This document discusses and compares different construction project procurement methods for a proposed 20-story condominium development. It analyzes traditional procurement, management contracting, lump sum contracting, and design-build approaches. The traditional method is recommended due to the project size and the client's need for cost certainty and control over design quality. This procurement method provides a fixed contract price early and ensures the client can directly influence the design, while also transferring most risks to the contractor.

1. SCHOOL OF ARCHITECTURE, BUILDING AND
DESIGN
Bachelor of Quantity Surveying (Honours)
Professional Practice 1
Group members: Felix Vong Zhi Wei 0318462
Lee Ern Hui 0319703
Elliot Pang Tiu Seng 0319438
Welson Lum Wei Jiunn 0319514
Kevin Lee Hee Xian 0315192

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Table of content
Content Page
1.0 Introduction 3
2.0 Management Contracting 4
2.1 Advantages 4
2.2 Disadvantages 4
3.0 Traditional Procurement Method 5
3.1 Advantages 5
3.2 Disadvantages 5
4.0 Lump Sum Contract 6
4.1 Suitability of Lump Sum Contract 6
4.2 Lump Sum Contract Analysis 6
5.0 Design and Build 8
6.0 Critical Analysis 10
7.0 Reference Link 11

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1.0 Introduction
In recent times, the Malaysian economic downturn has affected the developers in
Malaysia in delivering and meeting key property development and sales target. As being one
of the experts in this subject, the client who is a property developer have called upon us to
critically examine the types of basic procurement methods and suggest a suitable type for the
project. Since the project site has a good soil condition, a 20-story condominium would be
more suitable as it allows additional green and sustainable features to create more values to
the environment and purchases or end users. Other than that, the building will be focusing on
selling it to the middle-class purchasers as middle income earners are rising in this economic
downturn. In this report, it will examine and propose suitable contract forms for the project
and evaluate the viability of the design and build as a procurement method for the new
project in comparison with basic procurement methods.
The dictionary defines the word ‘procurement’ as acquiring or obtaining by care or
effort. The term ‘procurement method’ is described as the complex system of relationships
formed among clients, consultants and construction corporations. Procurement methods are
categorized into 4 parts and they are traditional method, design and build, management
contracting and construction management. The decision of choosing a procurement method to
use should be chosen as early as possible to support the clients project and the client’s
requirements. The main criteria for choosing the right procurement method for the project
will affect the time, cost and quality of the project. The risks should be considered as for
choosing which procurement method to be used and how it would affect the overall project.
Besides that, the employer or the contractor would also be at risk on which procurement
method is chosen. Each procurement method will have their advantages and disadvantages
and there are key points on which procurement method to consider on the project. By
understanding the characteristics of each procurement methods, a recommendation can be
made to the client.

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2.0 Management Contracting
Management contracting basically is the management contractor nominated by the client
based on their experience in the management services or selected by competition from tender
stage. He does none of the work himself but separate it into work packages to the contractors.
The successful management contractor will enter to a joint contract tribunal(JCT) management
building contract with the client. M.C provides a service on fees as part of the client’s
management team by managing the construction works in co-operation with the consultants.
He provides and maintains all the necessary site facilities and labour. The contractual links are
between the client and the member of management team and design team. The M.C and each
of the of the works contractors.
2.1 Advantages:
Management contracting can reduce the time requirement for design and construction
significantly so that the project does not delay and saves cost for the client. As a contractor in
this procurement method, he can identify client’s need and interests. At the mid of time, the
changes of design are flexibility. Besides that, the work can start earlier as the works package
designed. Contractor’s knowledge and management expertise can assist the design team.
2.2 Disadvantages:
The final cost of the project is uncertain until the last works contract signed because some
of the design might change. Variations and the amount of re-measurement required greater than
traditional contracts during construction period, because the problem of work packages will
interface. The management of the construction of the building will be totally relied on the
management contractor and if he is not experienced enough, there will be a lot of confusions.

