Integrated procurement system

The key feature of integrated CPS is the rigid integration of design and construction processes. This category of CPS incorporates all of those methods of managing the design and construction of a project where these two basic elements are integrated and become the responsibility of one organisation, usually a contractor (Masterman, 2002). The main system in this category is the traditional (pure) D & B system (or design and construct) and remaining systems in this category are variants of the D & B system.

Traditional (pure) D & B procurement system

The traditional (or pure) D & B procurement system allows a client to contract D & B organisation to manage both the design and construction process as a single point of contract (Akintoye, 1994; Walker and Rowlinson, 2008). Moreover, the contractor is responsible for the construction and full design, embracing the production of the aesthetic and working drawings together through obtaining statutory approvals (Harris

Client

Architect acting as design team leader and

project manager Design

Consultants Quantity

Surveyor

Main contractor

Nominated/named subcontractors

Direct management and labour force

Domestic subcontractors

and McCaffer, 2001). Masterman (2002, p.66) defined D & B system as “an arrangement whereby one on contracting organisation takes sole responsibility, normally on a lump sum fixed price basis, for the bespoke design and construction of a client‟s project”. These characteristics, especially the sole responsibility of one organisation for both design and construction facilitate the functional and contractual relationship between client and contactor when compared to other procurement options.

Many research studies advocate that the D & B procurement system can result in a reduction of an overall project duration, because of the increased client involvement in the construction process, the early involvement of the D & B contractor, and the overlap of the design and construction processes (Griffith, 1989; Akintoye, 1994;

Ndekugiri and Turner, 1997; Chan, 2000; Moore and Dainty, 2001). Moreover, as shown in Figure 3.7, the functional and contractual relationships of traditional D & B procurement systems are simple. Furthermore, the single channel in communication and coordination enhance the simplicity of the procurement process. The main steps of the D & B procurement process involved: preparation of client‟s requirements;

obtaining tenders; evaluation of tenders (based on the basis of design, specification and price); acceptance of the most appropriate tender and implementation and completion of the project (Masterman, 2002; Cox and Clamp, 2003).

Key: Contractual relationship Functional relationship Optional appointment by client

Figure 3.7. Contractual and functional relationships, D & B system (Masterman, 2002, p.70)

Variants of D & B procurement system

The literature shows that variants of the D & B system emerge as a popular option for procurement (Bound and Morrison, 1993; Ndekugiri and Turner, 1994; Akintoye, 1994;

Client

Contractor managing, designing, and building bespoke project to meet client‟s specific needs

Supervisory and/or cost consultants

Direct management and labour force

Domestic subcontractors

Chan, 2000; Doloi, 2008). Three major variants of D & B can be identified from the literature: Enhanced D & B (i.e. novated D & B, develop and construct); package deal;

and the turnkey method.

Enhanced D & B

„Develop and construct‟ and „novated D & B‟ together can be termed as enhanced D &

B. The salient feature of enhanced D & B is that the clients would develop design by employing their own team of consultants to a point where the significant planning issues are clarified and then require tenderers to submit a conforming bid based on the developed design (Anumba and Evbuomwan, 1997; Deakin, 1999). Therefore, the main difference between traditional (pure) D & B and enhanced D & B is the extent to which the design of the project has been developed by the client before inviting tenders (Masterman, 2002).

Novated D & B: The client appoints consultants to prepare conceptual design and prepare D & B tender documentation for the project. Once the contractor has been appointed the novated design team acts as contractor‟s consultants to carry out detailed design. The contractor is responsible for the design development, working details and supervising the sub-contractors with assignment (i.e. novation) of design consultants from client (Cartlidge, 2004). As such, Ng and Skitmore (2002) argued that novation is a mutual agreement which substitutes an old obligation for a new one, where the process of novation encompasses a contract in its entirety, the new contract replaces the original one completely and may result in one or more of the original parties being substituted. This kind of set up enables the design to proceed more smoothly from the pre-contract to post-contract stage (Masterman, 2002). However, novated consultants will not be available to advice clients from the detailed design stage onwards. This is because the clients‟ design team contractually become the contractor‟s consultants for detailed design preparation.

The basic principles of traditional D & B are applicable within the enhanced D & B. For instance, Doloi (2008) noted that the contractor, by accepting the contract, instigates the process of novation and is bound by the contractual obligation of design responsibility, and therefore the basic principles of the D & B are applicable within the novated D & B procurement approach. However, the client has a greater degree of control over design and quality in novated D & B as the contractor is appointed after the initial design. The system is also suitable when the time for completing the project is „of the essence‟; the budget for the project is fixed and extra resources of funding are very limited; and the project involves special design and technical requirements (Chan,

1994; 1998). Doloi (2008) revealed eight factors that have an impact on the success of the novated D & B approach: impact on initial design upon successful implementation of the novated system contracts; clear demarcations of clients‟ involvement in the post-novation stage; the process of the design team selection; clarity and understanding of the contractor‟s obligations; the effect of post-novation morale on project outcomes;

design team working experience; the working relationship between design team and contractor; and specific novated experience of the design team. Ng and Skitmore (2002) revealed benefits of the novated D & B system to contractors:

 it is less costly at the bidding stage than the traditional D & B system;

 the design has been outlined by the client;

 contractors do not have to go through various design layouts of a building as they do for the traditional D & B system;

 contractors can save time and effort identifying the client‟s needs;

 contractors should have more knowledge of the project as they have been involved with it since the conceptual stage; and

 the project delivery time can be saved in the time leading up to the start of construction, as well as during the construction, if the contractor was involved early on in the design stage to have an input into the buildability of the project.

