2

Risk & Procurement

management

Master of Science Purchasing, Logistics

and Suppy Chain Management

Student name: Isli Brahaj

SID: 1937724

Lecturer: Roger Garrini; Piotr Wojtasiuk; Hana Mosavie

Department of Strategy & Management

University of Bedfordshire
14th January 2022
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Table of Contents
1. Executive summary
2. Introduction
3. Procurement process stages
4. Procurement Methods and comparisons
5. Chosen Procurement Strategy
6. Form of contract
7. Contract breaches in construction
8. Conclusions
9. References
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Executive summary
A hypothetical construction procurement process of a new facility within the University of
Bedfordshire has been provided.
In this report, I will provide a critical analysis on tendering process, potential procurement
methods regarding design and construction, forms of collaboration and potential resolution of
contract breaches needed to consider.
Recommendations for the appropriate procurement route and contracting forms will be
supported by detailed reasons.

Introduction
University of Bedfordshire is known for its willingness to heavily invest in improving
campus facilities. In order to be ranked among the top 10 universities in the UK by 2030, a
new outstanding campus is planned to be constructed, offering improved research, innovation
and educational standards. Facilities included in the project plan include:

 Meeting rooms
 Laboratory accommodation
 External works
 State of the art lecture theatres
 Modern classroom and studio facility
 Office accommodation

Furthermore, in order to cover all the construction costs of the project, the university
allocated a budget of £40 million which will include construction and external works,
statutory and professional payments. The completion date of the new building is expected to
be by 1st of January 2027.

In order to construct the new facility, University needs to be know the procurement
procedures to successfully deliver the project. This report will analyze tender procurement
stages, methods, forms of collaboration and potential resolution of contract breaches they
need to consider.

Steps of procurement management (tendering)

 The procurement strategy specifies how the University will deal with its procurement
process. It will provide an overview of the steps that are required in the procurement and will
be used as the roadmap for the procurement activities.

1. Pre-tender Stage

During the pre-tender stage, the university will have an idea to develop and a consultant will
be employed to discuss more on this project. The consultant will be responsible for the
advices and management of the tender and contract so he can transfer the idea into drawing.
At the pre-tender stage, both the university and consultant will develop the scope, time of
completion and budget.
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Andi and Minato (2003) claims that this stage is the most important because it will initiate the
next steps. It is the first step for the tendering process in construction and if it fails, the
project will not complete.

2. Tender Advertisement Stage

Also knows as tender notice, during this stage the tender will be advertised and the basic
requirement that will appear are:

 Title of project ( New outstanding campus construction )

 Class of contractor
 Date and time, location (1st of June 2022, 10:00 , Luton)
 Fees for tendering documents (a symbolic fee)
 Location, date and time to submit tender documents (Luton 1st of February, 10:00)

3. Closing of Tender

As I explained earlier in the tender notice, the time and date of tender closing process will be
mentioned.
If within a specified date and time the contractors fail to submit the bids, they will be
considered as they refuse to bid for the tender process. During this time the tender validity
period is starting. Furthermore, if contractors are not interested anymore to participate in this
tender, they can withdraw back their tendering documents. During this stage, the consultants
will be assessing and evaluating each contractor offer. (Alderman & Ivory, 2007)

4. Tender Opening and Evaluation Process

It is time for the quantity surveyors to deal with the tender opening process. In order to
achieve a competitive process, the proposals evaluation should be taken objectively,
consistently and without favoring any contractor or supplier.

A set of criteria is going to be applied to the respective tenders in order to get evaluated and
the evaluation of each tender should be prepared as soon as possible after the opening of
tender. The quantity surveyor will prepare a report where the findings of the evaluation are
described and supported by tables and graphs. Finally, the quantity surveyor will decide in his
personal opinion, which tenderer is the most appropriate to execute the project.

5. Tender Award

On this particular stage, the evaluation team will review tenders received and make
suggestions which tenderer is the best value for money. All participants in the tender,
successful or unsuccessful will be notified once the work has been awarded.
The evaluation team issues the tender results to each tenderer once the contractor has been
awarded, which is in letter form. (Assaf and Al-Hejji, 2006)
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At the time that the university will accept the tender, it is binding on both parties, which
means that the awarded contractor has to provide the construction of the new facility
according to the agreed price and the university has to pay the specific amount specified in
the tender documents. Once the tender awarding is finished, the tendering process is already
completed.

Procurement Methods and comparisons

There are four Procurement Methods we can adapt to our case study:

Traditional Procurement
This method is the most used procurement strategy in the UK, and is known also as “design-
bid-build” method. The client set consultants to develop the design and contract
administration of the project. In this case, the contractor will not have any responsibility for
the design, but for building and delivering the project. In addition, due to the design must be
completed before the tender stage, the cost of construction can be determined with reasonable
certainty before the construction commences on site (Bresnen & Marshall, 2011).
Advantages of using traditional procurement:
 Price certainty for the client because design is completed before tendering.
 The client has control and influence directly to the design team so quality in design
can be assured.
 Contract variations can be kept at minimum because design can’t change during
construction.