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3.0 Traditional Procurement Method
Traditional procurement method is still widely used by building projects. For small
projects, the client would consider to have the contractor design and construct building.
However, for large projects, traditional procurement method is a more suitable method of
procuring building works. First, the client appoints consultants to meet his requirements such
as design, specifications, etc. At the same time, the consultants will appoint a QS to prepare
BQ after the drawings have been approved by the client. After the BQ is prepared, contractors
will be invited to the tender competition of the projects. Traditional procurement contracts are
widely used for lump-sum contracts, re-measurement contracts and cost reimbursement
contracts.
3.1 Advantages:
In the traditional procurement method, the client will confirm the initial design on the
overall concept in the early and final stage. Contractor does not to carry any risk in the design
stage as he only focuses on the construction of the building. This method can obtain tender
from competitive tenderers due to the lower risk in the design. It easily to control the budget
with variation.
3.2 Disadvantages:
It needs a longer period to start the project due to the design stage and the design must be
completed before invitation of the tenderer. Client need to bear the risk if there are any mistake
in the design. The delays in the project will cause the exceed of the budget due to unforeseen
circumstances.

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4.0 Lump Sum Contract
Lump sum contract is determined before construction work is started. Basically, it’s a
contract with quantities that is priced based on drawings and firm bills of quantities. Whereas,
a contract without quantities is a contract priced based on the drawings and other documents
such as specification or work schedule.
The contractor should provide material cost, labour cost and contractor’s overhead for
the construction in a Lump Sum Contract. However, at the client’s side in this form of contract,
it’s basically assigned to a higher risk to the contractor but it also allows the contractor to raise
his overhead cost due to unforeseen contingencies.
Other than that, poor performance in construction and delay will reduce the contractor’s
profit. In addition, supplier that contracted to the main contractor under this form of contract
will be responsible for the job execution.
4.1 Suitability of Lump Sum Contract
A lump sum contract is an approach in term of design, quality and cost. Lump sum
contract is suggested to our client as the work is defined in detail, limited variations in changes
and it allows minimal risk for the client. By fulfilling the scenario for the construction situation,
it is strongly advised to the client where this form of contract is the lowest first cost delivery
method where it is able to reduce and control the client’s cost at the early stages of construction.
The cost in lump sum contact is anticipated and it allows the client to control
contingencies. As all the analysis of the construction site has been done, it has strong soil
condition, complete pre-construction studies and assessment are completed. Therefore, we
proposed this form of contract for this construction to the client.
However, the disadvantage of this contract form is that the contractor has greater
control in cost or profit of the construction. However, the contractor carries most of the risk
during tender stage. For example, the tender price may include high risk contingency and
affects other competitor contractors and they may decide not to bid for the project to avoid a
high risk lump sum contract. The client should appoint a consultant team due to the
procurement method. Consequently, we have advised to the client that the contactor will not
provide pre-construction consulting services such as estimating, scheduling, logistics during
the design stages.
4.2 Lump Sum Contract Analysis
A lump sum contract provides large dispute and claims that will arise from contract
document. First, unbalance bids, the contractor will rise the unit price of an item to be complete
in the construction. For example, during the preparation stage where managing schedule of
work and task preparation by the main contractor that affects trade contractors to commence
their work on site.

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Secondly, change order, the price from the quotation becomes disputed due to the
contractor’s proposal of change order to the client and the client might appeal as it is already
included under contract provision. Thus, it is important to provide specific contract clauses in
the contract to protect the contractor on claim in delay, damages, or any changes orders in the
contract period to reduce disputes.
Lastly, scope of work and design changes, changes in design and cost must be clearly
stated in the contract provision to minimize disputes. For example, during the construction
stage, the contractor might find that the architecture’s design of the roof cannot be built on site
due to some unforeseen circumstances. Therefore, the contractor must inform the architect as
soon as possible.

