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2.6 Select a 2.6.

2 Advice
How procurement is decided and
procurement managed can make or break a project
route and it is vital to take proper advice. It 83
cannot be treated as an afterthought as
2.6.1 Procurement routes it affects every aspect of the project.
Procurement is the purchasing of Advice should be taken from someone

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products, work and services. It is more with experience of having delivered
important than its unglamorous name projects, able to take a balanced view
suggests and plays a major part in any of the clients needs in relation to
project. The procurement route quality, time, cost and risk.
determines many aspects of the clients
relationship with the design and
construction teams. Fig 17: Get help to choose a
procurement route
Procurement processes are usually
subject to a variety of controls, including
internal standing orders, external audit,
review by funding partners and, for
publicly funded projects, statutory
regulations such as the European Union
procurement directives. Government
recommends that central government
clients use integrated processes 33 such 77
as design and build, prime contracting and Glossary
various forms of public private partnership
(PPP), including PFI, to benefit from the
input of all the essential skills at the
earliest relevant moment. However other
routes, such as traditional ones, may be
used if they can be shown to offer better
value for money. If such routes are used,
attempts should be made to maximise
integration and allow contractor/specialist
input to design such as early contractor
involvement through a two-stage
traditional approach.

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Box 32: Questions to help select the right procurement route

84 Project balance quality, time, Project management


cost, risk Who should manage the project?
Is the project quality to be ambitious How involved does the client want
and inspirational or good but or need to be?
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not outstanding? Should any aspect be managed


How much cost certainty is needed directly by the client?
and at what stage? What skills and strengths
How important are time constraints, are available?
what is the urgency? If the project is managed outside the
What is the relative importance of client organisation, should it be by the
quality, time and cost? Is one more contractor, an independent project
important than the others? manager, a design professional, a
Will any of these aspects jeopardise financial expert, another specialist,
the project if requirements are or a combination of these?
not met?
How technically complex is the Risk management
construction? What is the degree of uncertainty to
What are the unknowns, where are be expected in funding, in the clients
the big risks? brief, inherent in the site, because of
How much flexibility to make changes innovation, etc? Will some decisions
at various stages is required? need to be deferred as long
Who is best able to control the risk? as possible?
Are potential changes foreseeable?
3 Selection and competition 7 Who is best able to control the risks
Work sheets 2-5 Should there be a design competition? client, contractor, others?
Should any design competition be Is the client able or willing to
open and widely advertised, or invited carry risks?
from known or recommended people? How should carrying risks be
Does the project fall within OJEU compensated?
thresholds for selection of
consultants, contractors or both?
Is funding tied to the procurement
method?
Do any public/private finance
issues apply?

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2.6.3 A procurement plan Projects with 50% or more public funding
Procurement must be planned as part of and above a set cost threshold must follow
the project. This will help ensure that the precisely the European Union (EU)
schedule allows the project to meet procedures and timetable which can 85
regulations and obligations. Basic decisions lead to a lengthy process. 3 7
should be summarised as a procurement Work sheet 3
plan, which defines the main areas of client 2.6.4 Four approaches

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responsibility. The client adviser can help All clients, even those who are not from
put this plan together. The procurement large public sector organisations, need
plan may be part of the plan for carrying out to understand procurement options 3. 7
the whole project, sometimes called a Different routes share responsibilities, risks Work sheet 1 contains tabular
Project Execution Plan (PEP). and rewards in different ways. They vary in: information about the ways
different procurement routes
There is a great deal of jargon in this topic how participants (designers, builders may be suitable for different
but in essence the decisions that need to be and sometimes funders and facility projects. These tables should
made are fairly clear. 33 managers) are chosen be used when the best way
forward is being discussed
A procurement plan must cover: their relationship to the client or with advisers. Work sheet 4
end-user describes the PPP/PFI
who the client is, who will represent procurement route.
them as project sponsor the participants and client 77
responsibilities OGC documents, in the
how and when procurement routes Gateway Review Process and
for services, works and supplies will the type and extent of risks the the Achieving Excellence in
be chosen participants and clients choose to take Construction guidance suite
or accept (Successful Delivery Toolkit,
how and by whom procurement www.ogc.gov.uk), contain
processes will be managed how much overlap there is between detailed advice, give references
design and construction and describe governments
how and when the project delivery team preferred procurement routes.
architects contractors and others who signs the contracts 3 Clamp, H and Cox, S (2003)
will be appointed Which contract?: choosing the
who manages the final building appropriate building contract,
a provisional timetable or programme, RIBA Enterprises, London, gives
including key stages and dates the ownership of the project an introduction to different
in the process procurement routes.
There are four broad ways in which 7
how and when reviews and monitoring arrangements are made between clients, Section 2.7
will be carried out designers and building contractors,
although these are constantly evolving.
how and by whom the new The four categories each have several
building/facility will be managed variants but in simple terms they are:

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3 Fig 18: Four types of procurement 7 Main legal relationship
Work sheet 4 The relationship between the players
client, designer and construction teams Communication
86 vary for the different approaches

Traditional relationships designer-led


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projects in which design and construction teams


are procured separately, one after another, and
managed independently. A worked-out design
is the basis for construction cost.

DESIGN TEAM

SERVICE &
BUILDING
MANAGEMENT
CLIENT

CONTRACTOR &
SUBCONTRACTORS

Managed forms of construction


design procured separately from construction,
the management of which is contracted for a
separate fee. One version is illustrated but
there are many variants.

DESIGN TEAM

SERVICE &
BUILDING
MANAGEMENT
CLIENT CONSTRUCTION
MANAGEMENT

CONTRACTOR

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Design and Build, including Prime
Contracting the builder is responsible for
design and construction. In Prime Contracting
a relationship is developed between the 87
contractor and the entire supply chain.

