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General Introduction of construction

• A construction is a process of constructing something by man for
COLLEGE OF ENGINEERING AND TECHNOLOGY
DEPARTMENT OF CONSTRUCTION TECHNOLOGY AND MANAGEMENT one purpose or another.
Course Name: Specification and Bill of Quantity (Arch 4122) • It may be a Road, bridge, a dam, a Railway, Tuneless, buildings

CHAPTER THREE (residential, Hospital, schools commercial building etc.), an airport,

water reservoir and sewer system, etc.

CONSTRUCTION PROCUREMENT AND
CONTRACT DELIVERY SYSTEMS

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Parties in Construction Project

Parties in Construction Project
 The Main parties in construction projects are: - Clients/Owner of the
projects, Consultants and Contractors. But, Participants/stakeholders in
 Employees/workers:-Employees of construction companies and
construction industry are:-
 Clients:- The clients are the people or organizations who commission and other workers play a big role in the development of projects.
fund a project.
 Local authorities and government:-The government works with
 Architects/designers:-They are responsible for the design of the project
and the architectural drawings. the local authorities to regulate the industry.

 Contractors:- are responsible for executing the construction work.  End-users:-. End-users are very important stakeholders in the
 Suppliers:-supply a raw materials such as cement, bricks, gravel,
construction industry.
limestone, wood, and electrical appliances are required to construct a
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CONSTRUCTION PROCUREMENT AND CONTRACT

Life Cycle of Construction Project DELIVERY SYSTEMS

Procurement:

 procurement can be defined as the purchase of goods or services or

works. at the best possible prices, delivery dates and legal terms.

 Procurement is a process used to select the lowest competitive and

qualified bidder for procuring services or works or goods from

potential competitors based on reasonable relevant criteria.

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Contract and procurement management Procurement and Contract Delivery System

Procurement and Contract Management involves three major processes:
 Contract Planning,
Generally, there are six types of Procurement and Contract
 Procurement Management and,
 Contract Management which in turn consists of the following Delivery systems. These are
 Force Account,
 Design Bid Build (DBB),
 Design Build (DB) or Turnkey,
 Finance / Build Operate Transfer System (BOT),
 Construction/Facility Management Consultancy, &
 Alliances and Outsourcing.

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Types of Procurement and Contract Delivery systems Design-Bid-Build

Force Account - When the Project Owners engage themselves to
In this type of delivery system, projects are divided into different
undertake the project, it is called a force account delivery system. packages interfacing to each other.

This system is promoted for

DBB Delivery System
Two Separate Contracts
Comparative advantage of cost, quality and time

Scale of projects and technology (large, small)

Remote projects General

Architects and Engineers
Contractor(responsible for
(Responsible for Design)
spatially scattered and maintenance projects Cost and Schedule)

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Design bid build Typical Design-Bid-Build Process

The Four Phases)

NEED

Planning Design Bid Construction Occupancy

Typical
Design-Bid-Build
Process

Design Team Contractor

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Merits of DBB Demerits of DBB

 Fragmented contract for the project owner
 Contractors bid competitively ,based on complete design documents to
 Severe Adversarial relations between the contracting parties, rather
maximize the built product for the price
than foster a cooperative atmosphere
 The owner selects the Designer on the basis of qualifications or ability  Non - Impartiality of the Design and Contract Administration services

 The Designer is active in construction administration, so design  Project owner responsibility for risks associated with the design and
contract administration
intentions are followed.
 Design-Bid-Build construction phases are sequential and may require
 Design and construction roles are clearly defined, and responsibilities more time

and liabilities clear.  No built-in incentives for contractors to provide enhanced performance
(cost, time, quality, or combination thereof)
 Owner is an active participant
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Design Build/Turnkey Design-Build (Turnkey)

DB approach

 Enhance the Force Account System Owner

 Reducing fragmentation, adversarial relations and Project Owners’

Design-Build
risk Firm

 Employ only one procurement process

 Single contractor to provide the entire Construction Process (Design

Designers and Consultants Subcontractors and Suppliers
and Construction Implementations)
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Design-Build Advantage of DB
 reducing fragmentation and adversarial relations between
OWNER designers and contractors;

 minimizing Project owners’ risk transferable due to

DESIGN-BUILD
FIRM Designers’ faults;

 minimizes the opportunity to claims.

 the client budget or financial requirement is defined early

construction
design
subcontractors enough
Sub consultants
 Earlier schedule and cost certainty
suppliers
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Build Operate Transfer

Disadvantage of DB  Build - Operate – Transfer(BOT) is a form of procurement and contract
delivery system that promotes Public Private Partnership (PPP) in
The disadvantage of this delivery system is
which a private company is contracted to finance, design, construct,
loss of control,
and operate for a certain period (usually 10 years) and transfer.
cost of tender and
 the project owner is not responsible for any liability other than force
cost of risks.
majeure and agreed upon claim adjustments.
Accelerated construction can potentially overextend the workforce.
 The Operation period between completion and transfer gives the
contractor an opportunity to verify the quality of the output of the
Traditional funding may not support fast-tracking construction or
services and works
may require accelerated cash flow.  BOT project involves a potentially complex contractual structure

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BOT Contractual Structure Advantages of BOT

This delivery system is advantageous because of

 It minimizes owners’ scarcity of financial resources;

 It devoid of considerable risks from the project owners

 the facility is well operated and transferred with free of charge or

minimum compensations to project owners.