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5.0 Designand build
(FIGURE 1)
Design and build (D&B) is a procurement method that employer’s might appoint the
consultants during the feasibility stage and pre-tender stage. After the selection of D&B
contractor, the consultants appointed by employer at feasilibity stage will be placed under the
contractor which mean the D&B contractor has the contractual links with all the consultants
and the contractual link between employer and his consultant had ended. The D&B contractor
then will received the design from the employer’s consultants and develop the design and
construct it (Ashworth & Hogg, 2000).
In D&B procurement, the employer is directly communicated with the D&B contractor
which means all the progress, details, and information of the construction should be informed
by D&B contrator to the employer. In this procurement, the D&B contractor has the single
point responsibility which he is not able to put any blames on other parties. D&B contractor
has to bear all the risks and problems faced and try to reduce the design problems. In basic
procurement methods, the employer hires his consultants and also select the succesful
contractor. When problems occur, there might be blames occured between the parties. With the
participated of different organisation and consultants the problems occur will be resolve easier
compare to D&B procurement method.The contractor will want his interim payment from the
employer as quickly as possible. However, it needs the process of inscpetion by the employer’s
consultant for example by checking on the work done by the contractor. The employer might
not be satisfied with the work done from the contractor and hold the distribute of payment. This
is one of the reason that D&B procurement reduces the project duration as compared to the
basic procurement methods.

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In the other way round, the employer’s ability to control the design in D&B
procurement method has reduced. The employer directly communicates with the D&B
contractor as all the progress, details, and information of the construction only can obtained
from the D&B contrator. In basic procurement methods, the employer has ability to control
and get more understanding and vision of the construction. There are consultants acting as the
middle man between the employer and contractor to ensure that the contractor is performing
their job with quality, within the time of completion and within cost budget then report to the
employer. For example, the consultant team and contractor can have a meeting once each
month to check on the progress report of the construction so that the employer could know
more about the progress of the construction in basic procurement methods rather than the D&B
procurement method.
Next, in D&B procurement method there is a Guarantee Maximum Price (GMP).
GMP constitute employer’s maximum liability and the contract sum should not exceed the
GMP. If the GMP is exceeded, D&B contractor has to bear the exceeded amount and if the
construction cost is below the GMP, the remaining sum will share between employer and
contractor with a ratio of 7:3. D&B procurement method also ensures that the employer will
not spend unnecessary costs unlike other basic procurement methods as they do not have GMP
so the construction might be over budgeted during the construction after a long period
(Cushman & Myers, 1999).
In conclusion, D&B procurement method is not recommended to use for a 20-storey
condominium. However, D&B procurement method is highly suggested to apply in small
projects rather than a large project. In D&B procurement, there is lack of discussion between
the employer, contractor and consultants because most of the project is authorized by the D&B
contractor. To construct a 20-storey buildings, there are many elements to consider by the M&E
services, piling works, and most importantly is the green sustainable technology to apply in the
20-storey condominium. After that, in D&B procurement the employer’s ability to control has
been reduced so the D&B contractor will try to save their cost as much as possible with cutting
down the materials cost and rush for the project which will affect the quality of the 20-storey
condominium. The D&B procurement submitted along with a GMP and is not suitable for
constructing the 20-storey condominium. Constructing a 20-storey condominium may take a
few years to construct and there will be unpredicted costs. Implementing the green and
sustainable feature in the 20-storey condominium requires consultation from a specialized or
professional and it might be costly. Other than that, the cost of technology and materials to
construct green and sustainable condominium will rise due to their increase of popularity and
the causes of unstable economics.

