CSM80013 Procurement, Tendering and Contracts - Session 3

CSM80013 Procurement, Tendering, and Contracts - Selected extract of Live Online Lecture Session in Week 3
(Semester 1 2022: SUT-Hawthorn)
CSM80013 Procurement, Tendering

and Contracts (Semester 1, 2022)
Ekambaram, Palaneeswaran
Office: ATC738
Tel: 92148526
Email: pekambaram@swin.edu.au
Procurement in production & project-based industries
Can you some similarities and differences of procurement in

construction industry and manufacturing industry?
This Photo by Unknown Author is licensed under CC BY-NC This Photo by Unknown Author is licensed under CC BY-ND
CSM80013 – Session 3, Semester 1, 2022 (E. Palaneeswaran)
© A/Prof Palaneeswaran Ekambaram (Tel: +61 3 92148526, Email: pekambaram@swin.edu.au; Office: ATC738);
School of Engineering, Swinburne University of Technology, Hawthorn, Victoria 3122, Australia 1
Procurement in project-based industries

Procurement is one of the key processes in project-based industries by
which a procuring entity procures specific products or services from
suitable supplying source(s) (e.g. supplier/ vendor).
Procuring Materials
Procuring Equipment/ Machineries
Procuring Project-delivery teams
– Contractors/ sub-contractors for project-delivery
– Consultants for project-delivery
Can you identify some examples?
Different functions in project delivery
Financing
Owning
Designing
Constructing
Maintaining
Any other ?
Parties involved in project-based industries – e.g. construction
Clients/ Owners
Consultants (e.g. Architectural, Structural, Geotechnical, Building Services)
Contractors
Subcontractors, Suppliers, Vendors
Users!
Others ?
Stakeholders at different stages in a typical building project
Pre-design Design Construction Occupancy
Clients/ owners Contractors End-users

Architects Facility Managers
End-users Subcontractors
Designers Contractors
Planners Managers (CM/PM)
Specialist Subcontractors
Architects Architects
consultants Suppliers
Designers Designers
Clients Architects
Financiers Specialist
Others ? Designers
Others ? consultants
Suppliers Specialist
Clients consultants
Others ? Property consultants
Clients
Others ?
Project delivery in a typical building construction project

Design delivery
Construction delivery
Figure Reference: Blyth, A. and Worthington, J. (2001) Managing the Brief for Better Design, Spon Press, London.

7
Examples of procurement/ project delivery structures

Financier Financier
Client/ Owner Client
Designer Designer
Builder Builder
Operator Operator &
Maintainer
Maintainer
User User
Examples of procurement/ project delivery structures (contd.)
Client/ Owner
Financier
Designer
Builder
Operator (O&M)
User
Financier Financier Financier

Client/ Owner Client/ Owner Client/ Owner
Designer
Designer Designer
Builder
Builder Builder
Maintainer Operator (O & M)
Operator (O & M)
Operator
User
User User
Client/ Owner
Designer
Financier Builder
Operator
User
Arrays of structures for Procurement/ Project Delivery (contd.)
Financier
Client
Designer
Builder
Operator (O & M)
User
Different Procurement/ Project Delivery routes

Design-Bid-Build types (Traditional/ DBB)
– Traditional Design-Bid-Build
– Accelerated/ Fast-tracked Design-Bid-Build
Design-Build types (DB)
– Variations of simple Design-Build arrangements
• e.g. Novated Design-Build
– Variations of extended Design-Build
• e.g. Design-Build-Maintain, Design-Build-Operate
– Design-Build types with financing arrangements
• e.g.Build-Operate-Transfer, Build-Operate-Own, Build-Lease-Transfer
Management types
– Management Contracting
– Construction Management
Traditional Design-Bid-Build (DBB)
Client & advisors

e.g. planning,
commercial
Needs Planning Design Bid Construction Occupancy
Design Team
Construction team
Traditional Design-Bid-Build Procurement
Traditional Design-Bid-Build (DBB) – contd.
Traditional DBB versus Fast-Tracked DBB
Traditional Needs Planning Design Bid Construction Occupancy

DBB
Fast-Tracked/
Needs Planning
Accelerated
DBB Design
Bid Construction
Occupancy
Fast-Tracking by Project Packaging for Accelerated Project Delivery

Traditional Needs Planning Design Bid Construction Occupancy
DBB
Needs Planning Design packages
Design Design Design

