DIRE DAWA UNIVERSITY

INSTITUTE OF TECHNOLOGY
SCHOOL OF CIVIL ENGINEERING AND ARCHITECTURE
CONSTRUCTION TECHNOLOGY AND MANAGEMENT CHAIR
Review on How Procurement Processes Affects the
Cost and Quality Performance of a Project

Construction Procurement and Contract

Management

Prepared By: Group 1.

APR, 2022
2 INTRODUCTION

• Project Procurement Management is the process necessary to purchase or

acquire
• Product
• Service
• Works

• Processes include
• Plan procurement
• Conduct Procurement
• Control Procurement
• Close Procurement
 Introduction (cont’d)

“
 4
Statement of the Problem

• One of the major and initial processes inside the construction industry is
procurement. Hence, investigations of a wide range of procurement
procedures and their effects on different aspects of project cost and quality
performance are crucial to increase the understanding of how chosen
procurement procedures affect project performance.
 5 OBJECTIVES

General Objective
• Analyze the effect of procurement processes on project cost and quality of construction
project

Specific Objectives
•Identifying major processes of procurement
•Examine the effects of each process in terms of cost and quality performance of a
project
6 METHODOLOGY

Conceptual Framework  Sources of Data Gathering

Independent Variable  Secondary Data Resource
 Journals
Procurement
preparation
Dependent Variable  Handbooks
 Proclamations
Project cost and
Tendering
quality performance

Tender
evaluation
7 PROCUREMENT PROCESSES

• Procurement process is successive stages in the

procurement cycle, including planning, choice of
procedures, measures to solicit offers from tenderers,
examination and evaluation of those offers, award of
contract and contract management.
8 MAJOR PROCESS 1

Procuremen
• Planning and
t Design
Preparation • Invitation to Bid
Stage
• Bid Qualification
9 PLANNING AND DESIGN

Project Design
 The design stage is very important for many aspects of project performance, such as
life cycle costs, project costs, and schedule.
 Adequacy of plans and specifications and a design with high constructability have
been identified to improve overall project performance.
 In order to get quality construction, quality design is essential. If more change
orders are issued during the construction phase. The failure to find mistakes during
the bidding period of the contract will result in change orders during construction
and will contribute to an increase in the duration as well as the cost of the project
(Pramen P. Shrestha, 2012).
10 CONT’D

 Case Study
 According to (Hsieh, 2004), reviewed 90 metropolitan public work
projects, completed in Taipei, Taiwan including 40 BC, 14 RC, 14 Bridge
Constructions, 12 flood control construction, and 10 subway tunnel
constructions.
• The cause of change orders was mainly faulted in planning and design
proportion of 23.17% with respect to the total change orders.
 The study suggested that more comprehensive planning and design would
be required in order to improve the performance of a project.
11 CONT’D

 Invitation to Bid
An invitation to bid is a “sealed bidding method” of soliciting bids used when
there is no substantial difference between the products or services that meet the
specifications.
In this process proper caution shall be given to the points where it might
mislead or contradict the client’s desire, especially in terms of quality
assurance.
• For instance, if the project needs high experience and financial capability,
the contractor to be hired must be limited based on the criteria.
12 CONT’D

• Bid Qualification Procedure

• Selection of contractors through the Restricted tendering approach may
overcome the deficiencies in open tendering but may lead to higher
quotations prices. This has a substantial impact on project cost performance.
• The client may suffer the exaggerated cost of the project due to the high-
profit margin of firms.
• Based on the above narration tendering approaches that are used for selecting
a contractor for a project can affect project cost performance.
13 MAJOR PROCESS II

• Tendering Duration
Tenderin
• Contractor Selection
g Stage Criteria
14 TENDERING STAGE

 Tendering Duration
 Adequate time shall be given for the purpose of
 Measuring the scope of the works or services to be executed
 Visiting the site to identify whether field tests are required or
not to check geotechnical condition of the project area.
 Assessing the tender and contract conditions
 Obtaining prices for reasonable cost estimation
15 CONT’D

 Contractor Selection Criteria

• Through the well-defined selection criteria, project clients can filter
out the good from the 'bad contractors
• Parameters to consider of effective selection.
• Financial (Turnover, Bond Capacity)
• Management Capability
• Past Experience
• Quality
16 MAJOR PROCESS III

Tender • Effects of Skilled Procurement

Evaluatio Professional
• Bid Evaluation and Criteria
n
17 TENDER EVALUATION

Effect of Skilled Procurement Professional

• Cost Analysis: Obtaining works at the right cost can determine whether the
client achieves satisfaction with the project.
• Negotiating Contract: is a major share of the procurement specialist’s job.
After securing the best pricing, terms, and delivery options for each work,
they settle the contract.
• Technical Analysis: any procurement professional possesses or use their
technical skills while it may be on prepare technical criterion or it may be on
evaluating the technical proposal of a bidder.
18 CONT’D

 Bid Evaluation and Criteria

• Selecting a capable contractor is one of the most important tasks faced

by clients who wish to achieve project success.
• Bid evaluations can include many different parameters, such as bid
price, technical competence, management capability, earlier
experience, reference objects, environmental and quality management
systems, financial stability, and collaborative skills.
19 CONCLUSION

• There are a number of factors that affect the project cost and quality performances in procurement
preparation process such as overall project design, specification, drawings. Delivery method selection
has also an impact on project performance. Invitation method and bid qualification procedure are
another sub processes that have later on effect on project performance either in positive.
• In tendering process performance of the project is affected by the tendering duration given to the bidder
and contractors selection criteria. The shorter bid validation duration may cause less sustainable project
performance and the weak selection criteria may cause quality reduction and cost overrun of the project.
• During tender evaluation process the criteria used to evaluate the bidders as well as the selection of
procurement evaluator experts as a part of evaluation team have significant effect on the performance of
the project
20