation is to assess the best procurement method in terms of integrating construction and design by using Design-Based procurement method. This will be followed by comparing the method with other procurement methods such as: Traditional lump sum, design and management, traditional form and Management contract.
To evaluate the current procurement methods applicable in the industry. The objective will be achieved by critically studying the literature review to get various ideas from different authors.
To evaluate traditional procurements methods and their effectiveness. Use of case studies will assist to get insight of the same.
To critically review Design-Build procurement Method. Literature reviews will assist connect to relevant information concerning this method.
Summarizing the differences between the traditional and current procurement method. Peer reviewed literature will be used as source of information.
The work discussed suggest that procurement methods are varied and apply depending with the type of task. Not all construction project adopt similar method. The choice depend with the nature of work and financial capacity of the client. With insight of proper procedure to employ when ordering the materials, a successful project can be enacted. The work basically reviews the various ways that can be used to enhance accuracy in the industry (Park et al., 2015). There has been changes in construction where strategic planning is required more than before. Desire to lower cost and increase efficiency are the guiding factors. Overlapping creativity and innovation are cited to have enable the industry grow at a faster rate. Evaluation of current and traditional procurement methods presents a good comparison, which can be utilized by various clients to manage their sites. However, the major point of concern in this paper is Design –Build procurement method. It is the most recent compared to others hence attracted considerable amount of interest.
BACKGROUND AND LITERATURE REVIEW
In the past few decades, the procurement methods I construction industry has been changing considerably. The project managers uses varied methods to bring on board then materials required to accomplish the entire project (Oshungade & Kruger, 2017). The nature of construction which is happening is the determinant for the method to be adopted. However, whichever the method is seen suitable by the project owner, the key element of consideration is quality of the final outcome (Beiske, 2003). The various methods available are design and build, construction management, traditional method of design and build. Procurement can be defined as management of all activities which are involved in construction project (Davis et al., 2008). It starts from sourcing for materials and determining the resources in terms of human capital that are required. Consequently, ensuring a good relationship between the workers and the owners of the project enables proper execution.
The effectiveness of any method is key in measuring whether the work get completed in time or not. According toHammer (2017), the complexity of the construction project and poor management results to unpleasable outcome. Consequently, the client end up paying for more. Alternatively, low quality materials are supplied and even the services offered become degraded (Eriksson & Westerberg, 2011). Number of factors are considered when procuring services in a construction project. They are divided into external and internal factors (Hammer, 2017). One of the external factors is economic environment. This is the prevailing market for products in terms of prices. If the materials are expensive, the project managers opt to source for materials in areas where they are cheap. This also has an effect of risking the quality. Additionally, technology also plays a vital role when ordering for materials. Traditional methods are laborious (Lam and Chan, 2000). If the owner of the project requires high turnaround time for commencement of the work, he or she can evaluate various offerers in the internet and estimate the one providing friendly prices. Adding to this, legal issues restricts what the materials and even the type of service to be offered in order to meet the required standards. Every country has a set of rules which govern construction industry (Naoum & Mustapha, 2001). Understanding the requirement help in choice of the right procedure. On the other hand, internal factors are more flexible and cab be controlled to fit the requirements. These are; requirements by the client. The owner can favors a particular method over the other (Ojo &Adeyeni, 2009). Basically, this is seen where the owner want to save on some cost. The nature of the project is also a determinant factor.
The measure of success for a project differs among the client and the contractor. On the side of the contractors, they view the success of any work depending on the cost reduction and time taken to finish the same (Westerberg & Eriksson, 2010). Clients are more focused on satisfying the customers and other stakeholders. According to Hammer (2017) the point of conflict arise because the contractor fails to meet the requirement needed by stakeholders. These are government bodies regulating construction industries and they tend to be strict on what is made available to the public.
Data collected for 69 studies conducted by Beiske (2003) suggest that construction industry is affected by the client and the designer. The preferences of the two input what the contractor should use of not. They impact the type of procurement method to be embraced. Construction industry is fragmented and therefore its success is pegged to teamwork (Eriksson & Westerberg, 2011). One individual cannot achieve the required outcome. Every section of work is purely assigned to a particular group who work in conjunction with senior experienced people to guide them. Consolidating the efforts of every person amounts to the progress of the work (Lam and Chan, 2000). For example, private clients have little complications compared to the public sector clients. Another stakeholder who is considered important is the designer. The role of a designer is to ensure the project replicates the paper work. They give direction on where to rectify or even improve. Choosing the right designer, who is experienced kin his/her work helps kin selecting the most effectual procurement method.
