LITERATURE REVIEW

2.1 INTRODUCTION

Public procurement systems in Nigeria has over the years been grossly abused especially in the construction industry leading to cost inflation, delays in project delivery, poor quality of work, and project abandonment. For a developing nation like Nigeria, which is still battling with the realities of providing adequate infrastructure and social amenities such as educational and health care facilities as well as decent housing for its teeming populace, the construction industry has a monumental role to play (Faniran, 2002).

After independence, especially between 1960s and 1980s, the construction industry was a major contributor to the nation’s GDP, accounting for up to 70 per cent of the GDP (Planning Committee on the National Construction Policy, 1989 as cited by Oladipo, 2007). This placed the construction industry in a very strategic position to the nation’s developmental efforts. However, the industry has been troubled by a combination of low demand, consistently low productivity and poor performance since the general decline of the national economy started at the end of the 1980s (Adeyemi et al, 2005). This has significantly reduced its contribution to the national economy to a meagre one percent of the GDP in 2002 (Oladapo, 2007). According to Mshelbwala, (2005 in Ayangade et al. 2009), the construction industry in Nigeria today is characterized by a wide range of problems including high cost of procurement, substandard products, project collapse and abandonment.

Poor performance of construction projects in Nigeria over the years has been attributed to the wrong procurement selection decisions and continuous use of the traditional framework notably in the public sector (Oyedele, 2012). It is pertinent to note that each construction project is unique with its own characteristics and requirements; and for a construction project to be successful, its procurement strategy must be carefully selected to satisfy the technical needs and/or objectives of the project. Selected procurement method must also address issues of cost management, appropriate technical features and timely delivery for client satisfaction and contractors' needs (Alhazmi, 2000).

Reducing the cost of public project’s delivery is a major challenge of governments worldwide and increasingly improved procurement systems and methods are being considered as unique means of achieving lower costs for infrastructure delivery and value for money. Procurement systems and methods are important aspects of the construction industry for two reasons; first, procurement of construction projects involves series of interrelated and sequential processes. The effectiveness and efficiency of these processes have a considerable impact on the success or failure of a project. Secondly, there are several procurement methods available today for a developer to adopt when procuring a project. However, a major challenge faced by project developers is deciding which method to adopt among the available procurement options to minimize costs and ensure timely and quality project delivery.

Numerous studies conducted in previous years have also demonstrated the impact of various procurement systems on construction cost management and procurement related factors on final outcome of a construction project (Ogunsanmi, 2013; Eriksson et al, 2012). While the various industry reports (Latham et al) advocates a move away from adversarial practice, there are also concerns that existing delivery options have not been appropriately utilized in the procurement methods (Alhazmi et al, 2000).

This research study is then carried out to examine various procurement systems and its impact on effective cost management in the construction industry and timely delivery of construction projects. This chapter will also review literatures of previously conducted studies relevant to this discourse with a view of pointing out the deficits and bridging the gaps where necessary.

PROCUREMENT SYSTEMS

The construction industry is an open system, and is quite sensitive to change; its characterization is determined by the operating external environment, which consists of subsystems such as economical, political, financial, legal and technological (Rowlinson, 1999). This has made the industry to be at the mercy of the ever changing external constraints occasioned by the challenges posed by these subsystems in a growing economy. Thus, construction industries all over the world are striving to tackle these changes through the new and innovative ways of procurement systems, efficient resource utilization and better organization of projects to enhance timely and quality delivery. Consequently, construction project procurement systems practiced in the industry have also been subjected to changes resulting in many newly developed procurement systems that could be used to meet contemporary requirements.

Public procurement is a process of acquiring (usually by means of a contractual arrangement following public competition) goods, services, works and other supplies by the public service. The process starts from initial conception and project definition to project closure. A 2006 study by the Transparency International found that public procurement amounts to an estimated 15-30% GDP or even more. According to a recent African Development Bank Concept, public procurement accounts for 70% of budget of African countries.

The term “procurement” in construction has been defined in many ways (McDermott, 1999; Love et.al. 1998). Masterman (1992) defined construction procurement system to be “the organizational structure adopted by the client for the management of design and construction of a building project”. Love et. al. (1998) expatiated on procurement systems as, “an organizational structure that arranges specific responsibilities and authorities to participants and defines the relationship of the various elements in the construction of projects”.

