Management of Project coursework
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W11.pdf
ENGM60061 MANAGEMENT OF PROJECTS (MOP)
PROCUREMENT MANAGEMENT
Week (11)
Mon 5th Dec 2022
Dr. Mohamed Abadi Engineering Building A
Email: [email protected]
Proc. Routes vs.
Contracts
Learning Objectives
Case Study
Procurement Route
Selection
Procurement Routes
Project Life-cycle
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Dr Mohamed Abadi – Procurement Mgmt. – ENGM60061 MoP 2022-2023Slide 2 / 54
Learning Objectives
Lecture Learning Objectives
At the end of this lecture, you’ll be able to:
1. Use Project Life Cycle as a Framework for Understanding Engineering Procurement: (Involvement of different parties in different stages of the project lifecycle)
2. Review Main Procurement Methods: (The CIOB Code of Practice for Project Management for Construction and Development)
3. Identify Different Factors Influencing Procurement Method Selection: (CIOB Survey: Procurement in the Construction Industry 2010)
4. Outline Families of Standard Engineering Contracts in UK and International: (JCT – NEC – FIDIC)
Proc. Routes vs.
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Learning Objectives
Case Study
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Dr Mohamed Abadi – Procurement Mgmt. – ENGM60061 MoP 2022-2023Slide 3 / 54
Learning Objectives
MACE12112 Recordings on BB (Week 6):
▪ Video (3): Procurement Routes in Engineering Projects
Note:
Video recordings represent crucial part of the delivery in Week (11)
Suggested Readings:
▪ Code of Practice for Project Management for Construction and Development, 5th ed.: by the Chartered Institute of Building (Available Online / Attached).
▪ APM Body of Knowledge, 6th & 7th Editions: by the Association for Project Management APM
▪ RIBA Plan of Work (2020) – Overview (Link): Royal Institute of British Architects RIBA
▪ CIOB Report ‘Exploring Procurement in the Construction Industry’: Chartered Institute of Building CIOB
Learning Materials in Week (11) Recommended Watching, Readings & Links
Proc. Routes vs.
Contracts
Learning Objectives
Case Study
Procurement Route
Selection
Procurement Routes
Project Life-cycle
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Dr Mohamed Abadi – Procurement Mgmt. – ENGM60061 MoP 2022-2023Slide 4 / 54
Learning Objectives
Useful Links – Engineering Contracts:
▪ https://www.neccontract.com/
▪ http://fidic.org/
▪ https://www.designingbuildings.co.uk/wiki/Construction_contract
▪ https://www.designingbuildings.co.uk/wiki/Engineering_procurement_and_const ruction_contract
▪ https://www.youtube.com/watch?v=IncIWMZ2u20
Recommended Watching, Readings & Links
Proc. Routes vs.
Contracts
Learning Objectives
Case Study
Procurement Route
Selection
Procurement Routes
Project Life-cycle
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Dr Mohamed Abadi – Procurement Mgmt. – ENGM60061 MoP 2022-2023Slide 5 / 54
Project Life-cycle
Understanding Projects
A project is: “a unique, transient endeavor, undertaken to achieve planned objectives, which could be defined in terms of outputs, outcomes or benefits. A project is usually deemed to be a success if it achieves the objectives according to their acceptance criteria, within an agreed timescale and budget”.
A process is: “intended to create value, i.e. transform a set of input resources into outputs of fairly similar products and services, by repeatedly performing a task or a set of tasks”.
Project management is: “the application of processes, methods, knowledge, skills and experience to achieve the project objectives”.
Proc. Routes vs.
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Learning Objectives
Case Study
Procurement Route
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Project Life-cycle
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Dr Mohamed Abadi – Procurement Mgmt. – ENGM60061 MoP 2022-2023Slide 6 / 54
Project Life-cycle
Understanding Projects Stages/phases in a Project Life Cycle
Proc. Routes vs.
