1.4a procurement issues (dr. zhang-tju).ppt

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Procurement of Construction Services

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Prof. Zhang Shuibo

Global Construction Engineering and Management Practices

Tianjin University, Tianjin, P.R. China 2012


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Who is the instructor ?

Dr. Zhang Shuibo is Professor of construction Management at

School of Management, Tianj in University, and Guest

Professor of I IEPM , Tsinghua Universi ty.

He special izes in the fi eld of construction contract and has

publ ished several books and a number of journal papers on the

topic of construction management and contracts.

[email protected]

Dr. Zhang is also Arbitrator of China I nternational Economic and Trade

Arbitration Commission (CEI TAC), Consul ting Expert of China International

Contracting Association (CH INCA), Bid Evaluation Expert of M inistry ofCommerce, China and FCIOB and Member of PM I GAC. He also acts as

consul tants for mega projects.


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The Objective of the Module

The objective is to make the students understandhow construction services are procured,

including bidding procedure and contract

strategy.


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Contents

1

Procurement: an overview

2Bidding and Contract strategy

3 Critical Factors for Procurement success


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1. Procurementan overview

Whenever the project owner needs a new project, the

f irst question that comes to his mind is:

How can I procure the project successfully?


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Defining Procurement:

The framework within which construction is

brought about, acquired or obtained.

(CIB W 92, Rowlingson and MCDermott, 1999)



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Related Term: Project Delivery System:

How project participants are organized together to

interact, transforming the owners project goals and

objectives into a finished facility. (ASCE, USA,2000)


What about the relevant Chinese terms?

Jianshemoshi= Construction business mode


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What we mean by procurement:


How project participants are organized

Bidding/Tender ing procedures

Contract strategy

I ts purpose is to bring about a finished faci l i ty to meet

the client/Owners needs.


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Common procurement Approaches:

1. Traditional DBB

2. CM/PM

3. DB/EPC

4. Other Variations



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1. DBB Approach:

Project wner

Consultants

Construction contractors

Designers

Suppliers???

Subcontractors???


(Supervison Engineer)


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1. DBB Approach: Character istics

Serial sequencing of project stages

Clear Project procedures

More interfaces and complex control

Cost usually uncertain



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Project wner

CM at risk

Trade contractors

Designers

Suppliers???

2. CM/PM Approach: at riskand pure/agency

I s this approach legally al lowed in

China?



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Project wner

PM/pure CM

contractors

Designers

Suppliers???

2. CM/PM Approach: at risk and pure/agency

Subcontractors???




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Early involvement of CM in the project for Owner

Less management load for Owner

Service fees charged by CM/MC as an addition

2. CM/PM Approach: Character istics

Re: Are reputable and rel iable CMs are available in the market?



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Project wner

DB/EPC contractor

Subcontractors/suppliers

PM/consultants

3. DB/EPC Approach:




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Single responsibility (Less management interfaces)

Relative cost certainty

Less management load for Owner

Disputes easily arise over design development (why?)

3. DB/EPC Approach-Character istics:



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Contents

1



3 Critical Factors for Procurement success


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2. Bidding and Contract Strategy

Means for Procurement:

Open Bidding

Invited Bidding

Direct Negotiation


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Character istics of Open Bidding:

Competitive prices from more bids

Taking longer time

Less attractive to strong contractors



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Character istics of I nvited Bidding:

Shorter bidding period

More attractive to strong contractors

Less bid evaluation workload



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Character istics of Direct Negotiation:

Quick to sign with contractor

Reliable project execution

Higher price



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Bidding Procedure:

Prequalification

Bid Submission

Bid Evaluation

Letter of Award

Signing Contract



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Bid Evaluation I ndicators:

Technical

Commercial

How about the weightings?



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Two Basic Bid Evaluation Cr iter ia

Composite Scoring method

Lowest evaluated bid method



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Contract Strategy:

Contract type

Risk Allocation

Owners Control

http://localhost/var/www/apps/%E6%95%99%E5%AD%A6%E6%96%87%E4%BB%B6/%E6%9C%AC%E7%A7%91%E7%94%9F%E8%AF%BE%E7%A8%8B/%E5%9B%BD%E9%99%85%E5%B7%A5%E7%A8%8B%E5%90%88%E5%90%8C%E7%AE%A1%E7%90%86-%E8%8B%B1%E6%96%87%E7%89%8806-06-5/Part%202%20Analysis%20of%20Contract%20Clauses/1.%20Model%20contracts.ppt


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Contract Type:

Firm and Fixed Lump-sum

Unit Price

Cost plus fee

Choice of Contr act Types: A di lemma



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Risk Allocation:

Market price fluctuation

Geological conditions

Climatic Conditions

Force Majeure/Acts of God

Correctness of Owner-provided data

http://localhost/var/www/apps/conversion/tmp/scratch_2/Risk%20allocations-Surveyor%20times.pdf


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Owners Control:

Loose or Tight Control? What to control?

How to control?

Corrective or Change Instructions

How to achieve the best project performance?



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Contents

1



3 Key Factors for Procurement success


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3. Key Factors for Procurement Success

Proper Criteria for Selection of Contractor

Type of Contract Price

Clear and reasonable risk allocation

Good incentives

Trust vs. Control


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Also bear in mind:

A successful project starts with the Owner.

The owner achieves its goals through the hands of the

Contractors;

The contractor achieves his goals through theachievement of the Owners.

We are in the same boat!

http://thonhonschool.com/Art%20boat.jpg


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And above all :

Teamwork Spirit!



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Questions Discussions

Procurement of Construction Services

1.4a procurement issues (dr. zhang-tju).ppt

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