Introduction to Procurement #1

Exploring procurement routes in tenders

When drafting the procurement strategy for a construction project, assessing the various procurement routes and selecting the most appropriate for the project is akin to laying down the blueprint for success. It sets the tone for collaboration, risk management, and ultimately, the project's outcome.

With numerous options available, navigating through the maze of procurement routes can be challenging. However, understanding the intricacies of each approach can empower stakeholders to make informed decisions that align with project objectives. Let's explore the different types of procurement routes in construction tenders and their respective advantages and considerations.

Traditional Procurement

The traditional procurement route follows a linear process where the project is divided into distinct stages. Under this process, the client initially appoints a design consultant to develop the detailed plans and specifications for the project requirements. Subsequently, a separate tender is run for construction contractors to bid on the completed design. The successful contractor is responsible only for building works, with limited influence over design, cost and risk allocation.

This method may be preferable because:

construction costs can be reliably estimated upon contract award. This aspect may hold significant appeal for clients operating under tight budget constraints.
the client is able to have direct influence on the design, facilitating a high level of performance and bespoke quality in the design.
competitive fairness is achieved, as all tendering contractors are bidding on the same basis.

While this approach offers clarity in roles and responsibilities, and facilitates transparency in requirements at all stages, it could result in adversarial relationships between the client, designer and contractor.

Design and Build

This procurement route involves the client contracting a single entity. This contractor is responsible for both the design and the construction phases. This can be the preferred route in time sensitive projects, as having a single contracting entity allows for streamlined communications and enhanced coordination.

There are two main types of design and build contract:

Single Stage: The contractor is appointed under a single contract to deliver the design and construction works. This approach is appropriate when the client can provide sufficient information to tenderers to enable them to submit a realistic price.
Two Stage: The client selects a contractor on the basis of their preliminaries, fee, profit and overhead. The contractor develops the design during stage one and then agrees a price for the construction works which is then delivered in stage two.

The design and build approach can accelerate project timelines by overlapping design and construction activities, however drawbacks such as reduced design flexibility and limited client input during design phases must be considered. Further, early price certainty is dependent on the absence of expensive alterations to the original brief.

Construction Management

Under the construction management procurement route, the client places works contracts themselves and appoints a third-party organisation as a construction manager to manage the works contracts on their behalf. The construction manager will then collaborate with the design team and oversee the construction process. The construction management route requires a high level of trust between the client and the construction manager, and may entail higher management fees, however this approach fosters a greater collaboration among project stakeholders and enables faster problem-solving during construction.

Management Contracting

Management contracting differs from construction management as management contractors contract work contractors directly. The management contractor works closely with the client and design team from the project's inception. The management contractor tenders works packages to various trade contractors, promoting competitive pricing and fostering innovation through early contractor involvement. However, this route demands a robust management framework to coordinate multiple contractors effectively.

Partnering

The partnering method (sometimes known as alliancing) describes a strategic, collaborative approach that facilitates the integration of design teams, contractors and suppliers, spreading responsibility across multiple parties who share the risk and rewards associated with a project. This method is most commonly utilised over long-term arrangements where opportunity for relationship-building and culture alignment is highest. Partnering requires the adoption of effective collaborative measures and close management by the client to ensure the project and partnership is continuously improving.

When selecting a procurement method in construction projects, it is likely that more than one route could be adopted to achieve both the client’s aims and requirements of the project. The procurement strategy should consider each option, assessing each route against project requirements, objectives and risk profiles. By grasping the intricacies of various procurement routes, clients can make informed decisions that maximises project outcomes.

Fran Butterworth is a Senior Procurement Consultant experienced in delivering expert procurement and commercial advice across a wide range of professional services projects in the UK, specifically in relation to public procurement.

If you have any questions on this topic, or would like support, please contact your Delivery Associate, or email DeliveryAssociatesNetwork@Arup.com