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6.0 CRITICAL ANALYSIS
The proposed project is to build a 20-storey condominium. As mentioned in the
previous part, the two procurement methods are traditional procurement method and
management contracting. Both methods basically have different principles as well as
advantages and disadvantages.
There are many factors influencing the evaluation of the most appropriate procurement
method. One of the main factor is the project characteristics including size and location of the
project should be considered. Project characteristics will affect the time, cost and risks such as
larger projects might need longer time to construct and unforeseen circumstances might lead
the project to a halt or causes delay to the project. If the time given is insufficient, traditional
method would not be a suitable choice because design process must be completed before
calling of tender. Therefore, it is not suitable for fast track project as it takes a longer time
whereas if early completion is required, management contracting is more suitable for this
scenario as design and construction can be overlapped so that construction can start off earlier.
However, if the client wishes to complete the project in a shorter time, there is also the
‘Accelerated Traditional Method’ which allows early commencement on site by the design and
construction running in parallel to a limited extent but the cost would be less certain.
The following factor is the cost issues. At the time of tender, the design completed will
affect the cost greatly. Lump sum contract under traditional method is where the contract sum
is a fixed amount under an agreement before construction starts. Furthermore, the contractual
date for completion is also firm. For management contracting, the management contractor can
begin construction before the design is completed but the final cost would be uncertain until
the final works contract is signed. If price certainty is required by the client, then the design
must be completed before construction starts showing that traditional method is more suitable
in this situation.
Which procurement method is more appropriate in each situation depends on the
client’s requirement. The degree of the client to involve in the project should also be considered.
Client can lead and have direct influence on the design and quality as well as functionality can
be assured in traditional method. As for management contracting, the client loses direct control
of design quality because it is under the control of management contractor. If the client has
high requirement on overall design quality, then traditional procurement method would be
better compared to management contracting.
The project characteristics, needs of client, time frame and cost issues should be a major
consideration in selecting the suitable procurement method. In conclusion, traditional
procurement method would be suggested for this project. This method is suitable for all clients
including inexperienced clients. Moreover, the price certainty is achieved early which can
secure the project within the client’s budget and provides a firm contractual date for completion.
Consideration should also be given to the risk of client by external factors such as impact of
economic. The amount is fixed after contract signed so lower financial risk on client but the
contractor should bear majority of the risk in terms of any cost fluctuation. Therefore, this
method is more suitable for the developer on this 20-storey condominium project.

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7.0 Reference link:
Ashworth, A. & Hogg, K. (2000) Added value in design and construction. 1st edition.
Harlow: Longman.
Ashworth, (2013) Willis's Practice and Procedure for the Quantity Surveyor 13e. 1st edition.
John Wiley & Sons.
CHAPTER 2 CONTRACT STRATEGY (no date) Available at: http://docplayer.net/8769421-
Chapter-2-contract-strategy.html (Accessed: 19 November 2016).
Cushman, R. & Myers, J. (1999) Construction law handbook. 1st edition. Gaithersburg
[MD]: Aspen Law & Business.
Davis, P., Love, P. & Baccarini, D. (2016) Building procurement methods. [online].
Available from: http://www.construction-
innovation.info/images/pdfs/Research_library/ResearchLibraryC/2006-034-
C/reports/Report_-_Building_Procurement_Methods.pdf [Accessed 11 November 2016].
Davis, P., Love, P., Baccarini, D., Wilson, G. & Lopez, R. (2016) Capital works
procurement: The selection of a building procurement method. [online]. Available from:
http://www.construction-
innovation.info/images/pdfs/Research_library/ResearchLibraryC/2006-034-
C/reports/Report_-_Capital_Works_Procurement_-
_The_Selection_of_a_Building_Procurement_Method.pdf [Accessed 11 November 2016].
Emad, E. (no date) Available at: http://osp.mans.edu.eg/elbeltagi/Cost%20Ch1.pdf
(Accessed: 19 November 2016).
Inc, S. (2016) Estimation and costing. Available at:
https://www.scribd.com/document/136930578/estimation-and-costing (Accessed: 19
November 2016).
Lupton, S., Cox, S. & Clamp, H. (2016) Which procurement method?. Available from:
https://www.thenbs.com/knowledge/which-procurement-method [Accessed 11 November
2016].

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Masterman, J. (2001) Introduction to Building Procurement Systems. 1st edition. London:
Spon Press.
Rijn, J. (2016) Procurement in the construction industry. [online]. Available from:
http://www.indevelopment.nl/PDFfiles/ProcurementConstructionIndustry.pdf [Accessed 11
November 2016].
Rodriguez, J. (2016) What is a lump sum construction contract? Available at:
https://www.thebalance.com/lump-sum-construction-contract-844915 (Accessed: 19
November 2016).