Construction Contract Relationship

1. Construction Contract Relationships
Group Members:
Hasan Alhashhoush
Ismail Fakhro
Mohamad Gheath Kreaker
Naska Abbassi
Laur Vatsfeld
Public
Procurement Award Criteria

2. Procurement Routes
Factors Affecting Selection of Procurement Route
Procurement Phases and Procedure
Awarding Criteria Selection
Interviews
Conclusion
Content

3.  What is Public procurement ?
 The acquisition, whether under formal contract or not, of
works, purchases and services by public organizations.
 Ranges from the buying of goods or services to formal
tendering and placing contracts for large infrastructural projects
Public procurement is concerned with how public-sector
organizations spend taxpayers money on goods and services.
Introduction

4. Procurement Routes
There are three different
methods of procurement
routes
The type of procurement
route is selected by
public client
Selection of procurement
route is based on many
variables

5. Procurement Routes: Traditional Method
 Widely used for public procurement and can be described as step-by-step approach.
 This method is relatively secure, especially when
it comes to value for money.
 On the other hand it can take relatively long time to accomplish the desired outcome. For
instance, fixing any kind of flawed aspect of the project takes a lot of time, because usually there
are different contractors for different parts of the developed project.

6. Procurement Routes: Design and Build (DB)
Can be single stage or two-stage.
Relative speed and cost certainty.
 less time consuming.
 the contracting authority loses some degree of control over the design process as the design will
be the responsibility of a contractor (design and build ).

7. Procurement Routes: Managing Contracts
 Relatively fast compared to the other two methods.
 There is a lot of uncertainty for the client until the completion of the project.
 Design developed by an architect employed by the client.

8. Factors Affecting Selection of Procurement Route
• Client resources: client’s knowledge and experience.
• Project characteristics: size, complexity and location of the project.
• Ability to make changes at various stages.
• Risk management.
• Cost issues
• Timing

9. Procurement Phases
The procurement process has two main phases that are dependent on the procurement route:
1- The supplier selection (the choice of adequate suppliers).
2-The supplier evaluation (assessment of performance).

10. Allowable Procedure for Public Procurement
 Open procedures : all interested parties can participate in the tendering process.
 Restricted procedures : only selected contractors may submit tenders.
 Negotiated procedures : clients consult with the contractors before making the decision which
one to select.
 Competitive dialogue : more complicated procedure used when contracting authorities find
that it is not possible to achieve the desired goals with one of the
aforementioned procedures.

11. Awarding Criteria Selection
 Historically the performance assessment of construction contractors has based on the lowest price
criteria, as it is an objective and transparent approach.
 Researches have shown that there can be many hidden risks behind the so called ‘cheapest tender’:
1. Does not ensure lowest overall project cost (cost overruns).
2. Can result in high costs during the building life cycle.
3. Lowest price may not provide quality or satisfaction among clients.

12. Awarding Criteria Selection
 More complex award systems with different non-
price criteria also known as scoring-based
competitive tendering have been developed .
 Research results in Sweden show that local
authorities prefer price or easily measured non-price
criteria.
 The same research states that project-specific
selection criteria include (listed from more to less
popular) :
Tender price
Individual experience
of key project
personnel
Personality related
criteria of key project
personnel
Technical aspects of design
Innovative/creative solutions
Project execution/action plan
Aesthetic aspects of design and life-cycle costs
Less Popular

13. Awarding Criteria Selection
 This list confirms that even though there are quality requirements in supplier selection, in most
cases public clients want to reassure that those requirements are met.
 Another important aspect that needs to be kept in mind when using scoring-based tendering:
“If multiple criteria are to be used, there are rules to safeguard that they are applied
transparently”.
Research in Sweden shows that For public projects :
Tender price: up to 70% weight
Project organization: as quality criterion between 10% and 15% weight

14. Interview #1: ChristerFröberg,KjellgrenKaminskyArchitectureAB
 Office manager and business developer at Kjellgren Kaminsky Architecture AB. Fröberg is
currently working with public procurement projects for Gothenburg´s municipality.
Projects they are involved in are mainly 600 housing units and planning.
Criteria such as sustainability, durability and quality give additional points. However, the price
owns the highest points ratio.