Contracts
Learning Objectives
Case Study
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Dr Mohamed Abadi – Procurement Mgmt. – ENGM60061 MoP 2022-2023Slide 7 / 54
Project Life-cycle
Understanding Projects Product Life Cycle - APM
A product life cycle can include the following phases:
▪ Concept – initial idea is developed, and business case and schedule are created. Project sponsor to decide: is project viable? is it worth investing in definition phase?
▪ Definition – preferred solution is identified, ways of achieving it are refined, and . Project Management Plan (PMP) is developed.
▪ Development – PMP is put into action and ‘Development’ can be broken into stages (e.g. design and construction), and project review are carried out at end of each.
▪ Handover and Closure – project outputs are handed over and accepted by sponsor.
▪ Benefits Realisation – a project may include a benefits realisation phase.
▪ Operation – continuing support and maintenance.
▪ Termination – closure at the end of the product’s useful life.
Proc. Routes vs.
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Case Study
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Dr Mohamed Abadi – Procurement Mgmt. – ENGM60061 MoP 2022-2023Slide 8 / 54
Project Life-cycle
Source: APM Body of Knowledge, 6th ed.
Understanding Projects Life Cycle - APM
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Dr Mohamed Abadi – Procurement Mgmt. – ENGM60061 MoP 2022-2023Slide 9 / 54
Project Life-cycle
Procurement in RIBA PoW Key Project Task
Procurement Route
Proc. Routes vs.
Contracts
Learning Objectives
Case Study
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Procurement Routes
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Dr Mohamed Abadi – Procurement Mgmt. – ENGM60061 MoP 2022-2023Slide 10 / 54
Project Life-cycle
Understanding Projects Project Life Cycle - RIBA
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Dr Mohamed Abadi – Procurement Mgmt. – ENGM60061 MoP 2022-2023Slide 11 / 54
Project Life-cycle
Procurement in RIBA PoW Estimate Accuracy Throughout Project Lifecycle
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Dr Mohamed Abadi – Procurement Mgmt. – ENGM60061 MoP 2022-2023Slide 12 / 54
Procurement Routes
Project Network – The need for Procurement
What do projects need? Services (Design/Mgmt.… etc.)
Works Goods / Materials
Expertise / Knowledge
Contract # Charter
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Dr Mohamed Abadi – Procurement Mgmt. – ENGM60061 MoP 2022-2023Slide 13 / 54
Procurement Routes
▪ Procure is to obtain (something), especially with care or effort (Oxford Languages)
▪ Procurement management is the process by which resources (goods, expertise and services) are acquired from outside the project organisation.
▪ It includes: - Selection of procurement method/route - Preparation of contract documents - Selection and acquisition of “suppliers”, and - Management of the contracts.
▪ Contractual Tree is a diagram illustrating the contractual relationship between the parties involved in a project e.g. the client, consultants, sub-consultants, contractors, sub-contractors, suppliers, and funders.
▪ Project Roles Table sets out the roles required on a project as well as defining the stages during which those roles are required and the parties responsible for carrying out the roles.
Selection of procurement method/route
Procurement Management
Proc. Routes vs.
Contracts
Learning Objectives
Case Study
Procurement Route
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Procurement Routes
Project Life-cycle
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Dr Mohamed Abadi – Procurement Mgmt. – ENGM60061 MoP 2022-2023Slide 14 / 54
Procurement Routes
Main Procurement Methods The CIOB’s ‘Code of Practice for Project Management’
▪ The various procurement methods which may be pursued can be broadly classified under four headings:
1. Traditional Contract
2. Design and Build Contract
3. Construction Management Contract
4. Management Contracting
▪ Each method has its own variations and provides advantages and disadvantages to suit different types of projects.
▪ For example:
5. Turnkey Contract is a variation from D&B contract
▪ No method is best in all circumstances.
Proc. Routes vs.
Contracts
Learning Objectives
Case Study
Procurement Route
Selection
Procurement Routes
Project Life-cycle
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Dr Mohamed Abadi – Procurement Mgmt. – ENGM60061 MoP 2022-2023Slide 15 / 54
Procurement Routes
Main Procurement Methods Traditional Contract: Main Features
• Also referred to as ‘design bid build’, and remains most commonly used method.