Construction project procurement is vast in scope because it involves the gathering and organizing of myriads of separate individuals, firms and companies to design, manage and build construction products such as houses, office buildings, shopping complex, roads, bridges etc. for specific clients or “customers”.

The term “Procurement” stems from the word “procure” which literally means “to obtain by care or effort”; “to bring about” and “to acquire”. System is about “organized methods, approach, techniques, processes or procedures”. In this context, project procurement is very much concerned with the organized methods and/or processes and procedures of obtaining or acquiring a construction product such as a house, shopping complex, roads and jetty. It also involves arranging and coordinating people to achieve prescribed goals or objectives.

The Aqua Group (1999) described procurement as the process of obtaining or acquiring goods and services from another for some consideration. Masterman (1996) described project procurement as the organizational structure needed to design and build construction projects for a specific client. This is true to an extent because the process of “obtaining” a building by a client involves a group of people who are brought together and organized systematically in term of their roles, duties, responsibilities and interrelationship between them.

TYPES OF PROCUREMENT SYSTEMS

Today, there are various types of project procurement systems widely used in the construction industry. They range from the traditional system to the many variations of “fast-tracking” systems such as turnkey, design and build, build-operate-transfer, management contracting, cost-plus contracting etc. The introduction of many variations of project procurement system was induced by the quest for more efficient and speedier project delivery systems, effective cost management and better project performance. They are innovations to the traditional delivery method aimed at meeting the ever changing demand of clients or customers. Current procurement systems have brought changes not only to the process and procedure of project delivery but also the aspects of cost management and organization.

Nedo (1983), Masterman (1992), Frank (1998) and many other authors of literature on procurement have made attempts at categorizing procurement systems in many ways. Hence, based on existing recent literature, procurement systems are broadly categorized into four types in this study:

Separated systems;

Integrated systems;

Management oriented systems; and

Collaborative systems

Separated System or Traditional System

These systems are also known as ‘traditional’ systems. The major characteristic of these systems are the rigid separation of design and the construction process and lack of integration across this boundary (Cox et al, 1998). In this system, the client appoints an independent team of consultants on a fee basis, who fully design a given project and prepare tender documentation upon which competitive bids are obtained from the contractors. The successful tenderer then enters into a direct contract with the client and carries out the work under the supervision of the consultants.

However, this system offers minimal input of contractors to the design process (Rowlinson, 1999). The most common subtypes of the separated systems are the Lump Sum, Measure and Pay and Prime Cost.

Integrated Procurement Systems

Integrated Procurement Systems refers to a process by which one contracting organization offers to undertake sole responsibility of design and construction of a project. Although, the contractor assumes overall responsibility for project delivery, the client may also appoint an independent adviser to monitor quality and cost (Cox et al, 1998).

This system, as the name implies, integrates or combines the responsibilities of design and construction of the project (Ashworth, 2001). Both responsibilities are contracted out to a single contracting organization. It is also referred to as parallel or single responsibility procurement system in which the client will only need to deal with a single organization for both the designing of and the construction of the proposed project. The contractor in turn will have to engage and be responsible for design and construction teams.

Various subtypes of the integrated procurement system have been introduced to bring more competition into the process and to achieve the balance of allocation of risks (Valance et al, 1996). The range of services offered by the contractor varies greatly with these subtypes (Frank, 1997). With some subtypes contractors find sites, arrange mortgages, sales and finance. Some even operate the constructed facility in addition to design and construction. The common subtypes include the Design and Build, Package Deal, Turnkey, Develop and Construct, Novated Design and Build; and concession contracts such as BOT, BOO, BOOT etc., It has been widely acclaimed that closer design integration and construction is a benefit of the system (McDermott, 1999).

Design and build system falls under this category of project procurement system. Under this system, the client together with is/her consultants will prepare a tender or bidding document that include the project brief and client’s requirements and invite a number of contractors to bid. For the purpose of submitting tenders, the invited contractors will produce their own design, construction and cost proposal. Very often the successful contractor will enter into a contract based on lump sum price and a fixed duration for project delivery (Ashworth, 2001; Edmond, 2003).

