PROFESSIONAL PRACTICE

Lecture 2
Procurement Methods in
Construction Project
Dr. Wahyudi P. Utama
Prodi Teknik Ekonomi Konstruksi
Universitas Bung Hatta
Outline
• Introduction
• Definition
• Terms
• Choosing procurement methods
• Procurement methods
• Comparison
• Task
 Introduction
• Construction projects involve processes which are
complex and dynamic
• Construction projects involve a number of
stakeholders and discrete business individuals
• Construction industry to be effective, projects must
be completed on time, on budget and on agreed
quality
• Fulfilment of these primary project objectives is the
main criteria for a successful project
• Using effective and efficient procurement methods
are prerequisites for optimizing project performance
 Definition
• Procurement refers to the process of obtaining a product or
service.
• Procurement is generally seen as the process of obtaining
goods and services for a stated task, in return for money.
• Procurement methods are referred to as a structured
process or procedural method used by owners to acquire
construction products and services (Oladinrin et al. 2013).
• Procurement is a term which describes the activities
undertaken by a client or employer who is seeking to bring
about the construction or refurbishment of a building (JCT).
 Definition
ü In the context of construction, procurement is the
process, led by the construction project manager, of
acquiring professional expertise.
ü The purpose of procurement is to design and construct
the proposed project, and covers the acquisition of
relevant expertise from professional construction
consultants, main contractors, sub-contractors,
manufacturers and suppliers.
ü It is normal for this procurement process to be
crystallised into formal contractual arrangements.
 Definition
ü In order to successfully deliver a construction project
for the client, the construction project manager will
need to enlist the support of a number of design,
costing and construction professionals and
organisations.
ü How these professionals and organisations operate,
when they are appointed, and what they actually
contribute to a project and when they carry this work
out, is reflected in the chosen procurement strategy
selected.
 Terms
ü Various terms have been used for the term
“procurement method”.
1. Project delivery methods,
2. Procurement systems,
3. Procurement strategy,
4. Procurement routes,
5. Project approach,
6. Contractual arrangement.
 Choosing
Procurement
ü There are several different routes a company can take
when it comes to strategic procurement in the Methods
construction sector.
ü When selecting a route, the long-term objectives of the
client’s business plan must be carefully considered.
ü Key factors that will influence procurement include:
a) Speed
b) Cost
c) Quality
d) Risks and opportunities
e) Budget and financing
f) Specific constraints on the project
Principal procurement methods Procurement
Procurement Methods
method
Traditional Alternative
Design and Build
Construction
management
Management
contracting
Integrated /
Partnering
1. Traditional Methods
ü The traditional procurement method is that procurement
method which offers the clients three separate sequential
tasks of design, bid, and build (Oladinrin et al. 2013).
ü This method has been in existence ever since the end of
the 18th century (Mbanjwa, 2003). For this method, the
client is leading the project.
ü Also, the client is in contract with two entities, namely the
design consultant and the contractor.
ü The client relies on the design consultant who may be
an architect or consulting engineer to carry out the
design work and also supervise the construction (Thwala
and Mathonsi, 2012).
ü The design consultant prepares the design and contract
documents for the project after which, the main
contractor is then procured by invitation of bids based on
the detailed design documents prepared by the client
and design consultant (Eriksson and Westerberg, 2011).
ü The main contractor can be appointed through one of these
three tendering methods – open, selective and negotiated
tendering (Thwala and Mathonsi, 2012).
 Traditional Methods
ü The traditional procurement method is also sometimes
known as design-bid-build.
ü Responsibility of a contractor is limited only to build.
ü All design works and management of contract are carried
out by consultant or engineer.
ü Finance and operation on project shall be controlled by
client.
ü This method of procurement recommended for complex
and comparatively huge project.
2. Design and Build Methods
ü The DB procurement method is a procurement method where the
two sequential phases of design and build are recognised as a single
task.
ü This method gives the client a single point of contact in which
the client is in contract with only one entity, namely the main
contractor (Grobler and Pretorius, 2002).
ü In this method of procurement, the main contractor is responsible for
both the design and construction of the project and all the
phases of project from conception through design and
construction are handled by the main contractor (Oladinrin et al.
2013).
ü There are three variants of the DB procurement method – direct,
develop and construct, and competitive (Mbanjwa, 2003).
3. Management Contracting
ü The works will be constructed by a number of different
contractors, all of whom are hired and managed by a
management contractor; who is usually appointed on the
basis of a fixed fee which will usually be paid a fee in the form
of a percentage.
ü This method of procurement system is completely different
from traditional method and design & builds method. In
addition to client, consultant and contractor, specialized
contractors become as participant.
ü Contractor acts as a manager for project whereas specialized
contractors undertake real build aspect on their specialized
field. Finance and operation carried out by client.
ü This method will be chosen if there are possibilities to identify
projects in packages.
4. Construction Management
ü Construction management is a procurement method in which
the works are constructed by a number of different trade
contractors. These trade contractors are contracted to the
client but managed by a construction manager.
ü The construction manager acts as an agent for the client,
administering and co-ordinating the works contracts.
ü The construction manager is generally appointed early in the
design process so that their experience can be used to
improve the buildability and packaging of proposals as they
develop.
5. Integrated/Partnering
ü Integrated or Partnering methods of procurement also can
know as collaborative procurement.
ü It is a form of procurement suited to large projects and a long
term commitment between two or more organisations for the
purpose of achieving specific business objectives by
maximising the effectiveness of each participant’s resources.
(Jack W E Masterman, 2002)
ü Besides that, it also is about working as a team, regardless of
organisation or location to achieve and to meet a client’s
needs.
Comparison
Comparison
Home work
Setelah anda mempelajari topik Procurement ini, buatlah ringkasan terhadap metode pengadaan
tersebut.
Ringkasan dibuat dalam bentuk matrik / tabel seperti format di bawah ini.
Ringkasan Tradisional D&B Management Partnering
Contracting
Defenisi
Karakteristik (Hubungan antara pihak)
Kesesuaian dari sisi client
Kesesuaian dari sisi proyek
Keunggulan dari sisi biaya
Keunggulan dari segi waktu
Keunggulan dari segi kualitas
Fleksibilitas untuk mengubah spesifikasi