• Client first appoints consultants to design project in detail and prepare tender documentation i.e. drawings, work schedules and bills of quantities BoQs.
• Contractors are then invited to submit tenders for the construction of the project, usually on a competitive basis (direct appointment still an option).
• Client retains consultant during the construction phase to respond to design queries, and inspect the works.
• Most commonly lump-sum contracts, however, measurement contracts and cost reimbursement contracts can also be used in this route.
• Client in full control, but responsible for the design.
• From construction perspectives, a low risk method of contracting for the client: (certainty of price - contractor takes the financial risk for construction).
Proc. Routes vs.
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Learning Objectives
Case Study
Procurement Route
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Project Life-cycle
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Dr Mohamed Abadi – Procurement Mgmt. – ENGM60061 MoP 2022-2023Slide 16 / 54
Procurement Routes
Main Procurement Methods Traditional Contract: Structure & Contractual Tree
Client Employer / Owner
Main Contractor
Consultant (Designer)
Sub- Contractor
Sub- Contractor
Sub- Contractor
Sub- Consultant
Sub- Consultant
Design
Tender
Construction
Long Sequential Process
Longer Duration Contractual Relationship
Supervisory Relationship
or Flow of Information
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Case Study
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Dr Mohamed Abadi – Procurement Mgmt. – ENGM60061 MoP 2022-2023Slide 17 / 54
Procurement Routes
The separation of the contractor from the design can mean:
• takes longer to deliver the project, i.e. project takes longer to start paying off its costs.
• tendering procedures delay the start of the construction stage.
• missed opportunities for specialist contractors to input during the ‘Technical Design’ stage, and buildability concerns.
• if design phase is rushed, i.e. design is incomplete at tender, or significant variations are required after the contractor has been appointed, the cost/risk to the client can be significant.
Main Procurement Methods Traditional Contract: Implications
Proc. Routes vs.
Contracts
Learning Objectives
Case Study
Procurement Route
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Procurement Routes
Project Life-cycle
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Dr Mohamed Abadi – Procurement Mgmt. – ENGM60061 MoP 2022-2023Slide 18 / 54
Procurement Routes
Main Procurement Methods Traditional Contract: Contractual Arrangements
Lump Sum Contract (also Fixed Price Contract): a single ‘lump sum’ price for all the works is agreed before the works begin. This contract is less appropriate where speed is important, or where the Nature and Amount of the works is not well defined.
Measurement Contract (also Unit Price Contract): used where work can be described in reasonable detail, but the amount cannot e.g. excavation works, refurbishment projects, or where the design has not been completed i.e. no BoQs. Tenderers bid competitively based on Rates or Unit Price of construction work.
Cost Reimbursable Contract (also Cost Plus Contract): used where the nature and amount of work cannot be properly defined at the outset, and high risk emergency work e.g. repair work, building failure, and urgent alterations. Contractor is reimbursed the actual costs they incur plus an additional fee (lump sum, or % fee). (example: Option E of the NEC3 Engineering and Construction Contract ECC)
Proc. Routes vs.
Contracts
Learning Objectives
Case Study
Procurement Route
Selection
Procurement Routes
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Dr Mohamed Abadi – Procurement Mgmt. – ENGM60061 MoP 2022-2023Slide 19 / 54
Procurement Routes
Main Procurement Methods Design and Build Contract: Main Features
• The client employs a consultant, or use own in-house designers, to prepare the
concept design including type of construction, materials and workmanship… Prescriptive Specifications.
• Main D&B Contractor is appointed to design and construct the works.
• D&B Contractor is responsible for the design, planning, organisation, control and construction of the works to the Client’s Requirements.
• Appropriate for simple projects, where design complexity/quality is not the main concern.
• What are the advantages of design and build? - single point of responsibility for delivering the entire project
i.e. design and construction (less risk) - earlier commencement of construction works onsite - benefit of contractor’s experience harnessed during design
(improves design buildability)
Proc. Routes vs.