15. Interview #1: ChristerFröberg,KjellgrenKaminskyArchitectureAB
 Most common procurement route is the traditional method.
Architects must put a value of their creation, the creative process into "working hours“ for the
price criteria.
Usually the contracts by Gothenburg’s municipality are open, where they announce the
project and the companies apply for it, while they have a list of ranked companies, and they
choose according to the most economically feasible.
They also use lump sump contracts and guaranteed maximum price contracts.

16. Interview #2: JessicaDosenius,Trafikverket
Public procurement officer from Trafikverket. Dosenius is currently working with an IT system
procurement with a budgeted cost of 400 MSEK.
Trafikverket have different selection strategies for projects from different infrastructure
sectors. They use a prequalification system, TransQ.
The award criteria for Trafikverket’s projects is based on a category strategy. Price is only award
criteria for a standard performance contract.

17. Interview #2: JessicaDosenius,Trafikverket
Additional award criteria is applied in complex projects.
1. Collaboration
2. Risk
3. Environment
Additional criteria is usually regarding quality and environmental management (e.g. ISO 9001).
The use of traditional or design and build method depends on the project typology.
Usually the contracts are open, unless there should are specific requirements.

18. Conclusion
 Construction management is a procurement route in which the works are constructed by a
number of different trade contractors.
Governments and firms spend large amount of money on procurement. The traditional
approach specifies every dimension, and gives opportunity to choose the lowest price
contractor.
There is a high focus on price or more easily measured non-price criteria in municipal tender
evaluations. This, in turn, suggests a limited ability of municipal officials to evaluate consultant
competence, especially aspects related to design and execution of projects.
Moreover, a majority of the respondents reported that they use ‘personal’ information and
prequalification sources as basis for their procurement decisions.

19. References
1. Araújo, M. C. B., Alencar, L. H. & Miranda Mota, C. M., 2017. Project procurement management: A structured literature review. International Journal of Project
Management, Volume 35, pp. 353-377.
2. Lambropoulos, S., 2013. Objective Construction Contract Award using Cost, Time and Durability Utility. Procedia - Social and Behavioral Sciences, Volume 74, pp.
123-133.
3. Lundberg, S., Marklund, P.-O. & Strömbäck, E., 2016. Is Environmental Policy by Public Procurement Effective?. Public Finance Review, 44(4), pp. 478-499.
4. Morledge, R. & Smith, A., 2013. Building Procurement. 2 ed. Hoboken: John Wiley & Sons.
5. PETERSEN, D. Public procurement. TEK 140 construction contract releationships , 22nd November 2017 Chalmers University of Technology, Gothenburg.
6. POTTS, K. F., ANKRAH, N. & DAWSONERA 2013. Construction cost management: learning from case studies, Milton Park, Abingdon, Oxon, Routledge.
7. Sporrong, J., 2011. Criteria in consultant selection: public procurement of architectural and engineering services. Australasian Journal of Construction Economics
and Building, 11(4), pp. 59-76.
8. Sporrong, J. & Bröchner, J., 2009. Public Procurement Incentives for Sustainable Design Services: Swedish Experiences. Architectural Engineering and Design
Management, 5(1-2), pp. 24-35.
9. Varnäs, A., Balfors, B. & Faith-Ell, C., 2009. Environmental consideration in procurement of construction contracts: current practice, problems and opportunities in
green procurement in the Swedish construction industry. Journal of Cleaner Production, Volume 17, p. 1214–1222.
10. Waara, F., 2008. Mitigating contractual hazards in public procurement: a study of Swedish local authorities. Construction Management and Economics, 26(2), pp.
137-145.
11. WALKER, H. & BRAMMER, S. 2009. Sustainable procurement in the United Kingdom public sector. Supply Chain Management: An International Journal, 14, 128-
137.

20. Thank You !