1. Procurement Systems
“The organisational structure adopted by the client for the
management of the design and construction of a building
project”
Masterman, An introduction to building procurement systems.
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2. The need for different procurement routes
 Differing project objectives
Time, Cost and Quality aims
 Differing clients
Degree of involvement, risk attitudes, experience
 Operating in a changing environment
Political, economic, legal etc…
 No single route will suit all circumstances
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3. The key variables in the procurement process
 Design control
Who employs/directs the designers?
Usually a choice between client & contractor
 Constructors’ involvement
When do you employ the contractors?
Usual choice is between when outline design is complete or
when design is finally complete
Contract to construct or to manage construction?
Who employs the subcontractors?
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4. The key variables in the procurement process
 Team selection
Competition or negotiation for selection?
Open or selected tendering?
 Paying for the construction
Pay on “Price” or “Cost”?
Price – contractor tenders to do work for a total amount =
estimated costs + profit + overheads +/- risk adjustments
Cost – contractor tenders to do the work for actual costs
(calculated as work proceeds) + allowance for profit etc…
Pay in timed instalments or on completion of stages?
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5. The key variables in the procurement process
 Form of contract used
Contracts specify obligations of parties to one another –
client & designers, client & contractor, contractor &
subcontractor etc…
Main variation in client/contractor contract
Main choice influenced by basic procurement route used
“Standard” forms exist for most routes e.g. JCT Forms
Modification of contracts is common to suit “strong”
party’s requirements
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6. The available routes
 The range of options
In excess of 100 recognised variants
In fact permutations are infinite
Better to treat options as lying on continuous spectra of
the procurement variables
 The most common routes
Four systems dominated the UK industry in recent times
Traditional, Design & Build, Management Contracting &
Construction Management
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7. The “Traditional” or conventional route
 The process
Client employs designers to produce complete design
Contractor tenders on PRICE after design complete
Tenders sought typically on competitive, selected basis
Often lowest price wins
Winning contractor carries out construction through
employed sub-contractors
Client pays price in monthly instalments based on amount
of work done
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8. The “Traditional” or conventional route
 Advantages
Client retains good control of design process
Widely used - all parties understand roles etc…
Fairly even split of financial risk between main parties
Cost “certain” after tender and tenders easily comparable
 Disadvantages
Slow because design and construction sequential
Contractor’s expertise not used in design
Creates “sides” – potential for adversarial attitudes, conflict
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9. The “Traditional” or conventional route
 Variants
Subcontractors may be “nominated” – specified by client –
potential for divided loyalties, blurs responsibilities
“Accelerated” – tenders sought on outline design – may be
quicker but cost certainty lost, time pressures on design etc
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10. The design & build route
 The process
Client employs designers to produce outline design
Contractor tenders PRICE to complete design and perform
construction
Tendering usually competitive & selected & best “overall
submission” should win – price, design, programme etc…
Winning contractor carries out design and construction
through employed design consultants and sub-contractors
Client pays price in monthly instalments as traditional
Significant shift in risk to contractor c.f. Traditional
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11. The design & build route
 Advantages
Design & construction overlapped – rapid procurement
Contractor’s expertise influences design – cost savings
Early cost “certainty” possible
Client has single point of contact with team
 Disadvantages
Client relinquishes control over design – quality problems?
Client changes difficult after contract let
Adversarial attitudes remain, perhaps worse than traditional
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12. The design & build route
 Variants
Client may require contractor to employ same design team
as client employed – “Novation” – potential conflict of
interest, blurs responsibility, authority etc…
Tenders may be sought on “Guaranteed Maximum Price”
basis – redistributes risk as savings may be split between
parties. Arriving at the right “Maximum” is the key issue.
Most extreme form – “Package” or “Turnkey” – approach.
Contractor provides full service – ALL design, even
finding site, finance etc in some cases.
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13. The management contracting route
 The process
Client employs designers to produce outline design
Contractor tenders on estimated COST to perform
construction + fee to manage process
Tendering usually competitive & selected
Best “overall submission” should win – fee, management,
programme, track record etc…
Winning contractor joins team – advises designers in
completion of design, organises construction in parallel by
employing “works package contractors”
Client pays COST of packages + fee on monthly basis
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14. The management contracting route
 Advantages
Design & construction overlapped – rapid procurement
Contractor’s expertise influences design – cost savings
Contractor in team reduces adversarial nature of process
Client retains control of design
Late changes in design can be accommodated
 Disadvantages
Client assumes high level of TCQ performance risk
Client involvement high
Possible time pressures on design
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15. The construction management route
 The process
Same as management contracting except that client
employs each package contractor directly
 Advantages
Client can exercise high degree of control over entire
procurement process
 Disadvantages
Client share of risk is even higher than MC
Client commitment/involvement is very high
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16. Further reading
Many texts give general descriptions of the procurement routes
and associated contracts as part of coverage of the industry: e.g.
Chapters 7 & 8 of Harvey & Ashworth, The construction industry
of GB, Newnes and Chapter 6 of Cadman & Topping, Property
development, Spon.
More detailed consideration of the routes can be found in:
Masterman, An introduction to building procurement systems,
Spon and Franks, Building procurement systems, Spon.
Murdoch & Hughes, Construction contracts – law and
management, Spon.As its name suggests gives an in-depth
coverage of the legal aspects and case law etc…
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