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SCHOOL OF ARCHITECTURE, BUILDING AND DESIGN
BACHELOR OF QUANTITY SURVEYING (HONOURS)
PROFESSIONAL PRACTICE I (QSB 60604)
Group Assignment
Submission Date: 21st November 2016
Group members:
Hong Kai Yin 0323361
Hiew Li Ming 0319941
Koh Wen Qi 0323355
Lim Jie Qi 0318313
Yap Kian Hoong 1102B13319
Yong Sing Yew 0318766
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Table of Content
Content Page
1.0 Introduction 3
2.0 Traditional Procurement Method 4
2.1 Advantages 5
2.2 Disadvantages
3.0 Construction Management Procurement Method 6
3.1 Advantages 7
3.2 Disadvantages 8
4.0 Suggestion of Contract Form 9
4.1 PAM Contract
4.2 Lump Sum Contract 10
5.0 Design and Build 11
5.1 Viability of Design and Build 12
6.0 Critical Analysis 13
7.0 Clear Examples 14
7.1 Traditional Procurement Method
7.2 Construction Management Procurement Method 15
7.3 Design & Build
8.0 Conclusion 16
9.0 References 17
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1.0 Introduction
In construction area, there are various types of procurement method for the
client to obtain the project. A suitable procurement method will make it easier to carry
out the work and also protect the benefits of both parties. For example, if the client
wishes to know the exact construction cost of the project, the most suitable method is
the traditional procurement method. In Malaysia, there are three procurement method
which are the most basic and commonly used, which are traditional procurement
method, management contracting and construction management. Also, there is a
procurement method which is rarely used in Malaysia, which is Design and Build
procurement. It is not commonly used in Malaysia because it is only suitable for small
projects and the contractor has the responsibility to produce his own design. However,
this method benefits the client as the client has more options in selecting the design.
Other than that, the type of contract used in the project is also a key factor as the
contract will interpret the exact terms and agreement between the client and the
contractors. In other words, the contract protects the rights of both parties. In
conclusion, procurement method and contract forms are ought to be chosen wisely
before the commencement of a project.
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2.0 Traditional Procurement Method
Traditional procurement method is a procurement method that the design work
will be separated from construction.
Based on the chart shown above, the client has contractual relationship with all
parties. In this way, the client would have a closer control of the works. However, this
may bring risks in control of works of the project since the client need to deal with
many points of responsibility.
Firstly, client will appoint a consultant team which included architect, quantity
surveyor and engineers to come out with the drawings and specifications of the
building. The quantity surveyor will come out with the bills of quantity based on the
drawings. The employer appoints the contractor team to be in charge of the
construction works only. Contractor may appoint other subcontractor to undertake
specialize works.
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2.1 Advantages of Traditional Procurement Method
Traditional procurement method usually comes out with high quality works
since the client has the closer control to the works. For example, the consultant team
must provide a design which meet the requirements of the client. Besides, due to the
advices and construction expertise provided by the consultant and contractor, client
may compare and consider which design and budget is more suitable for the project.
In this method, all tenderers produce a tender based on the same information.
Therefore, client may obtain the best or lowest price through competitive tendering.
Besides, the construction cost will be more accurate since the tender is based on
the complete design and specifications.
If compare with other procurement method, traditional method will be easier to
be adopted. It is because this method had been commonly used for a long time
Therefore, both contractor and consultant team are familiar to solve or face the risks
during the procurement state of a construction progress.
2.2 Disadvantages of Traditional Procurement Method
For this method, client may hard to manage the project since he need to
communicate with few parties at the same time. For example, the consultant and
contractor do not have contractual relationship, hence, if they need to communicate
with each other, they must communicate with the client first, which is very
inconvenience. Miscommunication may also occur.
Traditional method requires longer period to complete the project. It is
because the tender will only be provided after the design is fully completed.
Furthermore, if problems occur, consultant and contractor may shirk the responsibility
to each other. The argument and problems may need a long time to be settled.
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3.0 Construction Management Procurement Method
Construction Management is a procurement route based on the arrangement
where a client appoints a Construction Manager at an early stage to plan, co-ordinate
as well as organize the design and construction phases of a project. Construction
Manager do not undertake any physical construction of the project (Frank Harris and
Ronald Mc Caffer, 2001).
All the work done is carried out by the Works Package Contractors in which
each of them enters individual contract with the client. Examples of work packages
include reinforced work, aluminium work, facade work and more. The Work Package
Contractor may be selected by client or went through normal tendering process, be
compared and eventually came out as the best proposal.
Client
Construction
Manager
Works Package
Contractors
ConsultantsReport
directly
Contractual relationship diagram
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3.1 Advantages of Construction Manager Procurement Method
In order to assist the developer, Construction Manager plays an important role
at the early stage, providing his expertise in management of the design development
and project implementation. This will not only avoid low quality work, but also able
to carry out a functionally and financially viable project that meets the client's
requirement. Close connection between the construction manager and the design
team throughout the project also result in immediate decision-making and practical
solutions when any occasions arises (Denise Bower,2003).
