CONS6817_S01'16

Procurement (CONS6817) Lara Tookey
PROCUREMENT – SESSION #1
Overview of the Course
Introduction to Procurement
The Client

How to succeed in this course
•Show up
•Actively participate in the activities
•Learn to express yourself using the
language of procurement
•Do the readings
•Ask questions

Learning Outcomes
• Differentiate clients and examine their
varying objectives in procuring capital works.
• Compare the aims and objectives of
procurement systems.
• Deduce appropriate procurement strategies
for different scenarios.

THE CONTEXT

Within a market economy
• The relationships between the parties are
entered into voluntarily.
• The parties will only enter into the
relationship if they can see benefit to
themselves.
• The price paid for any service is influenced
by the current state of supply and demand.

market economy cont.
• Whether or not parties enter into any
particular relationship depends in part on
what alternatives are available to them and
their perception of the benefit of those
alternatives.

Procurement
• The structure of the interaction between the
purchaser of a new building and the supplier
of goods and services that enable the
building to be created.
• “Procurement is defined as the process from the
completion of design to the successful handover
of the building. It is also the contractual and
financial arrangements between the parties.”

user
owner
developer
designer
contractor
subcontractor
supplier
Procurement system
financiers

2006 NZ Construction Industry Council
Principles of best practice
construction procurement in new Zealand
‘Procurement method’ is the phrase
given to the process by which clients
and users achieve the delivery of their
construction projects. …..

2006 NZ Construction industry council
principles of best practice
construction procurement in new Zealand
‘Procurement’ means much more than the
purchase of products and services. It
covers the process from initial concept
planning and design, to development,
construction, maintenance and on going
monitoring of performance.

2004 NZ Construction industry council
best practice procurement in construction and infrastructure in
new Zealand (discussion document)
“….. Many problems facing the
construction sector in NZ…. focus on costs
over value, constrained innovation,
inappropriate risk allocation, unsustainable
market, … can be addressed with a
change in procurement….”.

Procurement (CONS6817) Lara TookeyOur focus for the course

THE CLIENT

ACTIVITY (10 MIN) Working with your peers
How well do you understand ‘the client’?
Answer the following three questions
outlining why you say yes/no.
1. Are all clients trying to achieve the same
thing?
2. Are they all prepared to take the same risk?
3. Do they all have the same amount of
experience?

CONSTRUCTION CLIENTS HAVE
DIFFERENT WANTS AND NEEDS
THEREFORE
THEY ARE LIKELY TO
WANT DIFFERENT SERVICES.

Types of Products
• Mass production
• Houses
• Bespoke service facilities
• Schools, hospitals, industrial processes.
• Minor repairs & maintenance
• Civil engineering
• Transportation, roads, tunnels, railways, docks
• Energy & Infrastructure
• Pipelines, powerlines, water & sewerage

Owner Sophistication
• Large Developers
• Large Government Agencies
Constantly Building
• Small Developers
• Small Government Agencies
Infrequent Builders
• Individuals
One-Time Builders

SO, WHAT ARE THREE KEY
OBJECTIVES OF A CLIENT
WHEN BUILDING?

TIME
COST QUALITY
The procurement triangle

Client priorities for procurement
selection
• Besides the “procurement” triangle, can you
describe at least 10 other possible priorities
that a client may have?

• Time
• Will the building be completed when I want it?
• Is the completion date reliable?
• Is it being built within the shortest possible
time?
• Cost
• Can it be afforded?
• Will it be within budget on completion?
• Is the price paid the best price possible?

• Quality / Functionality
• Does it enable the intended activities to happen
inside it?
• Does it keep the weather out?
• Is it efficient to use?
• Does it present the desired image?

Latham’s List of client
objectives
• Obtaining value for money
• Delivery on time
• Satisfactory durability
• Reasonable running costs
• Fit for purpose
• Defect free on completion
• Aesthetically pleasing
• Supported by meaningful guarantees

End Result….
• Unique industry – not the same as the
manufacturing industry
• Delivery of one-off projects.
• Construction takes place at site of consumption
vs. mass production of products consumed at a
distance.
• Client initiatives drive construction project!!!
• Targets often set based upon expectations
drawn from own experience, however
unsuitable.

What is the difference between
Purchasing Vs Procurement?
• Purchasing implies a monetary transaction.
• Procurement is simply the responsibility for
acquiring the goods and services the
organization needs.

Changing construction procurement for
the millennium.
(Reading by Smith, J., Love, P., & Jackson N.)
• Identify the key factors that have initiated
the need to change the way in which Client’s
procure projects.

Why the move?....
• Traditional (low bid methods)
• The Owner is ‘blind’ to factors of experience,
capacity, personnel, political ties etc. of the
contractor.
• This can result in the selection of a less desirable
contractor.
• Always provides an arms-length separation
between the Owner and contractor selection.
• Secondary effect – bidders are forced to become
price-competitive.

… to the alternative?…
• A move toward Owner influence and
subjectivity in the procurement of
construction.
• Provides conditions in which the cost of the
work is secondary and therefore potentially
higher.
• Benefits to the Owner are numerous and are
best summarized with the term ‘best value /
best practice’.

… to the alternative?…
• All factors are considered – cost, quality,
experience, schedules etc.
• Owners are more likely to receive a product
that meets all of their objectives.

HOW DOES PROCUREMENT FIT INTO
THE BCONS DEGREE ?

Procurement management processes
Procurement
Planning
• Determining what to procure and when
Solicitation
Planning
• Documenting product requirements and
identifying potential sources
Solicitation
• Obtaining quotations, bids, offers or
proposals as appropriate
Source
selection
• Choosing from among potential vendors
Contract
Administration
• Managing the relationship with the vendors
Contract close-
out
• Completion and settlement of the contract

Procurement management processes
Procurement
Planning
• CONS6817 - Procurement
Solicitation
Planning
• CONS6817 – Procurement and CONS6811 -
Tendering
Solicitation • CONS6811 - Tendering
Source
selection
• CONS6811 - Tendering
Contract
Administration
• CONS6812 – Contract Administration
Contract close-
out
• CONS6812 – Contract Administration

CONS6817_S01'16

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