Selection of Procurement Strategy

Selection of Procurement Strategy1.0 doorwayA major determinant of stray success is the take upion of the much or less appropriate procurance strategy which ordain be used as a frame work to acquire the go of paids in the assiduity (Morledge at al, 2006). This report presents the stages that beat to be gone done in other to take on the lift forbidden procurance strategy for Janus Leisure plc. to begin with a effort competent code strategy hind end be set aparted, on that point atomic number 18 many variables that lack to be considered. However, Masterman (2002) explains that with obediences to procurance, sole(prenominal) those sub strategies which go issue make an impact on the ultimate procurance strategy should be considered. He because describes the process as consisting of understanding the lymph gland, assessing lymph node objectives, detecting the pick up constraints including risk of exposure of exposures and the manner of organising the contrive and social organization. These points leave behind indeed ground level the framework of this report.1.1 customerClients in the kink industry ar becoming complex in their unavoidablenesss which has subsequently led to change magnitude guest dissatisfaction levels (Latham, 1994). It is thusly essential to identify the type of thickenings being dealt with as this pull up stakes have an influence in the choice of procurement order. Based on the categorization of leaf nodes by Masterman (2002), Janus unfilled plc can be described as a private b middle-agedness who generates its funds from its intern whollyy line of work activities and therefore argon c erstrned with pull in maximisation wherever possible. Furthermore, we can in like manner say that, the invitee is an unfledged knob in terms of construction as their main business focus is horse racing. It does non involve in construction activities oft and yet owns 6 racecourses. However, it is as magnetic coreed that, the node is very witting of what floor of its business should look like. Fin everyy, we can in any case say that Janus void is a hourary client who requires the courseing to enable it them house their business activities. This therefore agency that construction represents only a small percentage of their one-year turn over.1.2 PROJECT SCOPEThe company recollects to improve its flagship racecourse at Melchester which hosts the 5000 guineas stakes every year. The proposals are to be undertaken in two stages form Idemolition of the existing grandstandthe construction of a y come out of the closethful 5-storey grandstand to include an extensive conference and exhibition centre (10,000m2 numerate) and associated external works (budget 25M)refurbishment of two existing stands circa 100 old age old (budget 5M)Phase IIconstruction of a new 120-bed hotel deftness and casino (budget 12M) to be operational for the 2013 5000 Guineas Stakes meeting in mid- f amily line1.3 CLIENT OBJECTIVESJanus vacant plc has to consider a number of factors in other to choose the outperform procurement strategy for the determine. To provide guidance for client on their finality of the close to appropriate procurement strategy to adopt, turner (1997) proposed a attend of seven factors to consider.Comp allowion clock translationcomplexityquality expenditure certaintyprice ambition oversight and accountabilityThese give be discussed in detail in the next sub section.Client requirementsThe objectives and requirements of the client in this report have been categorised under cost, quality and clock expectations of the client. They also represent the criteria used by the client in the sagaciousness of the procurement strategies. The following criteria as adopted from Turner (1997) has been established and discussed. hailRelevance of cost certaintyJanus untenanted plc is a company which puts at maximising profit wherever possible. It go forth the refore non intend to spend more than it has budgeted for each section of the development. This implies that, extravagantly on the anteriority of the client is to have a average idea of how oft dates the project result cost foregoing to the blow up of the echt construction. Since the company desires to unendingly invest in all of its venues over the coming years. It give therefore be pickable that any strategy elect should be able to give an idea of the tote up commitment to be expect, since the project is mannequind, it means that, this allow be a tougher consideration for the introductory soma except bequeath be achieved to higher degree of accuracy I the plump for phaseRelevance of price contestationJanus leisure has a total budget of 42M for the entire project. With this commitment in mind and a fair certainty of the cost, the client does non really place so much focus on the competition for phase 1. Though Turner (1997) explains that outstrip marketplace price can only be obtained through competition, the client is of the view that factors such as time requirement are of more concern to him and any bid which was around his budget was alright for the primary phase. With regard to the arcsecond phase, since there go out be more time., it is the bearing of the client to use competition in other to attain the best price as such therefore any opportunities for price competition will be takered more.Organisation and accountabilityIt is assumed that the client is entirey aware of the fact that, risks go with premiums. However, Janus leisure plc prefers a genius point debt instrument for the construction of the hotel and will be prepared to