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SERVICE &
BUILDING
MANAGEMENT DESIGN TEAM & OTHER
CLIENT CONTRACTOR MEMBERS OF THE
SUPPLY CHAIN

Design, Build, Finance and Operate DBFO


(PFI is an example of this) a Special Purpose
Vehicle (SPV) is created to undertake all aspects
of the project including operating it for a period
(say 25 years), after which it may revert to the
client depending on the contract for the specific
project. Instead of spending capital, the client
payments are made from revenue budget.

DESIGN TEAM FACILITIES


MANAGEMENT

SERVICE &
BUILDING
MANAGEMENT SPV
CLIENT

CONTRACTOR FINANCE

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88
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CLIENT DESIGNER CONTRACTOR

Fig 19: An integrated process


This requires all parties to work together for
successful project outcomes, including quality

2.6.5 An integrated team explored, or a less experienced but


The terminology surrounding procurement innovative designer can be teamed
routes has multiplied and evolved over up from the start with an experienced
the last few years. Government initiatives, contractor. All clients spending public
described in reports such as Constructing money are encouraged to work with their
the Team (The Latham Report), design and construction teams in a
Rethinking Construction (The Egan positive and fair-minded spirit, seeking
33 Report) and Accelerating Change have mutual benefit from projects 77. This
Work sheet 4 strongly emphasised the need to get away approach is described as integrated.
from the blame culture and adversarial
approach previously prevalent in the An integrated approach can apply in
3 construction industry. 7 any procurement route. Where team
Section 6.1 members initially work separately, for
Government and the construction example in some versions of traditional
industry are supporting routes that procurement, this may result in a
emphasise early collaboration between designer and contractor working in
the design and construction teams to sequence rather than in parallel. If this
achieve a design that can be built easily is the case, greater efforts are needed
and economically, where the structure, to achieve integration. This is easier,
services and spaces are in harmony, the for example, in a two-stage procurement
details carefully considered and specialist route that can bring design and
contractors give early input. This construction skills together early,
approach is valuable when, for example, which will help to achieve a degree
new architectural ideas are being of integration.

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2.6.6 Public Private Partnership This method enjoys strong government
(PPP) support. The advantage of the PFI
The procurement methods that place route, especially for major (over 20M)
importance on working in partnership and complex capital projects with 89
with private finance and in integrated significant ongoing maintenance or
teams have been practised for a management requirements, is that
decade or more, and some good the team that will be responsible

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practice is emerging about how to get for long-term management and
good design in, for example, a PFI maintenance of the facility is often
project 33. Variations of specific ways included from the outset, which 77
PPP is used are being developed, for transfers this risk to the supplier. This see HM Treasury
example in the primary care and health provides a powerful incentive for the PFI:meeting the investment
sectors. Prime contractor relationships design/construct team to provide a challenge, July 2003
are being used on Design Build well designed building that is easy
Finance and Operate (DBFO) rolling and efficient to maintain and manage,
programmes so that many smaller built using materials and techniques
projects may be undertaken by a that will stand the test of time, and
team led by the prime contractor, but that offers good value for money
not all are defined or let on day one. throughout its life in use.
However the lessons for tendering,
and how these can be used to help However you will only get what you
a client achieve good design, are ask for, so clients must take great
similar in all types. 33 care to express their output 77
requirements carefully and, to Work sheet 4
PFI projects often give private financial be achieved, high quality design
partners responsibility to design, build must be explicitly requested.
and manage and/or operate the facility
for many years usually 25 beyond
initial construction, after which
management and operation may be
taken over by the client depending on
the contract with the SPV. These are
complex arrangements, designed to
introduce finance and management
approaches from the private sector
into public projects, and require
extremely careful definition of the
required result (output specification),
including the importance of all aspects
of design quality. This needs to be
built into the legal contracts between
client and supplier.

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90
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28

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2.6.7 Choosing a Initiative (PFI). Reasons why projects
procurement route have failed in the past have been
The procurement route should be chosen considered by both the government,
so that risk always resides with whoever through the OGC, and by the 91
is best able to bear it. It should aim to: construction industry. Rethinking
Construction, Accelerating Change
make appropriate trade-offs between and the Achieving Excellence

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quality, time and cost, without initiative, all emphasise the need for
compromising quality processes where the design and
construction teams work together as
get best value through the right type an integrated team to deliver best
and level of competition value for the client.

share risk in a suitable way between Points to consider and discuss


contractors, designers and the client with advisers:

provide suitable rewards for small projects can and should use
acceptance of risk simpler methods than larger ones

provide for innovation where needed when time and cost certainty are
required at the outset design and
Expert advice is needed from someone build may be used to achieve this
familiar with the features, benefits and ways must be sought to protect
problems of the different procurement design quality as the design evolves
routes, to help choose the right one for
the project. A workshop, to consider all is the project sufficiently advanced
the options available and the pros and and the client sufficiently
cons of each, is a good way to proceed. experienced for an effective and
High quality cannot be taken for granted complete output specification to be
in any procurement route and the client created as would be needed for
must emphasise the need for it all the PFI projects?
way through the process. Before starting
on a building project clients, particularly in projects with many unknowns at
first-timers, may have in mind a the outset, the risk is likely to be
traditional approach, which may distributed differently from those
or may not be suitable or in line with more certainty
with best practice.
projects that are part of larger
For projects with major government schemes may have to follow the
funding, three integrated approaches are procurement route chosen for the
currently preferred Design and Build, overall project
Prime Contracting and a Private Finance

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