Moreover, Ng and Skimore (2002) identified four major risks, mainly to contractors, associated with novated D & B:

 novated consultants‟ (design team) ability to perform: unsuitability of design team, poor performance of design team; inferior initial design; inheritance of design error made by a design team unfamiliar with local statutory requirements;

 lack of the design team‟s fee for the post-novation phase: inadequate fee left for completing the design; poor quality of work due to lack of fee; poor morale of design team due to tight budget;

 working relationship with design team: loyalty of design team to client, poor previous working experience and lack of previous knowledge of the design team;

and

 timing of novation: alternatives not carefully explored and examined, poor relationship with client.

Develop & Construct: Design consultants are appointed to design the building to a certain stage (may be up to RIBA stage D: detailed design) and then the contractors complete and guarantee the design and competition using the contractors‟ own

designers in terms of detailing taking into account of the construction technique to be adopted for the project (Akintoye, 1994; Seeley, 1997; Cartlidge, 2004). In brief, the D

& B organisation‟s contribution to the design process is primarily in developing the construction information from the client‟s concept design (Potter, 1995).

The literature reveals several pertinent issues associated with the enhanced D & B.

These are:

 the lack of clients‟ engagement over the currency of a project undermines the overall performance and success in projects (Akintoye, 1994; Molenaar and Songer, 1998);

 the lack of adequate clients‟ brief (client requirements are not being adequately defined) reported to have adverse impacts on a contractor‟s ability to add value in the projects (Siddiqui,1996) and late design changes, cost quality and performance requirements (Anumba and Evbuomwan, 1997);

 difficulties faced by the design team as a consequence of novation and its change in employer; pre-novation working for the client, post-novation working for the contractor (Chappell, 1994; Speed, 1995);

 lack of sufficient pre-novation time to produce good design solutions is a major theme of dissatisfaction of the design team (Akintoye and Fitgerald, 1995) and the successful contractor also has to spend time clarifying client requirements and liaising with the initial consultants and time spent sourcing and seeking approval for alternative materials and design changes (Anumba and Evbuomwan, 1997);

 inadequate time spent by the design team with the contractor at the end of the tender period for detailed checking of errors and omissions and in assisting with risk assessments remained problematic in the transition process (Chan, 1998);

 the outline design, which form as the basis of tenders, inhibits the ingenuity and creativity of the tendering consortia by limiting them to the initial consultants‟

vision of the desired facility. Thus expertise of the consortia is not fully exploited at the most influential stage of the design process (conceptual/preliminary design) (Anumba and Evbuomwan, 1997);

 there is a significant amount of rework and duplication inherent in existing procedures, particularly where the initial consultants are not novated to the successful contractor i.e. develop and construct (Anumba and Evbuomwan, 1997); and

 the client‟s influence on the design team‟s course of action over the post-novation phase exerts adverse impacts (Swindall, 1993).

Package deal

„Package deal‟ is a special type of D & B variant where the client chooses a suitable building from a catalogue (Ashworth, 1996). The contractor provides standard buildings or system buildings and in some cases there is a possibility to adapt to suit requirements such as space and functional requirements (Cartlidge, 2004). Clients would be able to purchase a total package, virtually off the shelf, to satisfy their building needs at an economical price. The client is often able to view similar types of buildings that have been completed elsewhere (e.g., industrial buildings - timber or precast concrete that needs to be erected very quickly; the client provides the site, relevant design information, performance specs etc.). In practice the fact that package dealers provide an adopted standard product means that they are unable to satisfy the full needs and criteria of the majority of clients (Masterman, 2002).

Turn key

In a turn key arrangement, the contractor provides the total resources required, including the finance as well as the design, construction and fitting out (Aqua Group, 1990). The responsibility of the contractor often extends to include the installation and commissioning of the client process or other equipment and sometimes the identification and purchase of the site, recruitment and training of management and operatives, the arrangement of funding for the project and latterly, under the Private Finance Initiative (PFI) the operation of the project (Masterman, 2002).

The PFI is an alternative method of procuring services for the public sector (Owen and Merna, 1997). Roe and Craig (2004) stated that PFI involves sub-contracting the design, building and operation of public services (particularly capital assets and related activities, such as maintenance, used in those services) to private sector companies in such a way that the operational risk is transferred from the public sector to the private sector. Additionally, the same authors attempted to differentiate the misguidance between PPP (Private Public Partnerships) and PFI by drawing explanations. While PPP serves as an alliance between public bodies, local authorities or central government, and private companies, PFI schemes generally provide the capital assets and services relating to that asset as well as the public sector specifying a level of service in return for a unitary charge. Furthermore, PFI transfer operating risks to the private sector, which PPP do not involve transferring risk to the private sector. PFI

arrangements are generally called as concession contracts and the major variants are as follows:

 BOT - Build, Operate, Transfer

 BOO - Build, Operate, Own

 BOOT- Build, Operate, Own, Transfer

 DBFO- Design, Build, Finance, Operate

The fundamental advantage of this method is that the client has an opportunity to take over an operational facility or increase of PFI schemes by reducing the public sector‟s capital expenditure in the short term while establishing commercial viable developments in the long term.