compensation a premium for that. Clamp et al (2007) argues that leaving both fig and construction within one entity could have compromising effects on the quality however, Janus leisure will prefer to have to deal with upright one company in other to eliminate the hassle of elongated negotia tions with many professionals. The client requires that it sustains the control for the succeedment of the low phase because it is of more importance to him as he needs it to be ready by 2012.TimeEarly comp allowionThis is a very high precedency for the client because they intend to return the 2012 5000 guineas stakes to Melchester. This cl primeval states that phase 1 should be competed and ready for commissioning before that time. It is known that the duration of the fist phase is short as such early grow in needs to ensure early completion. Similarly, with the second phase, it must be established be 2013. Though this seem to be a longer, advantage should be taken to obtain more competitive while maintaining grateful standards of quality. in that respectfore, time is of a higher priority in phase 1 than in phase twoPhased requirementsThe proposed developments are in two phases and should be carried out as such, the duration of the startle phase is 2 years which should be ready by mid-September 2012 while that of the second phase is three years and should be lie withd and ready to use by mid September 2013. As a private client, completion time is of a high priority.QualityVariationsJanus leisure plc has been describes as an in experienced client, as such there is the hypothesis for the client to want to change his mind as the project progresses. Furthermore, the extent of the refurbishment in the first phase cannot be fully envisaged. This implies that, there is an increased possibility of significant variations. However, variations will be minimal in the second phase because, Janus has built some hotels in the past and therefore know what exactly they will want to have in this hotel. It is important to consider variations because they entail high costs and have effects on the construction period and also each procurement frame deals assortedly with variations.Level of prestigeHorse racing is a sport that is patronised by a considerable cross- section of the humanity as tumesce as wealthy and rich however, the proposals by Janus leisure does not call for a prestigious purport though the requirements of the conferencing, banqueting as well as the hotel should be solid and incorporate state-of-the-art technology.Project complexityIn terms of complexity during procurement, functionality of the project is not an essential requirement however complexity of the construction itself and the environmental services is usually very significant (Turner, 1997). The requirements of the project are fairly unprejudiced as the major requirements were air conditioning and public address organizations therefore complexity is not a great problem in the first phase. With the second phase, more facilities like escalators, lifts and air conditioning facilities will be provided but that notwithstanding, we can say that both faces require a genuine quality.RiskIt is important that any risks to the project are to be efficaciously managed by the party that is best able to handle them. And every procurement system distributes the risks mingled with the client and asserter (Masterman 2002). rough procurement systems deal more of the risks to the client and others more to the affirmer. Since the client want to control of the first phase, they accept to have the risk even though they will prefer to share them wherever possible. Because the client is quite inexperienced in construction, will prefer to leave to as much of the speculative risk as possible with a single promise entity though they are aware this might mean payment of premiums for the second phase because it will need time to organize its business activities.2.0 procural SYSTEMSWith respect to the client requirement, quartette procurement manners have been selected to be appraised because of the peculiar characteristics they have which whitethorn be of interest and suitability to the project. They areTraditional orderDesign and advanceManagement dete ctionConstruction management2.1 TRADITIONAL METHODThis method is referred to by some authors and researchers as the separated system and it is the oldest form of procurement (Masterman, 2002). It is characterised by the separation between the function and the construction phases and therefore offers triple points of state (Oyegoke et al ,2009). The client first appoints consultants who will be obligated for the send off, cost control and contract administration. Once the jut in complete, the client and his group invites tenders from satisfactory affirmers and eventually appoints one of them who will be trusty for carrying out the works. There is therefore direct contractual kinship between the client and the consultants and also between the client and the asseverator. The asseverator is responsible for all the workmanship and materials including work by sub-contractors and suppliers (Clamp et al, 2007). In some cases, the client could replace subcontractors or supplier s with whom the main contractor will have legal contracts. The figure infra shows the contractual sexual similitudes of this system.Fig 1 Contractual dealinghip The Traditional Procurement Method (Morledge et al 2006)Use of Traditional method of procurement match to Murdoch and Hughes (2008), following the criteria developed by the Joint Contracts homage (JCT 1988), the