Contracts
Learning Objectives
Case Study
Procurement Route
Selection
Procurement Routes
Project Life-cycle
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Dr Mohamed Abadi – Procurement Mgmt. – ENGM60061 MoP 2022-2023Slide 20 / 54
Procurement Routes
Main Procurement Methods Design and Build Contract: Structure & Contractual Tree
Client Employer / Owner
D & B Contractor
Designer Department
SuppliersSub- Consultants
Sub- Contractors
Construction Department
Consultant (or In-house Designers)
Concept Design
Prescriptive Specs.
Design
Tender
Construction
Shorter Project Duration
Design & Construction Overlapping
Proc. Routes vs.
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Case Study
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Dr Mohamed Abadi – Procurement Mgmt. – ENGM60061 MoP 2022-2023Slide 21 / 54
Procurement Routes
Early involvement of contractor, and design and construction overlapping can mean:
• client may find it hard to prepare a sufficiently comprehensive brief & concept design
• client has to commit to a concept design early
• variations from the original brief can be difficult to arrange and expensive
• harder to compare tenders and determine if they offer value for money
• focus on construction, which limits design innovation (changes concept), and
• there are benefits of getting D&B contractor involved earlier.
Main Procurement Methods Design and Build Contract: Implications
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Dr Mohamed Abadi – Procurement Mgmt. – ENGM60061 MoP 2022-2023Slide 22 / 54
Procurement Routes
• Also referred to as ‘Engineering, procurement, and construction (EPC) contracts’.
• Like design and build, single contract for the design and construction.
• On a turnkey project, the client may seek tenders based on a Performance Specifications and then have no input into the design.
• Whereas, on a D&B project, the client seeks tenders based on a Prescriptive Specifications i.e. concept design that describes the materials and workmanship.
• For example, in a university hospital project performance-based specifications: number of patients serviced, design to integrate healthcare-research-education, attractive and human environments for patients and staff, environmental sustainability at all levels, and energy performance and use of renewable energy sources.
• Generally, the client seeks a fixed price, lump sum agreement where the responsibility for cost control is taken by the contractor.
• Use of Performance Specifications allows more innovation in design.
• Used to procure complex infrastructure and public projects.
Main Procurement Methods Turnkey Contracting: Main Features
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Case Study
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Dr Mohamed Abadi – Procurement Mgmt. – ENGM60061 MoP 2022-2023Slide 23 / 54
Procurement Routes
Main Procurement Methods Turnkey Contracting: Structure & Contractual Tree
Client Employer / Owner
Turnkey Prime Contractor
Designer
SuppliersSub- Consultants
Sub- Contractors
Consultant (or In-house Designers)
Performance Specs.
Design
Tender
Construction
Shorter Project Duration
Design & Construction Overlapping
Proc. Routes vs.
Contracts
Learning Objectives
Case Study
Procurement Route
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Procurement Routes
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Dr Mohamed Abadi – Procurement Mgmt. – ENGM60061 MoP 2022-2023Slide 24 / 54
Procurement Routes
Main Procurement Methods Construction Management Contract (JCT-CM): Main Features
• As in traditional contract, the design is provided by the Employer/Client, often developed by Design Team working on behalf of the employer.
• Works are constructed by Trade Contractors contracted directly to the Employer (Client), with separate contractual responsibilities, but managed by a Construction Manager Firm (CM), who does no construction works (i.e. no one main contractor).
• The Construction Manager (CM) is appointed by the employer to oversee the completion of the works for a fee (% of works done) in the capacity of employer’s agent.
• The CM is appointed early in the design process to improve cost and buildability of proposals, as well as to advise on packaging, and the selection of trade contractors.
• This enables some trade packages to be tendered earlier than others, and sometimes, even before the design is completed (why?).
• This form of contracting is generally only used by experienced employers.
• Disadvantages include the lack of a single point of responsibility for both design and construction phases, which opens the possibility for disputes to arise.
• Compare: Traditional Contract # Construction Management Contract
Proc. Routes vs.