Design and build Procurement

Cameron and Duff (2007) defined design and build as “ a procurement method where only
one contractor is responsible to the client for the design and construction of a project”. It
means that under this strategy, the risk and responsibility is taken by one contractor for the
design and building aspects. The construction can start before the design is completed, but
under the contractor risk.
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The main advantages of design and build procurement:

 There is only one company that the University has to deal with since they have full
responsibility for both design and construction

 The project cost is lower compared to other types of procurement methods.

 Since the construction can start before the design is completed, the project time can be
reduced.

Management Contracting
This procurement method involves engagement of a management contractor by the client to
manage the work packages subcontractors. This contractor has direct links with all the
subcontractors and takes the risk and responsibility for the construction. The works during
this strategy are done in form of work packages and guarantees competitive bids from
subcontractors for each work package. The Subcontractors may start working before the
design stage is completed, resulting in a reduced period of completion.
Eriksson and Khalfan (2007) suggest that Controlling strictly the work package budget is
essential to successfully deliver the project. Due to the nature of this strategy, the client has to
reimburse the cost of work packages to the management contractor who is going to pay the
subcontractors. It means that management contractor has to be carefully selected and make
sure that the management fee is reasonable.
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Construction Management
Construction management is another procurement strategy where the client does not assign
risks and responsibilities to only one contractor. The University will have to employ a design
team and a construction manager just to manage the activities in relation to design and
construction. Compared to management contracting, in this case, subcontractors for each
work package directly have contractual links with the client and receive payment directly.

Laedre and Klakegg (2006) state that the employed construction manager will only provide
professional expertise in construction, but will not guarantee financial risks because there will
be no contractual link with the design or work package contractors. Therefore, by choosing
this procurement strategy, the client has to be involved regularly through the design and
construction stages and take actions based on the construction manager recommendations.
We do not suggest this method of procurement to inexperienced clients. Complex projects
where the client is looking for deep involvement regarding high degree of design are
recommended to follow this route.

There are similar advantages with the management contracting, so I will not discuss more in
this section but please refer to the previous section if necessary.
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Procurement strategy

The most appropriate procurement system can be selected by assessing and setting the
priorities of the project objectives regarding time, quality, cost and the university’s attitude to
risk.

After we critically analyzed all possible procurement methods used in construction industry,
the Management Contracting strategy is recommended to be applied in our new campus
construction. Below I am explaining the reasons that lead us to this decision :

Cost strategy

Regarding to costs, the Management Contracting may not be the most appropriate method
compared to Traditional or Design and Build, but it does not mean that the client has less
control over costs as firm management can be applied to this aspect of the project. Since there
is competition between contractors to get the packages of work, the client can observe the
costs directly and modify work packages in the future in order to cover costs overruns.

In addition, based on their competency and experience, the Management Contractor can give
advices and contribution during the design process to make sure that the project is building
within budget.

Time strategy

A key requirement regarding the project is completion on time. The new facility has to be
finished on 1st of January 2027 and Management Contracting can make possible to meet the
deadline. It provides overlapping of construction and design stages due to fast progress of this
procurement method and allows early start of works on site which results in saving time.

To make sure that the construction will be completed on time, we need to ensure that the
information from design team is communicated on time to Management contractor and keep
them updated. This strategy will avoid any delays during the package works.

Based on the professional expertise of the Management contractor will help in the “fast track”
procurement to be taken efficiently. A contractor that is highly experienced working on this
procurement route has to be selected in order to manage the works effectively. (Reichstein &
Gann, 2005)

Quality strategy
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One key element of the construction must be aesthetic standards and high quality of building,
which the Management Contracting would ensure because this procurement method allows
the client to be regularly involved in the design process. Furthermore, all the specifications
and drawings developed by design team will be detailed in the contract between Management
Contractor and the Client so that design expectations of the client are explained precisely to
make sure requirements will be met.

Form of Contract
A contract is defined by Swan & Khalfan (2007) as a formalized relationship between the
contracting parties in which the rights and obligations are accepted and the balance of risk
between the parties established. Furthermore, the contract also demonstrate how
administrative procedures and the notices are to be managed and mechanisms to deal with
contract payments, compensation, delays or dispute.

There are different type of contracts used in construction industry but by far the Joing
Contracts Tribunal is the most popular contract. The JCT Contract contains:

 Management Building Contract

 Management Work Contract / Employer Agreement
 Management Work Contract Tender & Agreement
 Management Works Contract Conditions

Under this contract, the management contractor receives a management fee and the works
contract will be let by different packages when the design of the packages are created. It
means that the management contractor will be responsible for the management of the work
package contractors.

Furthermore, the contract requires the management contractor to cooperate with architects or
engineers during the design stage. Additionally, the management contractor must prepare the
required construction programs for implementing the project. The contract specifies that
maintaining and regularly updating the programme is the contractor’s duty.