Public Private Partnership (PPP)

The public private partnership is an attempt bygovernment to tap from the enormous privateresources by way of diversification and lettingprivate hands partake in the provision of fundamentalgovernment responsibility of providing basicsocial and infrastructural amenities.Different options of Public Private Partnership (PPP)have continued to emerge in the recent times and they are;

DBFT (Design, Build, Finance and Transfer): In this system, the developer develops the structure using his own generated finance, after construction and certain agreed period of ownership transfers thewhole facility back to the government.

BOT (Build, Operate and Transfer): in this system, the developer uses the project for a certain period of time before transferring the project to the government.

BOO (Build, Operate and Own): In this format, ownership is not transferred.

DBFO (Design, Build, Finance and Operate): the government owns the project in this system, but leasesit to the consortium.

BRT (Build, Rent, and Transfer): This system allows for the consortium to obtain payment from the government before the actual transfer of the project.

BOOST (Build, Own, Operate, Subsidize, and Transfer): In this procurement system, government provides incentives to users of the completed project in other to make it financially viable for the private consortium.

Management Oriented Procurement Systems

In this type of procurement system, management function is separated from design and construction. With these arrangements the client enters into a contract with an external organization, which is responsible for management and coordination of design and construction of the work. This implies that management of the design and construction of the project is contracted out to a contractor who acts as a management consultant on behalf of the client. The construction work itself is then commissioned to many “specialist” or sub-contractors who enter into contract with either the management contractor or the client.

This procurement approach was introduced based on the notion that a builder or contractor has more expertise to manage the design and construction of a project. As management consultant, the appointed contractor does not itself, carry out the design or construction of the project. Its main responsibility is to manage the design and construction by the design consultants and the many specialist contractors, respectively. There are three types of procurement method subtypes that fall under the category of Management Oriented Procurement Systems, they are:

1) Management contracting

2) Construction management

3) Design and manage

Management contracting and construction management contracting are forms of “fast-tracking” procurement approach whereby a contractor is contracted and paid a fee to manage, procure and supervise the construction of a project rather than to build the project. The actual construction works are contracted out to many package or specialist contractors. Under this arrangement the management contractor is employed as a construction consultant to be part of the client’s team.

The major difference between contract management and construction management contracting however is that, in the former the package contractors are in contract with the management contractor. In the latter, the package contractors (specialist sub-contractors) are in contract with the client or building owner.

In the design and manage system, a single organization or firm is commissioned as the major firm responsible for designing the project and managing its construction. This firm also does not carry out the work itself, but it is contracted out to a number of specialist sub-contractors or package contractors, who enter into contract with the client. A design and manage firm or company is engaged as a consultant for the client and becomes a member of the project team.

Collaborative Procurement Systems

In this system, there is collaboration between two or more parties to achieve successful project objectives through fair dealings, commitment, and shared investment. Various forms of joint ventures through combined investment of capital and expertise to undertake the works are also considered as collaborative procurement systems (De Valence et al, 1999). Partnering is the latest collaborative system that has enjoyed an increasing attention globally. Crowly et al (1995) stated that partnering is a decentralized organizational structure that allows better flexibility in meeting specific project needs through increased organizational competence. The common subtypes are Partnering, Joint ventures, Alliancing and Voluntary Arrangements.

PROCUREMENT METHODS EMPLOYED IN THE NIGERIAN CONSTRUCTION INDUSTRY

Contract procurement processes have a lot of challenges in the Nigerian construction industry.These challenges are evident in the various procedures used for selection of contractors andconsequently, performance of projects.Over the years, the public procurement system in Nigeria has been grossly abused leading tohuge loss of resources. In a bid to sanitize the system, the Federal Government set up a Due ProcessUnit under the presidency to undertake the reform (BMPIU, 2005). Due Process is defined as amechanism for ensuring strict compliance with openness, competition, cost accuracy rules andprocedures that should guide contract award (BMPIU 2005).

According to Ezekwesili 2004 (in Ayangadeet al. 2009), Due Process is geared towards infusing the needed fiscal discipline and sound economicprinciples to ensure transparency, accountability and rebuild public trust in governance by attacking themuch abused processes in the past. The Due Process mechanism was conceived among other things tobring sanity to public procurement system in the country through the attainment of this performancetargets:

ensuring sustainable participation by reputable, competent and reliable contractors;

settlement ofcontract price at near marginal cost;

faith by tenders in the tendering mechanism and

Value for money inprojects execution and delivery (BMPIU 2005).