The other pros include the privity of contract between the client and works
contractors that leads to client’s amendment at fingertips in the event of difficulties.
For instance, when delay arises, client can straight away coordinate with the works
contractors without going through main contractor or consultant.
Furthermore, overall development duration time is greatly reduced due to
maximum overlapping between design and construction development. When design
comes in, the physical works can start early. This fast-tracked project allows an earlier
start and completion of construction, which reduce the risk of liquidated damages
(Kwakye, 1991).
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3.2 Disadvantages of Construction Management Procurement Method
On the other hand, the cons of Construction Management include no
guaranteed final cost until the last of the works contracts has been signed. This is
the developer's greatest risk. Cost over-runs in the following stages of the project are
completely borne by the developer. There is also time risk as no single organisation
is solely responsible for the date of completion.
Last but not least, from the contractual relationship diagram, it clearly shows
that the client plays an active role. He has to deal with various trades contractors
by himself, unlike Management Contracting. Client has the responsibility to bear all
risks including the poor performances of any trade contractors. Therefore, client need
to be competent and experienced, otherwise it will be very challenging for him to
manage the Package Contractors (Richard Fellows, 1983).
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4.0 Suggestion of contract form
4.1 PAM Contract
PAM (Pertubuhan Akitek Malaysia) contract is most commonly used in private
sector of building contracts. In PAM contract, it allows the architect to act as an
independent certifier. There are two types of PAM contract: PAM contract with and
without quantity. The differences between PAM contract with and without quantity are
the QS is empowered to evaluate claim and he is responsible for the risk of
quantity error in PAM with quantity. While in PAM without quantity, the QS only
required to assist the architect and contractor to estimate the lump sum cost of the
works. In constructing a 20 storey condominium, we suggest to use the PAM contract
without quantities.
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4.2 Lump sum contract
Lump sum contract is commonly used in construction industry and it is the
common form of construction contract. There are several benefits for client to apply
lump sum contract to the construction project. The benefits for client are: the client
takes lower financial risk, shorter time frame and has stable working progress.
Lump sum contract lowers the financial risk of client because the drawings
are all done and works are all defined completely. Client’s liability will be limited since
the client has agreed to the proposed fixed price. If there is any overruns cost, the
client is not liable to it.
Project which is under lump sum contract usually can be done in shorter time.
Contractor will try to work in the most efficient way. If the project is completed without
exceeding the fixed price, the amount of difference will become the profit for the
contractor. The client can make payment monthly depending on the progress of work.
Therefore, this will motivate the contractor to improve the performance, minimize the
price for overhead and complete the construction in shorter time to maximize his profit.
Contractor only need to come out with the total price, he is not required to break down
the cost to details.
Even though it requires longer time to award lump sum contract, change orders
like drawings errors, change in design and inaccurate specifications can be minimized.
It ensures the progress of project to run smoothly so the contractor can complete
the project without facing any unexpected condition.
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5.0 Design and Build
Design and build (Fig.1.1) is a procurement method that delivers a project by
providing single point responsibility, which means the design and construction
services are both the responsible of design-build contractor. The client only appoint
consultant to prepare the employer’s requirement. In this case, contractor will design
and build a project by following the employer’s requirement. The contractor will receive
the concept of design from client’s consultant and they will need to develop the design
and construct the work (Allan & Keith, 2007, p.227-228).
Figure 1.1 Design and Build.
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5.1 Viability of Design and Build
Based on our research, we do not recommend to use Design and Build
procurement comparing to basic procurement method for this project (20 Storey
Condominium). This is because the difficulty in selection of tenders. In Design and
Build, the selection of tenderer must be carefully examined because the design
proposal of each contractor is different. In this case, it brings problems and difficulties
during the tender review process if compared to normal tender process. This may also
cause the delay of tendering process. However, this problem will not occur for basic
procurement method because only the bid and offer by different tenderer need to be
evaluate (Allan & Keith, 2007, p.229).
Other than that, the client’s ability to control the design is reduced. In
Design and Build, the contractor is in charge of the design and construction for a
project by following the brief in employer’s requirement, which means that the design
proposal of the design-build contractor may not be what the client want. In this case,
if there are any variation requested by the client they will need to pay more money.
However, under basic procurement method, the client involves more and have full
control to the design process carry out by his consultant team. They are allowed to
make variation at any time until it is satisfied and meet their requirements (Edward &
Richard, 2012).
Last but not least, in Design and Build the client may get a lower quality of
end product. In Design and Build, the specifications are opened for contractor to
propose based on the basic employer’s requirement. In this case, the contractor may
take this as their advantages and lower the quality of workmanship and material as
much as possible to achieve the basic employer’s requirement and gain maximum
profit. With this approach, the quality of end product may not be the expectation of
client. However, in basic procurement method, the employer’s requirement is fully
control by client and they are allowed to change it any time during the design phase,
which means that the contractor need to follow exactly the specification stated in
tender document to construct the work (Simon Millman, 2013).