Construction Contract Breaches

Thompson and Anderson (1998) suggest that contract breaches should be carefully
considered and studied. Each party should collect all important information and read the
contract again. The majority of contracts have the section that states what happens if
contractor or client breaches the contract. It is recommended to firstly consider the alternative
dispute resolutions (ADR) before thinking of suing the other party. ADR is a negotiation type
process which involves mediation, conciliation, adjudication and arbitration.
Legal actions should always be avoided since going to court will be a time consuming and
usually very expensive process. Furthermore, the results can be unpredictable, even if your
party thinks that you are right.

Disagreement between parties can happen for a wide range of reasons, but the most common
causes of construction contract breaches include the following:

 Abandonment of a construction project: 

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If the contractor abandon the project before its completion, the University has the right to
require recovering of funds paid for the rest of incomplete work or the contractor has to
return and finish the construction. It is recommended to use negotiations between parties,
and if there is no agreement, next stage might be Mediation, where we ask another third
party to facilitate. The constructor will be notified with a letter letting them know that
they are breaching the contract and your party will require dispute which may result in
litigation.

 Delays in construction.

Usually construction works take more time than it is calculated. The client must grant
extension of time if the reason for delay does comprise a Relevant Event and the date of
completion is likely to get delayed. The university must notify the contractor the decision
within 12 weeks and state the given time extension. The goal is to allow a fair and
reasonable time extension to complete the work. If the contractor or subcontractor still
does not perform work after the extensions of time date, this case can possibly result in
litigation. (Yasamis & Mohammadi, 2002)

 Construction defects / lower quality

In the contract, it is clearly explained what the project expectations are according to
the standards and quality of work. Both parties involved in the construction contract
has to know that the defects regime is subject to rights and obligations. The university
will notify the contractor with a registered letter mentioning that their actions create a
breach of contract, and that you will dispute and seek damages if they do not fix their
work. The client, through negotiations, will require other party to return to work and
repair the defects. When the University feels that the contractor is not willing to
provide a satisfactory work, this can result in a lawsuit against the contractor or
subcontractors.

 Conflict over nonpayment: 

There are also cases when the client fails to pay the contractor as promised, even when
contractor has completed a satisfactory work. Reasons for non payment can be different,
but the contractor in this case may undertake legal actions for not receiving the payments
mentioned in the contract. Mechanics liens is a popular way the contractors use to force
the property owner to pay, or it will result in the contractor placing a lien on the property.
The university may require extension of time through negotiations if this happens and pay
the contractor within a specified period of time as agreed.

Conclusions
Tendering procurement process for the new campus construction case was described and
critically analyzed. Different types of contractor management routes are identified and we
decided that the Management Contracting is the most suitable strategy for this project. The
university will be allowed to design the new outstanding facility according to our
requirements, whereas the contractor will manage the other construction work packages.
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Furthermore, by adopting this strategy, the price certainty will be achieved by closely
monitoring the costs for each work so we can finish the construction within the budget of £40
million while ensuring the high quality standard are met.

Contract breaches remedies include adjudication, conciliation, mediation, arbitration and if

none of them works-litigation. Finding the common language through negotiation and
compromise is much cheaper and is always highly suggested. If it fails, then we may need to
take further steps. Litigation is extremely expensive and is recommended to be considered as
the last possible choice.

REFERENCES
Alderman, N. & Ivory, C. (2007) 'Partnering in Major Contracts: Paradox and Metaphor'.
International Journal of Project Management, 25 (4), 386-393.

Andi, S. & Minato, T. (2003) 'Design Documents Quality in the Japanese Construction Industry:
Factors Influencing and Impacts on Construction Process'. International Journal of Project
Management, 21 (7), 537-546.

Assaf, S. & Al-Hejji, S. (2006) 'Causes of Delay in Large Construction Projects'. International
Journal of Project Management, 24 (4), 349-357.

Bresnen, M. & Marshall, N. (2011) 'Building Partnerships: Case Studies of Client- Contractor
Collaboration in the UK Construction Industry'. Construction Management and Economics, 18 (7),
819-832.

Cameron, I. & Duff, R. (2007) 'Use of Performance Measurement and Goal Setting to Improve
Construction Managers' Focus on Health and Safety'. Construction Management and Economics, 25
(8), 869-881.

Eriksson, P. E. & Khalfan, M. (2007) 'The influence of partnering and procurement on subcontractor
involvement and innovation'. Facilities, 25 (5/6), 203- 214.

Laedre, O. & Klakegg, O. (2006) 'Procurement Routes in Public Building and Construction Projects'.
Journal of Construction Engineering and Management, 132 (7), 689-696.

Reichstein, T. & Gann, D. (2005) 'Last Among Equals: A Comparison of Innovation in Construction,
Services and Manufacturing in the UK'. Construction Management and Economics, 23, 631-644.

Swan, W. & Khalfan, M. (2007) 'Mutual Objective Setting for Partnering Projects in the Public
Sector'. Engineering, Construction and Architectural Management, 14 (2), 119-130.
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Thompson, I. & Anderson, L. (1998) 'Contracting Strategies for the Project Environment'. European
Journal of Purchasing & Supply Management, 4 (1), 31-41.

Yasamis, F. & Mohammadi, J. (2002) 'Assessing Contractor Quality Performance'. Construction

Management and Economics, 20 (3), 211-223.