Construction packages
Fast-Tracked Bid Construction
with project
packaging Bid Construction
Bid Construction
Occupancy
Early occupancy
Traditional route – i.e. Design-Bid-Build
Client
Main
Consultants
Contractor
Others Engineer Architect Subcontractors Suppliers
e.g. e.g.
Sub-subcontractors
Quantity Surveyor Structural Engineer
Design-Build
Simple Needs Planning

Design-Build
Design
Construction
Occupancy
Design/Build
Team
RFP & Design-

Builder Selection
Design-Build Procurement – contd.
Simple Design-Build Arrangement
Reference: Palaneeswaran (2001) Contractor Selection Systems for Design-Build Projects
Design-Build variations (based on percentage of design completed)

Usually Best Value or Typically Low-Bid-Based
Qualifications-Based Procurement Procurement
Direct Design-Build
-10% to 10%
Design Criteria Design-Build
5% to 25%
Preliminary
Engineering
Design-Build
20% to 35%
Design Draw-Build
35% Design or Greater
-10% -5% 0% 5% 10% 15% 20% 25% 30% 35% 40% 45% 50% 55% 60% 65% 70%
Pre-Design
(Source: Design-Build Institute of America, 1999)
Design-Build variations (team composition)
Reference: Palaneeswaran (2001) Contractor Selection

Systems for Design-Build Projects
Design-Build variations (team composition)
Reference: Infrastructure Australia (2013) Efficiencies in Major Project Procurement – Volume 1
Management Contracting
Client
Main
Consultants (management)
Contractor
QS, Engineers, Trade

Architect
others contractors
Works
contractor
Subcontractors
Construction Manager as Agent
Client
Construction Main
Consultants Manager (as (management)
agent) Contractor
QS, Engineers, Trade

Architect
others contractors
Works
contractor
Subcontractors
Construction Manager as Agent (CM as Agent)
Needs Planning
Design
Construction
Design Team
Occupancy
CM as Agent
Contractors
Typical CM As Agent Procurement Process
“Construction Manager as Agent” Procurement – contd.
Construction Management (CM at-Risk)
Needs Planning
Design
Construction
Design Team
Occupancy
CM At-Risk
Typical CM At-Risk Process
Management Type – CM at-Risk
Client
Architect/ CM At-Risk Multiple

prime
Engineer (Construction
contractors
Manager)
Responsible for Design Responsible for Costs & Schedule
“Construction Manager at Risk” Procurement – contd.
Project Management Procurement
Client
Project Main
Consultants
Manager Contractor
Sub- Specialist Specialist

Subcontractors
consultants consultants contractors
Specialist/
Specialist sub-
subcontractors trade
consultants
subcontractors
Suppliers
“Project Management” Procurement
Factors considered in selecting a procurement strategy
Time requirements
Cost/ financial considerations
Quality considerations
Risks
Division of Responsibility
Certainty requirements
Flexibility aspects
(Additional) Value requirements
Any other?
Procurement strategy development
Figure Ref: Austroads and APCC (2014) Building and Construction Procurement Guide – Principles and Options
Procurement Strategy – Some examples from Australia
“Procurement strategy is a core project document that presents the outcome of a rigorous
procurement options analysis undertaken by the project owner to identify the
recommended delivery model and procurement method for a project, taking into account
the project’s individual characteristics, risks and circumstances.” (Austroads & APCC, 2014)
Common options for the delivery of infrastructure procurement:
– Traditional (e.g. construct only)
– Design and Construct (& related variants e.g. design-construction-maintain)
– Managed (e.g. directly managed, management contracting, construction management)
– Relational/ relationship based(e.g. Early Contractor Involvement, Alliance)
– Public Private Partnership
Some examples in Victoria based public sector projects

public-private partnerships (Partnerships Victoria projects)
alliance contracting
managing contractor model
construct only (lump sum or fixed price contract)
design and construct
design, construct and maintain
construction management.
Reference: Department of Treasury and Finance - Victoria Government (2007) Investment lifecycle guidelines – Procurement
Strategy Guideline
Procurement in International Projects
Can you identify some challenges/ threats related to procurement in

international projects?
Can you identify some notable opportunities as well?
Global Supply Chains for Procurement in Project-based Industries
This Photo by Unknown Author is licensed under CC BY-SA-NC
CSM80013 - Session 2, Semester 1, 2022 (E. Palaneeswaran)
Global supply chains
Can you identify some complexities (challenges) of global supply

chains?
Can you identify some uncertainties (risks) of global supply chains?
This Photo by Unknown Author is licensed under CC BY