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6.0 CRITICAL ANALYSIS
For the project that will be working on, it is a 20 storey high condominium. From
the procurement that has been mentioned before these are the Traditional
Procurement Method and Construction Management Procurement Method. Both
methods have their advantages and disadvantages which have also been stated
above.
Depending on the situation, such as the client have a time constrain on the
project, the traditional procurement method will not be used for this situation as
traditional method will take a longer time of completion. The reason for the longer time
frame is due to the design process needed to be completed before calling for tender.
For this scenario, Construction Management Procurement Method will be chosen as
the project can be completed at a shorter time frame.
For another situation will be that the client would like to have the project to be
done within the budget or the cost for the project can be control. In this situation,
the traditional procurement method will be chosen as this method will give advantage
in cost control such as determine the cost of the construction more accurately. The
reason for this is because the tender will be based on the completed design and the
risk of using this method will also be lower which will help in controlling the cost of the
project.
If the client wants the project to finish fast and also controlling the cost of
the project, it would be best to first analyse which will cost more. In traditional
procurement method, normally extended work time would not cost too much as some
client would request the employee that is in charge of the site to accelerate the work
even though it would cause the project to be delayed. In Construction Management,
as for cost control, it will be hard to foresee what kind of situation might occur during
the course of the project duration. This could lead to situation where the unforeseen
happening could cost more than extended work time. Therefore, traditional
procurement method would be better in this situation.
In conclusion, the Traditional Procurement Method would be more suitable in
this project as the cost of the project can be controlled.
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7.0 Clear Examples
7.1 Traditional Procurement Method
The purpose of our project is to build a 20 storey condominium, assume that
there is a problem from the drawing of the design and the contractor wants to
communicate and get information from consultant team.
For traditional method, the contractor will only be appointed after the design is
done. Therefore, contractor is unable to plan for the project and input his design. Thus,
the contractor need to communicate with the client first, then only the client will
communicate with the consultant since there is no contractual relationship between
the consultant team and contractor team. Besides, the changes of the design need to
be approved by the client first.
7.2 Construction Management Procurement Method
The sequence above clearly shows that design stage is in parallel with
construction.
For our proposed project which is a 20 storey condominium, we assume that
the design for doors and ironmongeries is ready and we would like to appoint work
package contractor for this element through normal tendering process.
The first step is to make sure all the doors in the 20 storey of condominium are
able to be determined. Then, Construction Management will seek confirmation from
the Architect whether the particular doors and ironmongeries elements are already
defined. Also, coordination with other consultant team members is a must.
Construction Manager at this stage will provide his expertise in advising on “buildability”
aspect of the doors and ironmongeries design.
Brief Design
Construction
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When everything is on track, all the relevant information for this particular door
and ironmongeries package shall be compiled by consultant QS together with the
respective designers. Then, it is ready to be called for tender.
Therefore, it is not necessary to wait for all works packages to be finalised then
only call for tender. Design and construction must always be concurrent and works
continue trade by trade until completion to shorten the overall development duration
time significantly.
7.3 Design & Build
By applying Design& Build procurement method into a 20 storey condominium,
the contractor is able to contribute its own design either by the help of his own design
team or the help from developer’s novated consultant team. Unlike other procurement
method, developer only requires to deal with contractor if any problem occurs during
the works. As the drawings provided by the contractor can be said to be completed
and free from any errors, thus the risk of contractor cannot carry out the construction
works due to complexity of design can be minimized. However, this procurement
method is mostly unsuitable for a large scale project such as 20 storey condominium
as it will take a longer time for the contractor to produce his design. This will result in
delay in construction works and leads to liquidated damages. Other than that,
contractor may take the opportunity to propose the lowest grade of material to gain
maximum profit for themselves. The employer may also be required to pay more if
they ask the contractor to take on an unreasonably high level of risk due to a lack of
design clarity at the point of tendering, thus resulting in high contract sum.
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8.0 Conclusion
In conclusion, the most suitable procurement method for constructing a 20
storey condominium is traditional procurement method. Although this method takes a
lot of time in initial stage, client able to determine the actual contract sum of the project.
Even though it might take a longer time frame, client’s financial is capped. Other than
that, traditional procurement method is constructed based on the completed design,
thus there is less variation in the designs. Client able to remain his initial design and
also prevent the cost from increasing due to change in designs. On the other hand,
the final cost of the project only can be determined until the last signed work packages
in construction management procurement. Also, the designs also may vary in this
procurement. Therefore, the procurement method we recommend for this project is
traditional procurement method.
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9.0 References
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Mass.
Denise Bower(2003), Management of Procurement, Thomas Telford, London.
Frank Harris, Ronald Mc Caffer(2001), Modern Construction Managamenet, Blackwell
Science, Malden.
Kwakye, A.A. (1991), Fast tracking Construction, Occasional Paper No.46, UK, CIOB.
Richard Fellows(1983), Construction management in practice, Addison Wesley Longmam,
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