following are a proposed a tend of instances which tralatitious method is most sui tabular array.The employer has caused the design to be prepared and for the purposes of the building contract takes responsibility for it.The employers designer is sufficiently experienced to co-ordinate and lead the design team and to manage the interface between design and production.The design is substantially complete when the contractor is selected.An independent quantity surveyor will be used to propose and control the financial aspects of the projectThe contractor is selected on the basis of the contractors label and ca rries the risk that the estimate may be wrong.The employer reserves the right to select sub-contractors for certain parts of the work.Prime cost sums including employer-selected sub-contracts, do not form the major proportion of the contract sum.The employers agents feel that it is important to use an acceptable negotiated form to ensure a fair and familiar distribution of risk.The employer makes no explicit choice and the advisors do not raise the issue. capablenessWith regard to the requirement of the client, the traditional method will be very suitable with regard to price certainty which is high on the priority of the client for the first phase. This is because designs will be completely finished and bills of quantities produced which will be priced by tendering contractors. As such, Janus will know its financial commitment to a high degree of accuracy before the start of the project. However, the problem will be whether there is exuberant time for full designs to be produced followed by tendering before actual construction starts. This is a concern because completion time is equally of high priority to the client and so the traditional method might not be so suitable in that regard. The traditional methods is also one of the best ways to secure best market price as there is competition between tendering firms, however, since competition is not high on the priority of Janus leisure plc for the fist phase, the second phase will take advantage of that. Since variation is to be expected in the project during the first phase, the traditional method will allow, Janus leisure, a flexibleness of mind until when the tender documents are prepared for bidding. After this, changes in specification might be very costly and time wasting. It will be suitable for the second phase as well because variation is expected to be even lower. Janus leisure will not be favoured in terms of his accountability requirements for the second phase because Oyegoke et al (2009) explai ns that this system introduces ternary points of responsibility.2.2 DESIGN AND BUILDThis system is characterised by the integration of the design and construction phases. Masterman (2002) explains that, the commonly used integrated system is the design and build method however there are other variants such as novated design and build, develop and construct, software system deal and turn key projects. Within this report, only the design and build variant is considered.The approach leaves full responsibility of the design and construction with a single organisation the contractor. Rashid et al (2006) explains that, the selection of the most suitable contractor is based on the brief and the specification assumption by the client at the time of bidding. In effect, the contractor has the total responsibility for all the works, co-ordination and integration of the whole process as well as appointment of any consultants, specialists or subcontractors (Murdoch and Hughes, 2008). Figure 2 .2 shows the contractual sex act with this system.Fig 2 Contractual kinship The Design and Build system (Morledge et al 2006)Use of the design and build methodAccording to Murdoch and Hughes (2008), there are some characteristics of a project which determine whether the design and build method will be suitable for a particular project, theses are listed belowThe clients familiarity with construction(experience)The relative importance of client priorities (time, cost, function, quality, think of for money etc.)The expert complexity of the projectThe need to make variations to requirements as work rejoinderThe patterns of responsibility and communicationThe need for an early start on site.suitabilityWith regard to the requirements of Janus leisure plc, this method will be suitable in regard to project completion time because of the integration of the construction and design phases will make the project faster, furthermore, since there is a lump sum fixed price for the bespoke des ign and construction (Masterman, 2002) the client will equally have high degree of price certainty prior to the start of the project. This method will be suitable because for the client in the second phase in terms of his risk allocation requirement as most to the risk will tend to be with the contractor however, it may not be suitable for the first because the client wants to retain more control. to a fault, design and build will be suitable for the client because the client will only have one contractual relation with the contractor which will march his responsibility criteria. However many researchers including Masterman (2002) and Turner (1997) have argued that since both design and construction are left with the assure firm, there could be possible compromises in the quality expectation in terms of both design and more importantly workmanship and materials, I will also argue that since the client will give a comprehensive brief with myopic variation for the second phase, this