Procurement projects in construction industry has evolved. Due to the increased demand for construction in the market, selecting the right method to order for materials and source for services needs a reference point from an expert. As it was alluded earlier that, coming up with the tight strategy to manage the construction lay a lot of emphasis on background efforts before commencement of the work. Design-Build procurement method and traditional methods are still applicable in the current times
This type of procurement method is whereby the designer is separate from the contractor. The contractor is left to control all the activities in the site while the designer comes up with the work framework (Ojo & Adeyeni, 2009). It is important to note that the work of a designer is one time and ends up after giving an overview of the entire project. Competitive tendering is used to select the right contractor to be trusted with any project (Ozbek & Garza, 2006). Submissions are submitted to the administration and the criteria for selection is based on various factors such as cost and the estimated time of completion. Moreover, the trusts of a contractor is a strong factor of consideration to avoid cases of incomplete work (Bacon, 2009). Traditional procurementmethod comprises of lump sum contract, measurement contract and cost reimbursement. Under lump sum procurement, the contractor agrees to work at an agreed specific amount depending with the nature of the work. The employer is not allowed to make any variation.
Additionally, the contractor has no authority to ask for more in case the project costs him extra money. The cost is subject to changes due fluctuations and this applies to cater for the taxes. This method is still applicable in the current world (Okunlola & Yakeen, 2011). Government is known for this kind of procurements, where they required the contractor to complete the work at an agreed amount. Measurementprocurement where the contractors are allowed to submit their tenders which are evaluated by a team of expert (Naoum & Egbu, 2016). The work cannot be accurately measured and therefore the tenders made are used to estimate the actual cost. This is the leeway that the project owner who has no glimpse of the cost uses to know the cost of the whole project. Cost reimbursement is accomplished where the contractors agrees to pay the actual amount of cost of labor and other expenses (Fernando, 2009).
One of the advantages of this method is accountability on the side of the contractor. Since the method of selecting the contractor is competitive in nature, one can be answerable to any problem that arises in the process of doing the project (Yescombe, 2007). The team that is tasked with the responsibility of choosing the right contractors critically evaluate all the elements needed for proper performance hence settles on the right one. The second pro of traditional method is equity. Tendering process is done in a non –biased manner which increases the chances of quality (Park et al., 2015). The owner benefits from the process since they have an array of choice to settle on. Automatically, the one who meets the characteristics desired is given the job. Besides, the cost of the entire project is established before the work begins (Beiske, 2003). This is a good chance presented to the client to organize themselves and consolidate enough money to complete the entire project. As it was alluded earlier, lead designer and the clients have a direct influence of the quality of work delivered. They are able to identify flaws and give the right measures to rectify the same. However, traditional methods have some repercussions (Davis et al., 2008).
The process is too long to come to completion. It starts form the tendering process where various interested parties submit their proposals for possible considerations. The first stage involves reviewing all the documents and discussing them based on the requirements of the clients (Eriksson & Westerberg, 2011). Contractors are not included in the design stage and therefore can cause a disconnect between the parties involved. According to Hammer (2017), the traditional method of procurement is applicable in some instances. The following are conditions which hold constant for this method to be appreciated. It should be when designer and the contractor are appointed differently. It is advisable for the clients to choose the two experts at different stages. The designer’s input is required at the onset stage, where they provide the drawing of the work and an overview of final look (Ghadamsi & Braihah, 2012).
The contractor comes in to ensure the designed work is achieved. If the project owner has enough time to wait for the lengthy process, then this method is recommended. Time factor takes into play since relevant people and bodies should be involved (Hammer, 2017). Tendering is the most time consuming followed by regulations from the government. Price certainty is another element to consider. The cash flow of the owner is a strong factor that cannot be ignored. The final requirement is to maintain the balance between the client and contractor. The two have to ensure constant engagement for the purpose of establishing good working condition. Considering this method, client is at the top of hierarchy while other professionals respond directly to him.
Design-Build Procurement Method
It is an integrated procurement system which is cropping into the industry of construction. This is whereby the contracting company bears all the responsibility for any activity (Ozbek & Garza, 2006). The organization that designs the work is till the same that builds. In this case, one single contractor is given the chance to complete the entire work. It makes it easier for the client to hold accountable one single organization if anything goes wrong (Bacon, 2009). The organization combines all aspects of construction. One of the characteristics of Design-build procurement is that design is not fully complete when the work begins. This is because the designer of the work is the same who build. This shows that one can work on design while the work in progress by doing it in stage format.
Second, the contractor is supposed to sign a contract before the work is done (Lam and Chan, 2000). Just like in traditional method, design-build procurement also requires an individual to seal a written agreement under a lawyer. The purpose of this document is to mitigate the chances of violating the requirement. The last feature is that bill of quantities is not prepared. This allows variations in prices of materials which is attributed by changing economic market (Hammer, 2017).A growth of this procurement method is witnessed in the United State and other countries. It is the recent method which has replaced the traditional methods. It has resulted to a belief that integration of design and construction cannot be separated. Bacon (2009) claims that design-build method has improved the relationship between the client and the owner of the project by reducing the chances of misunderstanding.