A discussion agenda - Obsolescence
Can you briefly discuss your recommended procurement measures

for minimising and mitigating impacts of obsolescence
A discussion agenda for arrangements & governance
Novel Materials
Innovative Designs
New Technologies & Novel Solutions

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CSM80013 Procurement, Tendering, and Contracts - Selected extract of Live Online Lecture Session in Week 3

(Semester 1 2022: SUT-Hawthorn)

CSM80013 Procurement, Tendering

Procurement in production & project-based industries

Can you some similarities and differences of procurement in

CSM80013 – Session 3, Semester 1, 2022 (E. Palaneeswaran)

Procurement in project-based industries

CSM80013 – Session 3, Semester 1, 2022 (E. Palaneeswaran)

Different functions in project delivery

CSM80013 – Session 3, Semester 1, 2022 (E. Palaneeswaran)

Parties involved in project-based industries – e.g. construction

CSM80013 – Session 3, Semester 1, 2022 (E. Palaneeswaran)

Stakeholders at different stages in a typical building project

Pre-design Design Construction Occupancy

Clients/ owners Contractors End-users

CSM80013 – Session 3, Semester 1, 2022 (E. Palaneeswaran)

Project delivery in a typical building construction project

CSM80013 – Session 3, Semester 1, 2022 (E. Palaneeswaran)

Examples of procurement/ project delivery structures

CSM80013 – Session 3, Semester 1, 2022 (E. Palaneeswaran)

Examples of procurement/ project delivery structures (contd.)

CSM80013 – Session 3, Semester 1, 2022 (E. Palaneeswaran)

Examples of procurement/ project delivery structures (contd.)

Financier Financier Financier

CSM80013 – Session 3, Semester 1, 2022 (E. Palaneeswaran)

Examples of procurement/ project delivery structures (contd.)

CSM80013 – Session 3, Semester 1, 2022 (E. Palaneeswaran)

Arrays of structures for Procurement/ Project Delivery (contd.)

CSM80013 – Session 3, Semester 1, 2022 (E. Palaneeswaran)

Different Procurement/ Project Delivery routes

CSM80013 – Session 3, Semester 1, 2022 (E. Palaneeswaran)

Traditional Design-Bid-Build (DBB)

Client & advisors

Needs Planning Design Bid Construction Occupancy

Traditional Design-Bid-Build Procurement

CSM80013 – Session 3, Semester 1, 2022 (E. Palaneeswaran)

Traditional Design-Bid-Build (DBB) – contd.

CSM80013 – Session 3, Semester 1, 2022 (E. Palaneeswaran)

Traditional DBB versus Fast-Tracked DBB

Traditional Needs Planning Design Bid Construction Occupancy

CSM80013 – Session 3, Semester 1, 2022 (E. Palaneeswaran)

Fast-Tracking by Project Packaging for Accelerated Project Delivery

Needs Planning Design packages

Design Design Design

CSM80013 – Session 3, Semester 1, 2022 (E. Palaneeswaran)

Traditional route – i.e. Design-Bid-Build

Others Engineer Architect Subcontractors Suppliers

CSM80013 – Session 3, Semester 1, 2022 (E. Palaneeswaran)

Simple Needs Planning

RFP & Design-

CSM80013 – Session 3, Semester 1, 2022 (E. Palaneeswaran)

Design-Build Procurement – contd.

CSM80013 – Session 3, Semester 1, 2022 (E. Palaneeswaran)

Simple Design-Build Arrangement

Reference: Palaneeswaran (2001) Contractor Selection Systems for Design-Build Projects

CSM80013 – Session 3, Semester 1, 2022 (E. Palaneeswaran)

Design-Build variations (based on percentage of design completed)

Design Criteria Design-Build

CSM80013 – Session 3, Semester 1, 2022 (E. Palaneeswaran)

Design-Build variations (team composition)

Reference: Palaneeswaran (2001) Contractor Selection

CSM80013 – Session 3, Semester 1, 2022 (E. Palaneeswaran)

Design-Build variations (team composition)

Reference: Infrastructure Australia (2013) Efficiencies in Major Project Procurement – Volume 1