should not be a big problem. It is again worthy to note that the system will not particularly be suited to the variation requirement of Janus leisure plc for the first phase. The criteria established the possibilities of variations as the project progresses, especially in the first phase but the design and build system freezes excessive variation at an early stage when the contract is signed and any changes by and by that will tend to cost the client lots of money and time. Fortunately, Janus is already aware of this. Again, leaving both the design and construction on the contractor means leaving more risks with him and this will involve payment of premiums as such.2.3 MANAGEMENT CONTRACTINGThis is a method of procurement in which the management contractor is paid a fee by the client to manage the whole building process and therefore has direct contractual relations with all the works contractors (Morledge at al, 2006). The management contractor advices on the buildability of the designs as well as value management during the design. The construction works are let out in packages therefore there is early start with this method. The management contractor does not take part in the actual construction but provide preliminaries for the project. The figure below shows the contractual relation with the management contracting form of procurement.Fig 3.Contractual relationship Management contracting (Morledge et al 2006)Use of Management contractingMurdoch and Hughes propose a list developed by the Joint Contract Tribunal (JCT, 1987a) which indicates suitable draw in which to use Management contracting. The list is as followsThe employer wishes the design to be carried out by an independent architect and design teamThere is a need for early completionThe project is fairly largeThe project requirements are complexThe project entails, or might entail, ever-changing the employers requirements during the building periodThe employer requiring early completion wants the maximum possible competition in respect of the price for the building works.SuitabilityThis system of procurement is desirable in respect of the client priorities of completion time because of the crossroad between design and construction, furthermore, as the work will be let out in packages, competition, though not of a high priority to the client, can be used to attain best price. Under this procurement method, the client will also be able to have a fair certainty of the price before the start of the project. The system will also be suitable in terms of the variation requirements of the client for the first phase because the full design is co-ordinated and developed by the client and his team, as such there is much room for flexibility until that package has been let out on contract. With this procurement system, much of the speculative risk is with the client while works contractors take just a little (Clamp et al, 2007) as such this will be acceptable for the first phase but no t quite meet the expectation of Janus leisure for the second phase as they prefer to leave much of the speculative risks with the contracting firm.2.4 CONSTRUCTION MANAGEMENTWith this procurement system, the client appoints the construction manager on the basis of a fee to manage, prepare and co-ordinate the design and construction as well as advising the design team on the buildability of the design (Morledge et al, 2006) as such the client does not allocate risk and responsibility to a single firm because the works are subsequently let out to packages contractors who are in direct contractual relation with the client. The contractual relation with this procurement type is shown below.Fig 4 Contractual relationship Construction management (Morledge et al 2006)Use of Construction managementAccording to Murdoch and Hughes (2000) Construction management is suitable when the characteristics of the project fulfils in part or whole of the followingThe employer is familiar with constructi on, and knows some or all of the professional team.The risks associated with the project are dominated by timeliness and cost (e.g. the employer may be a private sector employer requiring a commercial building).The project is technologically complex involving diverse technologies and sub-systems.The employer wants to make minor variations to requirements, as the project proceeds.There is scope for separating responsibility for design from responsibility for management of the project.The employer requires an early start on site.The price needs to be competitive, but value for money is more important than simply securing the least possible cost.SuitabilityThis procurement method similar characteristics with the management contract variant, however, there are some differences. The completion time requirements, variation requirement and quality requirements is the identical as in the management contracting. However, this system leaves virtually on all the risk on the contractor a trait which will not suit the requirement of Janus leisure plc. Furthermore, the is no certainty of price as the system works with target sum but advantage can be taken of price competition as the packages are let out to package contractors. Another point worthy on mentioning is that, this method will not particularly suit the responsibility requirement of Janus leisure, who prefer to have to deal with just one contractor.2.5 RISK SHARINGThis determines the tryst of the risks that occur to the party that is able to handle it more adequately than the other. Some procurement methods allocate more of the risks to