The causative agent to inefficiency when construction work is in progress emanates from poor communication (Naoum & Mustapha, 2001). Also reduces chances of error because the services are provided by one organization. Rapid changes can also be introduced when all services are provided by one person. An expert who has prepared the design is able to follow every work at the site. This is contrary to when a second party is there to provide the design services. Changes appears depending with the requirements of the client. It is able to enact changes if the contractor understand the design of the work. Hammer (2017) affirms that the method enables the client to access services at a single contract without looking for more providers. It saves then on cost as well as the time.
Despite the advantages detailed above, disputes arises when the work is in progress (Ozbek & Garza, 2006). This comes from not meeting all the requirements of the client. Lack of well-defined procedures ate early stages of the work propagates the chances of misunderstanding. This is also added to minimized checks on the side of the owner (Bacon, 2009). The contractor is given full responsibility to oversee the entire work. Reduced checks places the project at risk of poor quality. Continuous quality assurance is needed to keep in check every step made by the contractors. Through regular checks, they are able to evaluate the work alongside the signed agreement (Okunlola & Yakeen, 2011. Key points of considerations are embraced when selecting this type procurement method. Employer has less control over the entire project. The contractor is given the full mandate to supervise and manage every activity that takes place at the site. Additionally, completion of the task is dependent on the contractor (Fernando, 2009). They have the full responsibility to control the speed of work and give estimated dates to clear up everything. This is a drawback on the side of the client. However m due to increased competition in the market to win construction tenders, the turnaround for the contractors have improved (Yescombe, 2007). The desire to build the image of their business necessitate them to offer quality services and respond effectively to deadline issues. Certainty of cost is high and any changes of requirement by the owner might affects the contractors plan negatively (Park et al., 2015).
The estimated budget is always exact with minima deviations. Furthermore, it is advisable for the project owner to appoint advisor to generate daily information and hurdles arising from the project work. Love (2002) affirms that the current form of construction management is focusing on cost reduction. Quality is less considered as a major factor. This is the reason quality assurance industries in the world have heightened their strictness regarding any building activities. More policies are put in place to halt unethical behaviors of rogue investors. According to Bacon (2009) design construct method is likely to be useful when simple project is being done rather than a complex one.
Complex projects are tasking and cannot be accomplished by one entity. It requires input of various experts. The strategy is adopted to spread risks. The client would opt to look for various contractors in varied sectors. It is also used where the design of a project is functional. Prestigious construction involves various input. This cannot work for this method of procurement (Davis et al., 2008). Where one organization is ready to take all risks, then the project owner can allocate the responsibility.It takes time to determine the viability of the organization to incur the entire risk of a large project. Before the decision is arrived at to trust one organization, backgrounds checks are performed to ascertain its credibility.
There exist various types of procurement management. They are management construction, construction management, Design and management (Eriksson & Westerberg, 2011). A subtle difference exist between the three. The characteristics of every method is unique. Management contracting involves the employer selecting a professional in construction industry (Hammer, 2017). The advisors are involved in preconstruction stage and also during the ongoing process of the project. The main purpose of the construction manager is to keep everything under check. They provide written submissions to the owner, detailing all cost of the work done and fees to be paid to the relevant bodies. It is based on trust and teamwork spirit (Lam and Chan, 2000).
Emphasis is laid on understanding the type of contractor to be engaged in the work. Construction management involves selecting an individual from a list of submitted application. The process of selection is conducted over a period of time and the suitable candidate is offered the job. He or she work under a fixed payment rather than contractual basis. Management contractor is basically an agent and cannot provide actual time for project completion. This exposes the owner to higher chances of risk as opposed to other methods (Ojo &Adeyeni, 2009). The agent is not liable to any error that occurs which is costly to the client. Design and management has been linked to management contracting. The contractor is paid a certain amount of fees and expected to cater for both design and construction work. Advantages of utilizing this approach are; the client deals with one contractor. This means that coordination is high and responsibilities are held to one organization (Westerberg & Eriksson, 2010). The high level of collaboration ensures that the work is completed in a safer manner, without harming the environment and the people around. In addition, time is saved because most of the activities are overlapped and performed by a single organization. Instead of sourcing for multiple institutions to work, it is healthier to depend on one trustworthy provider. Risks and roles are well understood by one organization because all activities are done at one common point. The disadvantages of this method are; poor price certainty (Ozbek & Garza, 2006). Ability to determine exact cost is not easily defined. A proactive client is required to closely follow any move by the contractor in managing the work.