 Integrates the process of design, construction, operation, and

maintenance.

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Disadvantage of BOT Construction/Facility Management Consultancy

Disadvantages of BOT are:
Cost more in the long run  Construction management consultancy firm is used to coordinate all

Longer tendering process activities from concept inception through acceptance of the facility.

Costly tendering  Facility management consultancy adds operation of facility during

Future political change may disrupt prior agreement operation to Construction Management Consultancy.

No capable local contractors

Contractors not interested in all works

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OWNER
Construction Management consultancy
ARCHITECT
LIMITED Construction Management Consultants then represents Project Owners
CONSTRUCTION
ADMINISTRATION
to carry out the following services:
DESIGN
DATA DETAILED  Feasibility studies of Construction related services
CONSTRUCTION
COORDINATION
 Plan and Monitor the Triple Constraints of Project Performances
FEASIBILITY
+COST DATA
 Lead and Organize regulatory systems of the Construction
Architect’s
design GENERAL Industry
consultants CMa CONTRACTOR
 Valuation, Quantity Surveying and Procurement and Contract
subcontractors
Management Services
Construction Management: materials suppliers
“Agency” Form
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Construction Management-at-Fee Partnering, Alliances

(CM at-Fee)
This is a method where an owner/developer and a contractor agree
Owner to work together by freely sharing resources, risks and knowledge
Agency
CM during the course of the project

A/E These systems require to overcome cultural and behavioral barriers

GC
among interest groups and control motivated performance based

Designers and Consultants management

Subcontractors and Suppliers

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Partnering, Alliances Partnering, Alliances

This type of project procurement can be The advantages of partnering are
distinguished from others by;-  increased opportunities for cost saving by continual improvement,

 collective performance of obligations by the owner/developer and  cultivation of good public relations and increased prospects of
repeat business,
contractor,
 incentives for innovations and improved cost, time and quality
 decision-making by consensus,
outcomes.
 commitment to resolve disputes without resort to litigation

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Procurement Management Bidders’ Coverage:

Competitive Vs Negotiated Tendering
Procurement types can be classified based on the things to be procured
Generally, procurement types can be classified into Competitive and
and the way how they are procured.
There are five bases for classifying procurement methods. These are: Negotiated Tendering

Things Bidders’ Geographical Procurement Procurement  Competitive Tendering: The objective of competitive bidding is to acquire
Bases Procured Coverage Coverage Awareness Steps
the goods, or works, or services at the most economic cost to the project
Types Goods Competitive International General PN Single
owner.
Services Negotiated Regional SpecificPN Two Staged
Works National Pre – Qualification
 This type of tendering is commonly used for the selection of better and
Local Post - Qualification
capable winning bidder among the various eligible firms.

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Competitive Vs Negotiated Tendering Competitive Vs Negotiated Tendering

 Competitive bidding can either be Open or Limited Competitive  Limited Competitive Bidding is often used when:-
Bidding in the form their invitations.
 the nature and urgency of the work justifies to do so. In this case limited
 As their name implies, while Open competitive bidding allows all
eligible bidders to participate. numbers of eligible firms are invited to participate for the bid.

 Limited competitive bidding allows a number of selected firms decided  Commonly short listing is done based on:-
by the Project Owners in consultation with concerned parties for
 the firms past performance,
qualification.

 The major difference between open and limited competitive bidding is  work load at present,
the addition of qualifying criteria beyond eligibility imposed on the
 knowledge of similar type of works before and financial and technical
procurement type for limited competitive bidding.
capabilities of the firms.
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Competitive Vs Negotiated Tendering

Procurement Steps
 Negotiated Tendering: direct appointment of an eligible firm can
be exercised by Project Owners.
 Procurement Steps: This includes Single Vs Two Staged; and Pre - Vs
 The nomination of this direct invitation is usually based on good
Post – Qualification Tendering.
performance, acquaintance with the Project Owner, for
supplementary agreements, etc.  Single or Two Staged Tendering: Procurement can be made using a single

 This kind of tendering is exceptionally exercised when the project or two staged tendering process.
under consideration is very urgent or needs special skill whereby the
 They are related with whether tender packaging for submission separately
required skill is rarely available.
and their evaluations are staged for a single or two steps when invitations
 The main disadvantage of this type of tendering is that the price
are made.
offered can usually be higher than the competitive bidding.
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Prequalification
Procurement Steps
• Prequalification It is a procedure in which eligible bidders are invited to
provide evidence of their ability to perform the services required by the
 Often two staged biddings are made for the submission of technical employer.
The following criteria are often used in determining this ability of the
and financial proposals separately and their evaluations one after the bidder;
 Experience and past performance,
other.
 Health, Safety and Environment Records, if any,
 According to Ethiopian Procurement Regulations, the following  Capability in respect of personnel and equipment,
 Organizational arrangement and facilities,
shall be enforced to use Single or Two Staged Tendering:
 Financial Status, and
 Pre or Post Qualification Tendering: Procurement can also be
 Schedule of Commitments.
based on Pre - or Post - Qualification processes.
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Post - qualification .
• Post - qualification is a tendering type where Financial Evaluation

is carried out first and rank bidders on the basis of their offer for

tender price. That is, Technical Evaluation will be done after the

Financial Evaluation.

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