the client and others more to the contractor, Janus leisure plc is spontaneous to accept some of the risk provided they will be able to forbid it before it occurs for the first phase but will prefer to leave much risk on the contracting firm fro the second phase. The different procurement methods have limits to which the client can tranfer risk. A speculative risk chart accordin g to the different procurement methods can be seen belowtable 1 Speculative risk (Clamp et al., 2007)3.0 SELECTION PROCESSThe aim of the selection process is to accurately identify the best procurement alley which meets and satisfies the client requirements best (Masterman, 2002). The tables below shows the results of the assessment criteria for the two phases of the project put off 2 priority checklist for phase 1Table 3priority checklist for phase 23.2 PROCUREMENT SYSTEMS FOR PHASE 1Based on the rating on table 2 and the clients success criteria, the management contracting procurement system has been recommended to be used in the movement of phase 1Reasons for darling wordIt has been established already that time is crucial to the first phase of the developments, as such, this procurement system is suitable because it allows construction to start early once a work section has been completely designed, for example, immediately the foundation are fully designed, the client and his team can give that part out on contract as the designed is continued.The client still retains full control of responsibility of the design as the construction goes on, so since Janus indicates the possibility of variations this will be very much accommodated while the management contractor contributes to the buildability of the designs.The client and his team will also have the chance to select materials and techniques in other to achieve the standard it requires which still reduces maintenance costs.3.3 PROCUREMENT SYSTEMS FOR PHASE 2Based on the fine analysis of the critical factors of success for the project as well as the adoption of the table 3 above, the competitive design and build system of procurement has been chosen for the construction of phase 2.Reasons for recommendationThe client rates time as important as such, since the contractor is in charge of both the design and construction, there will be an early start of the project on site which will guarantee completion to schedule. However, since the responsibility of the design will be that of the contractor, the client will have to provide a good brief to the contractor in other to eliminate any confusion. This will be required to a great extent so that variations will be reduced to the barest minimum.The design and build procurement method is also best for the phase because the entire of design and construction has been shifted to the client and this suit Janus as a client thought the implication is the likelihood for an increased cost. The client is satisfied with this option because he will have enough time for his own business activitiesAlso, since Janus does not require direct professional accountability for the design and consultants for the second phase, this system proves to be very suitable because the design and build system leaves the entire accountability between the contractor and his team and Janus only has a single contract with the main contractorJanus requires a high degree of price certainty before the start of the construction and the design and build system offers this. Moreover since the requirements indicated that the project is not so complex in terms of technical advancement, the system will be adequate and certain to deliver a product of good quality and workmanship.Finally, the adoption of the competitive variant of the design and build procurement system will give the client and his team the chance to select the best bid from the contractors as a result of the tenders that will be submitted based on the client brief.3.3 ORGANIZATIONS TO BE COMMISSIONEDThe consultants to be commissioned for the first phase are as followsManagement Contractor active very early in the project to provide expert association to other consultants on the constructability of the designs.Architect Prepares all the necessary architectural designs in accordance with the clients brief and with the management contractorQuantity Surveyor Carry out feasibility studies, prepa re cost estimates and cost plans in conjunctive with the designs. Also carry out interim valuations for payment to works contractors, in conjunction with the management contractor.Engineers Prepare the structural, mechanical and electrical engineering drawings to be priced by the quantity surveyor and form part of the contract documents for executing the works.For the second phase, the client needs to contract a design and build contractor who will be in charge of both design and construction of the facility4.0 CONCLUSIONThe proposals by Janus leisure plc have been thoroughly examined and discussed, going through the range of procurement methods and applying the table by CRT, it has been recommended that for a successful execution of the clients developmental proposals, management contracting should be adopted for the first phase while design and build is adopted for the construction of the hotel in the second phase. However, it must be stated that, the success of the project does not only depend on the procurement method used but also on the efficiency of the consultants and the contractors used. Therefore the client should be methodical in the approach for selecting the professionals for the execution of the work.