Contracts
Learning Objectives
Case Study
Procurement Route
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Procurement Routes
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Dr Mohamed Abadi – Procurement Mgmt. – ENGM60061 MoP 2022-2023Slide 25 / 54
Procurement Routes
Client Employer / Owner
Trade Contractor
Trade Contractor
Trade Contractor
Construction Management Firm
Design Team
Design
Work Package 1
Project Duration
Construction Manager
Construction
Work Package N
Work Package 2
Package Tendering
Trade Contractors
Main Procurement Methods Construction Management Contract (JCT-CM): Structure & Contractual Tree
1 2 … …… N
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Dr Mohamed Abadi – Procurement Mgmt. – ENGM60061 MoP 2022-2023Slide 26 / 54
Procurement Routes
Main Procurement Methods Management Contracting: Main Features
• Works are constructed by a number of different Works Contractors contracted to a Management Contractor (MC), who does no construction works.
• The MC is appointed early in the design process to improve cost and buildability of proposals, as well as to advise on packaging the works.
• The MC appoints & manages Works Contractors (separate works contracts) for a fee.
• Design is the responsibility of the employer, often carried out by Design Team working for the employer.
• This form of contracting is designed for use on large complex projects, typically where an early start on the site is required.
• It offers great flexibility as work can begin on site without full design information being available, where design involve specialist components (more risk).
• Disadvantages include the lack of a single point of responsibility for both design and construction phases, which opens the possibility for disputes to arise.
• Compare: Construction Management Contract # Management Contracting
Proc. Routes vs.
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Case Study
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Dr Mohamed Abadi – Procurement Mgmt. – ENGM60061 MoP 2022-2023Slide 27 / 54
Procurement Routes
X
Main Procurement Methods Management Contracting: Structure & Contractual Tree
Client Employer / Owner
Management Contractor
Designer Team
Works Contractor
Works Contractor
Works Contractor
Sub- Consultant
Sub- Consultant
Design
Work Package 1
Shorter Project Duration
Management Contractor
Construction
Work Package N
Work Package 2
Trade Contractors
Package Tendering
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Dr Mohamed Abadi – Procurement Mgmt. – ENGM60061 MoP 2022-2023Slide 29 / 54
Procurement Route
Selection
Procurement Route Selection: The CIOB Procurement Survey
Proc. Routes vs.
Contracts
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Case Study
Procurement Route
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Procurement Routes
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Dr Mohamed Abadi – Procurement Mgmt. – ENGM60061 MoP 2022-2023Slide 30 / 54
Procurement Route
Selection
Procurement Route Selection: The CIOB Procurement Survey
Dr Mohamed Abadi – Procurement Mgmt. – ENGM60061 MoP 2022-2023Slide 31 / 54
Proc. Routes vs.
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Case Study
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Procurement Routes
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Dr Mohamed Abadi – Procurement Mgmt. – ENGM60061 MoP 2022-2023Slide 32 / 54
Procurement Route
Selection
Risk-informed Procurement Route Selection: The CIOB Procurement Survey
Factors Influencing Procurement Method Selection:
• Client’s Requirements (Cost – Time)
• Client Experience from Other Projects
• Clients Level of Involvement
• Type of Project (Complexity & Innovation)
• Cost of Procurement Methods (£ or %)
• Size of Project
• Quality of Work
• Others
• Project Risk is Key
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Dr Mohamed Abadi – Procurement Mgmt. – ENGM60061 MoP 2022-2023Slide 33 / 54
Procurement Route
Selection
Risk-informed Procurement Route Selection: The CIOB Procurement Survey
Proc. Routes vs.