Design –Build procurement method is more effective to the client. This is because it saves both time and cost. Services can be offered at a centralized system by one organization without involving a series of contractors. It reduces the chances of errors on ongoing projects. Traditional methods are still in existence and much considerations are needed to select the procurement method that guarantee maximum returns. As the time progresses, more reliable methods are sought in the market to enhance reduction of costs which are sometimes proliferated by contractors. Changes in the market structure contributes to choice of appropriate method. Interlocking the project requirements and what the market can provide is essentially for the general benefit of all involved parties. The client saves some costs and the contractors build positive business image.
RESEARCH DESIGN AND METHODOLOGY
The type of research method adopted affects the outcome and conclusion made. Selection of the right design is paramount and directs the channel the research work takes. The idea behind justification of the methodology and design used helps to validate the objectives set.
Research methods adopted involved study of literatures consisting of peer reviewed papers that are dated between year 2000 and 2017. Constant review of the peer reviewed papers was conducted with an intention of getting the insight concerning the various procedures used to procure in construction industry. The survey was conducted by various authors to objectively evaluate the effectiveness of procurement methods applied in various industries (Hammer, 2017). The survey was conducted by sending emails to about 147 construction companies.
The choice of the respondents was spread out to ensure accuracy was well met. Additionally, professionals such as quantity surveyors, civil engineers and contractors were involved in this study (Beiske, 2003). The studies collected responses from the various groups and subjected the information and data collected to thorough analysis. Elements which were measured revolved around time taken to complete the task, quality of the services offered and client satisfaction. From the variable described, customer’s feedback were used to estimate the satisfaction of the people who received the services (Lam and Chan, 2000). Moreover, the client’s responses gave a good overview on the impact the current procurement methods had in the industry.
As the original data were subjected to responses, the current study aimed to utilize the secondary information as it was. This is because the data from the peer reviewed journals were collected adhering to the responses given by various respondents involved. The instruments which were used to collect initial data consisted of well-structured questionnaires, designed in a manner that favored the people in construction industry. Questions were framed depending with the type of interviewed people. For professionals, questions which were technical in nature were used to get more information concerning the various methods that are embraced and the major reasons for that.
Stratified random sampling was also employed to conduct the survey. According to Bacon (2010), he carried out an interview among 40 companies (Lam and Chan, 2000). The study designed questionnaires and started by conducting a pilot survey that comprised of 20 construction companies. The questionnaires were emailed to them and responses received through sealed envelopes. From the study, 80% of the responses were positive which indicated the importance of adopting proper procurement method before ordering any construction materials. The final survey was conducted by sending around 200 questionnaires where the responses were consolidated together with the pilot study responses (Bacon, 2009). Literatures categories responses from various parties I various categories. Those from the designers, architects, clients and contractors. All the four parties gave varied responses depending with the experience of the nature of work they do. What a designer can give is not the same as the comments from the contractors and the others. In other words, every party is specialized in a particular task hence a leeway of differences is allowed.Moreover, costs of rework were also sought from the responses of the interviewee. Tendering methods used were measured against to the required standards in the market. Respondents were allowed to comment at the end of the questionnaire and the data was analyzed using statistical package for social sciences.
Various research strategies exist that enables that help in getting insight concerning the topic under study. It is defined as the systematic step wise approach given to a particular research topic to assist in establishing viable ground to base the argument (Davis et al., 2008). It details step by step stages in conducting the research work. From the reviewed papers, it was clear that survey was highly employed to collect data and information. This is looking for respondents from various regions to give information concerning construction procurement. Surveys could be conducted via internet or even physical presentation. However, various papers consulted conducted their work through the internet by studying various methods employed by construction companies (Hammer, 2017).
Additionally, data from the national construction agencies were consumed because they provided valuable surveys that were used as lead documents. Additionally, case studies formed basis for the research. Selected countries such as Asia, United State and Australia were chosen for analysis. The procurement methods embraced in these nations were compared to gauge the most used method. Furthermore, action research was also invoked largely. This is critiquing works done by other authors in the same field. All the strategies are embraced with so as to help build on the research question.
Ethics are set of code of conducts that should be adhered to when performing any research work. Acknowledging work done by other is one of the most important thing that every author is required to respect. Respect of intellectual property is the first consideration (Hammer, 2017). Moreover, the primary work involved dealing with human beings by seeking information from them. Ethical considerations were adhered to when emails and messages were sent to various respondents. By ensuring voluntary contribution gave the literature consulted an upper hand in reliability. However, the current study did not consider any ethical issues. This is because the information was sought from secondary data which was believed to have been reviewed and satisfied the body of knowledge (Bacon, 2009). The data detailed in these papers contains valid data which is more accurate. Additionally, responses which were received from the people interviewed corresponds to the ethicality. People cannot give positive information id high moral and ethical standards are not held high. This gives the current report weight in addressing the issue of concern.