Building Procurement – Condensed Exam Notes
Procurement Overview
Procurement in building is like the entire journey of getting a building ready, from planning its look and feel, actually building it, and then getting it ready for use. The main goal is to get the best value over the building's whole life for the client, which means not just the cheapest price but also good quality and low running costs later on. The way you choose to do this (the 'route') affects who is responsible for what, how long it takes, how much it costs, the quality, and who takes on the risks.
Key Factors When Selecting a Procurement Strategy
When deciding how to go about building a project, several things are considered:
Project characteristics: Is the project big or small, simple or complicated, where is it located, and is it a unique build? These things affect the time, cost, and risks involved.
Design change potential: Sometimes, the initial plans aren't fully complete, or new technologies come out. If changes happen while building is already underway, it can increase the and . How likely these changes are affects the strategy.
External influences: Things outside the project, like the economy, government rules, social trends, or new technologies (e.g., changes in interest rates or new laws), can affect the project.
Client resources & objectives: The client's own experience, how much they want to be involved, and their general approach to projects are important.
Cost issues: Clients often want to know the final price firmly upfront. This depends on how complete the design is when bids are requested.
Timing: When does the building need to be finished? How long will the design take, and how long for approvals? Sometimes, designing and building are allowed to overlap to save time, but this can affect costs.
Risk management: How much uncertainty is the client willing to accept regarding and ? Some strategies offer more certainty than others.
Quality & performance: How much control does the client want over the design details or how well the building performs?
Traditional Procurement Route
This is a common method where the design work is completely finished and separate from the actual construction work.
The design is done by professional consultants (like architects and engineers).
The construction is handled by a separate contractor.
Typical organisation: It usually flows like this: The Client hires an Architect, Engineers, and a Quantity Surveyor (who manages costs). These people then work with the Contractor, who then hires Sub-contractors (like plumbers, electricians, etc.).
Three main types of contracts in this route:
Lump Sum: A fixed price agreed upfront.
Measurement: Prices are based on how much work is actually done, measured during or after construction.
Cost Reimbursement: The contractor is paid for their actual costs plus an agreed fee.
Lump Sum Contracts
With these contracts, a single, fixed price is agreed upon before any construction work begins.
Bills of Firm Quantities: In this one, very detailed lists of all materials and work needed are prepared, and the design is almost entirely finished before a price is asked for.
Advantages: Everyone bids on the same detailed list, making it easy to compare prices, and the cost is very well controlled.
Disadvantage: It takes a long time before construction can start because of all the detailed planning.
Bills of Approximate Quantities: This allows work to start faster because the quantities are estimated, not fully confirmed. The final quantities are adjusted later.
Disadvantages: Less certainty about the final cost, and everything needs to be fully measured again later.
Drawings & Specification only: For smaller or urgent jobs, companies bid based only on the drawings and general descriptions, measuring their own quantities.
Disadvantage: It's hard to compare different bids, and figuring out the cost of changes later on can be tricky.
Measurement (Schedule of Rates) Contracts
These are used when the design isn't fully complete but you want to start work. The contractor provides prices for a list of common work items or quotes a percentage adjustment on a standard list.
Standard schedule: A general list of common building activities.
Ad-hoc schedule: A list made specifically for the project, which might already have prices or be left blank for the contractor to fill in their rates.
Bills from previous contract: A list adapted from a similar past project.
Pros: Can start work earlier, and the documents are often familiar.
Cons: The final cost isn't clear at the beginning, and comparing bids from different contractors can be difficult.
Cost Reimbursement (Cost-Plus) Contracts
In this type, the contractor is paid for their actual costs for things like labor, equipment, and materials (called 'prime cost'), plus an extra agreed-upon fee.
Variants:
Percentage Fee: The fee is a set percentage () of the actual prime cost. The contractor has no real reason to keep costs low.
Fixed Fee: The contractor gets a set lump sum fee. If the project costs more to build, their fee becomes a smaller percentage of the total cost.
Target Cost: An agreed target cost is set. If the actual cost is below or above the target, the contractor and client share the savings or extra cost (typically a split). This encourages the contractor to be efficient.
Pros: Work can start very early, useful for emergencies, or for work that involves a lot of repetition or maintenance.
Cons: The final cost is the least certain, and it requires a lot of checking (auditing) of the contractor's expenses.
Circumstances for Each Contract Type
Firm Bills: Choose this when there's enough time to finish all the design details, and knowing the exact final price is extremely important.
Approx. Bills: Use this when the design is mostly done but there's not enough time to get all the exact measurements before asking for bids.
Drawings & Spec: Best for small projects or when speed is more important than having detailed lists of quantities.