Contracts
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Case Study
Procurement Route
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Procurement Routes
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Dr Mohamed Abadi – Procurement Mgmt. – ENGM60061 MoP 2022-2023Slide 34 / 54
Procurement Route
Selection
The Risk Management Process Risk Response Planning
Threats
Risk Matrix can be used to:
▪ Rank risks according to their Magnitude (Likelihood & Severity)
▪ Inform Risk Response Strategy whether threat or opportunity
▪ Inform Procurement Method Selection
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Dr Mohamed Abadi – Procurement Mgmt. – ENGM60061 MoP 2022-2023Slide 35 / 54
Procurement Route
Selection
The Risk Management Process Risk Response Planning
Threats
Risk Matrix can be used to:
▪ Rank risks according to their Magnitude (Likelihood & Severity)
▪ Inform Risk Response Strategy whether threat or opportunity
▪ Inform Procurement Method Selection
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Contracts
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Case Study
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Procurement Routes
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Dr Mohamed Abadi – Procurement Mgmt. – ENGM60061 MoP 2022-2023Slide 36 / 54
Procurement Route
Selection
Procurement Type
Client Risk
Contractor Risk
Price Built
Speed
Risk Response Strategy
Comment
Traditional / Conventional
High Low Low Very Slow Design by Client,
built by contractor
Design & Build Medium Medium Medium Fast Single point of responsibility
for design/construction
Turnkey Low High Very High Fast Client specifies and
waits for completion
Construction Management
Low Medium High Medium Expert 3rd party takes
responsibility for delivery
Risk-informed Procurement Route Selection: Risk Allocation in Procurement Routes: Clients Point of View
Accept
Reduce
Transfer
Avoid / Mitigate
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Dr Mohamed Abadi – Procurement Mgmt. – ENGM60061 MoP 2022-2023Slide 37 / 54
Procurement Route
Selection
Traditional Contract
(Accept)
Procurement Route Selection Risk-informed Procurement Route Selection
Proc. Routes vs.
Contracts
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Case Study
Procurement Route
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Procurement Routes
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Dr Mohamed Abadi – Procurement Mgmt. – ENGM60061 MoP 2022-2023Slide 38 / 54
Procurement Route
Selection
Design & Build Contract
(Reduce)
Procurement Route Selection Risk-informed Procurement Route Selection
Proc. Routes vs.
Contracts
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Case Study
Procurement Route
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Procurement Routes
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Dr Mohamed Abadi – Procurement Mgmt. – ENGM60061 MoP 2022-2023Slide 39 / 54
Procurement Route
Selection
Turnkey Contract
(Transfer)
Procurement Route Selection Risk-informed Procurement Route Selection
Proc. Routes vs.
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Case Study
Procurement Route
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Procurement Routes
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Dr Mohamed Abadi – Procurement Mgmt. – ENGM60061 MoP 2022-2023Slide 40 / 54
Procurement Route
Selection
Project Mgmt. or
Partnering
(Avoid/Mitigate)
Procurement Route Selection Risk-informed Procurement Route Selection
Proc. Routes vs.
Contracts
Learning Objectives
Case Study
Procurement Route
Selection
Procurement Routes
Project Life-cycle
T h e U
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it y
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M a n c h e st
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Dr Mohamed Abadi – Procurement Mgmt. – ENGM60061 MoP 2022-2023Slide 41 / 54
Procurement Route
Selection
Procurement Route Selection Risk-informed Procurement Route Selection
?
Proc. Routes vs.
Contracts
Learning Objectives
Case Study
Procurement Route
Selection
Procurement Routes
Project Life-cycle
T h e U
n iv
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it y
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M a n c h e st
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Dr Mohamed Abadi – Procurement Mgmt. – ENGM60061 MoP 2022-2023Slide 42 / 54
Procurement Route
Selection
Procurement Route Selection Risk-informed Procurement Route Selection
?
Proc. Routes vs.
Contracts
Learning Objectives
Case Study
Procurement Route
Selection
Procurement Routes
Project Life-cycle
T h e U
n iv
e rs
it y
o f
M a n c h e st
e r
Dr Mohamed Abadi – Procurement Mgmt. – ENGM60061 MoP 2022-2023Slide 43 / 54
Procurement Route
Selection
Procurement Route Selection Risk-informed selection
Might need to consider:
▪ Dividing the project into different packages delivered through different procurement methods.
▪ Using hybrid procurement methods, for example:
- D&B & Partnership
- Project Management & Partnership
- Project Management & Turnkey for packages
▪ Prequalified contractors to be invited to bid on the project.
▪ Any other factors that may influence selection of procurement method?
Proc. Routes vs.
Contracts
Learning Objectives
Case Study
Procurement Route
Selection
Procurement Routes
Project Life-cycle
T h e U
n iv
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it y
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M a n c h e st
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Dr Mohamed Abadi – Procurement Mgmt. – ENGM60061 MoP 2022-2023Slide 44 / 54
Proc. Routes vs.
Contracts
Engineering Contacts
Engineering Contracts can be defined as:
“are legally binding agreements between a business and an engineering company that covers scope of work (i.e. services/works promised), payment for these services/works, period of performance and termination of work, to embrace the procurement method/route selected for a project”.
Proc. Routes vs.
Contracts
Learning Objectives
Case Study
Procurement Route
Selection
Procurement Routes
Project Life-cycle
T h e U
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M a n c h e st
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Dr Mohamed Abadi – Procurement Mgmt. – ENGM60061 MoP 2022-2023Slide 45 / 54
Proc. Routes vs.
Contracts
• The Joint Contracts Tribunal (JCT) was formed by the Royal Institute of British Architects (RIBA) in 1931.
• Most projects in UK are carried out using JCT contracts.
• It produces a range of standard forms of contract for the construction of buildings, for example:
- Standard Building Contract
- Intermediate Building Contract
- Minor Works Building Contract
- Major Project Construction Contract
- Design and Build Contract
- Management Building Contract
- Construction Management Contract
Traditional
Design and Build
Families of Engineering Contacts The Joint Contracts Tribunal (JCT) Contracts - UK
Proc. Routes vs.
Contracts
Learning Objectives
Case Study
Procurement Route
Selection
Procurement Routes
Project Life-cycle
T h e U
n iv
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it y
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M a n c h e st
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Dr Mohamed Abadi – Procurement Mgmt. – ENGM60061 MoP 2022-2023Slide 46 / 54
Proc. Routes vs.
Contracts
Families of Engineering Contacts National Engineering Contract (NEC) - UK
▪ Created by the Institution of Civil Engineers ICE (UK – 1993)
▪ Promotes partnering and collaboration between parties to a contract
▪ NEC3 suites of documents includes: - ECC Engineering and Construction Contracts
- ECSC Engineering and Construction Short Contracts
- ECS Engineering and Construction Subcontracts
- ECSS Engineering and Construction Short Subcontracts
- …
▪ Engineering and Construction Contract (ECC) frequently used, and offers options: - Option A: Priced contract with activity schedule
- Option B: Priced contract with bill of quantities
- Option C: Target contract with activity schedule
- Option D: Target contract with bill of quantities
- Option E: Cost reimbursable contract
- Option F: Management contract
- Option G: Term contract
Partnership Win-Win
Management Contracting
Cost Reimbursable
Traditional Contacts
Proc. Routes vs.
Contracts
Learning Objectives
Case Study
Procurement Route
Selection
Procurement Routes
Project Life-cycle
T h e U
n iv
e rs
it y
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M a n c h e st
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Dr Mohamed Abadi – Procurement Mgmt. – ENGM60061 MoP 2022-2023Slide 47 / 54
Proc. Routes vs.
Contracts
Families of Engineering Contacts FIDIC - International Federation of Consulting Engineers
▪ FIDIC family of contracts:
- Red Book: Conditions of Contract for Construction For Building and Engineering works designed by the Employer (1st ed. 1999)
- Pink Book: The Multilateral Development Banks (MDBs) Harmonised Edition of the 1999 Red Book (2nd ed. 2006, 3rd ed. 2010)
- Red Book Conditions of Subcontractors for Construction For Building and Subcontractor: Engineering works designed by the Employer (1st ed. 2011)
- Yellow Book: Conditions of Contract for Plant and Design-Build, For electrical and mechanical plant, and for building works, designed by the Contractor (1st ed. 1999)
- Silver Book: Conditions of Contract for EPC Turnkey Projects (1st ed. 1999)
- Gold Book Conditions of Contract for Design, Build and Operate Projects DBO: (1st ed. 2008)
- Green Book: Short Form of Contract (1st ed. 1999)
- White Book: Client/Consultant Model Services Agreement (5th ed. 2017)
Traditional
D&B
Turnkey
DBO
Proc. Routes vs.
Contracts
Learning Objectives
Case Study
Procurement Route
Selection
Procurement Routes
Project Life-cycle
T h e U
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M a n c h e st
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Dr Mohamed Abadi – Procurement Mgmt. – ENGM60061 MoP 2022-2023Slide 48 / 54
Proc. Routes vs.
Contracts
Families of Engineering Contacts China’s Public Procurement Laws
China’s public procurement market is regulated by two major pieces of legislation, the Government Procurement Law (GPL) and the Tendering and Bidding Law (TBL) https://www.uschina.org/sites/default/files/government-procurement.pdf
Proc. Routes vs.
Contracts
Learning Objectives
Case Study
Procurement Route
Selection
Procurement Routes
Project Life-cycle
T h e U
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it y
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M a n c h e st
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Dr Mohamed Abadi – Procurement Mgmt. – ENGM60061 MoP 2022-2023Slide 49 / 54
Case Study
Case Study: Heathrow Terminal 5 Project
Proc. Routes vs.
Contracts
Learning Objectives
Case Study
Procurement Route
Selection
Procurement Routes
Project Life-cycle
T h e U
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it y
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M a n c h e st
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Dr Mohamed Abadi – Procurement Mgmt. – ENGM60061 MoP 2022-2023Slide 50 / 54
Case Study
Case Study: Heathrow Terminal 5 Project: Background
• One of the largest projects in Europe in the early 2000s.
• Completed in Spring 2008, on time and within its budget (£4.3Bn).
• A complex multimodal transport interchange designed to handle up to 30 million passengers a year.
• By 2008, 50’000 people, employees, and key stakeholders had been involved in the construction.
• Construction involved 60 contractors; 16 major integrated projects e.g. buildings, air traffic control tower, earthworks, airfield, baggage handling system; 147 subprojects; and 2 train extensions.
• However, its construction success has been overshadowed by the operational difficulties at opening that grabbed the headlines.
Proc. Routes vs.
Contracts
Learning Objectives
Case Study
Procurement Route
Selection
Procurement Routes
Project Life-cycle
T h e U
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M a n c h e st
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Dr Mohamed Abadi – Procurement Mgmt. – ENGM60061 MoP 2022-2023Slide 51 / 54
Case Study
This group exercise should be guided by the three objectives outlined below (after lecture):
1. Identify risks associated with this project. Consider using suitable risk tools: (Risk Breakdown Structure (RBS), Risk Matrix… etc.)
2. Discuss alternative procurement routes for this project, recommend a specific rout and justify your selection using suitable criteria: e.g. risk, project size, complexity… etc.
3. Discuss risk allocation resulting from the selected procurement route.
Case Study: Heathrow Terminal 5 Project: Exercise Objectives
Dr Mohamed Abadi – Procurement Mgmt. – ENGM60061 MoP 2022-2023Slide 52 / 54
Proc. Routes vs.
Contracts
Learning Objectives
Case Study
Procurement Route
Selection
Procurement Routes
Project Life-cycle
T h e U
n iv
e rs
it y
o f
M a n c h e st
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Dr Mohamed Abadi – Procurement Mgmt. – ENGM60061 MoP 2022-2023Slide 53 / 54
Case Study
Heathrow Terminal 5 Project:
▪ https://www.oecd-ilibrary.org/governance/effective-delivery-of-large-infrastructure- projects_9789264248335-en
▪ https://www.oecd.org/governance/procurement/toolbox/search/allocation-risks-during- construction-heathrow-airport-terminal-5.pdf
▪ https://www.theirm.org/media/1055871/case_study2.pdf
▪ http://www.emeraldgrouppublishing.com/learning/management_thinking/articles/pdf/termina l5.pdf
▪ https://brainmass.com/file/1498907/T5-case-study-MBE-papaer.pdf
▪ http://gerard-de-valence.blogspot.com/2018/05/procurement-case-study-heathrow.html
Case Study: Heathrow Terminal 5 Project: References
End of Lecture