The mechanism was also meant to carry out functions likeregulating and setting standards to enforce harmonized bidding and tender documents; formulation ofgeneral policies and guidelines on public sector procurement and upholding professional ethics andreporting erring personnel amongst other statutory functions.

Before the advent of the Due Process Policy, contract procurement process for publicconstruction projects in Nigeria was facing a lot of challenges. These challenges included theimplication of project failures on the image of the Nigerian construction industry in terms of projectabandonment, delay in project delivery, cost inflation, poor quality of work, inflated initial projectcosts etc. Arguably, poor methods and procedures of selection of contractor could belinked to this. However, these methods are not only subjective; decisions on public contractawards are based on informal relationships between contractors, public officials and projectteams. Thus, most of the models of assessment used for the selection of contractors are notbased on value and merits of bids but on tender price and “initial” lowest bids, as well as otherinformal factors (Olatunji, 2007).This challenge therefore triggers mismanagement of fundsthrough public contract by erring contractors as well as unethical practices by constructionprofessionals.

Evidently, imperfections in contractor selection are not limited to the developing economies alone (Doree, 2004; Wong et al, 2004). However, until recently, perhaps after the advent ofNigeria’s Due Process Policy, many African countries had not incorporated objectivity in theirapproaches of selection of contractors for public works. However, other African nations as well as other developingcountries in other continents can be motivated by the overwhelming success of the strategic application of DueProcess Policy in Nigeria.

According to Obiegbu (2005), the Policy was not only able to save thecountry over $1bn within 3 years of its application but there was also a critical factor of nationalrebirth–“no more business as usual”. Therefore, the need to motivate and sustain proactivepublic procurement system is inevitable.

However, in a recent study conducted by Ameh et al in 2013 to identify reviewing processes andprocedures for the selection of contractors for public construction projects in Nigeria under theDue Process policy between 2002 and 2008, it was found that most construction firms adopted the due process policy as the main procurement method although this was sometimes subject to the extent of the definitionof the client's requirements/objectives, allocation of project management responsibilitiesbetween members of the organization, simplicity/complexity of the proposed project in terms of size, technology of construction, and components, and the simplicity or complexity of the environment.

However, Oladapo [1991], in a study of procurement systems and project organizations asserted that12 organizational arrangements based on design, develop, build and the traditional approachmethods were feasible in the Nigerian construction environment. Eight of the systems wereassociated with foreign-managed construction firms and could be used successfully formedium to large size projects. However, the performance of these systems was closelyrelated to the design input and managerial control exercised by the contractor in overcomingthe management deficiencies of client and design team. Four of the systems, which arevariants of the traditional approach, were associated with indigenous construction firms andalso could be used successfully for the small to medium sized buildings.

CHALLENGESENCOUNTEREDWHEN EMPLOYING VARIOUS PROCUREMENT METHODS EMPLOYED FOR CONSTRUCTION PROJECTS IN NIGERIA

Generally, the processes of public contract procurement stipulated by BMPIU must pass throughthe following:

Project planning,

Advertisement,

Prequalification,

Short-listing,

Tender action,

Determination of Winning Bid,

Award of Contract and

project execution.

Mostly, consultants areengaged to handle Project Planning, while invitations for prequalification for major projects aredone via major national dailies and the Federal Tenders’ Journal. Prequalification is a major aspect of selecting contractors for public projects in Nigeria. Arguably, it is aimed at “filtering” outincompetent hands from the contract procurement system.Prequalification is a mechanism for assessing the capability of candidate competitors in order to ascertaintheir competencies in handling prescribed technicalities and financial investments of clients(Russell et al, 1998; Hatush et al, 1997).

It has also been significant in ensuring risk-free project delivery system and maximizing value for money in the project deliverysystem in the Nigerian construction industry. The assessment criteria are similar to global standards andhave been applied to generate national models for selection of contractors for public worksin Nigeria (Olatunji 2005). However, the principle of prequalification is to enact the ability ofcontract administrators to understand desires of clients and establish the best set of criteria to beused for assessing contractors (Bulama 2005). Thus, these criteria are not meant to be rigidbecause expectations of clients on performance and functional requirements of projects aredynamic and flexible (Herbsman et al, 1992).

Commonly faced challenges in the Nigerian construction industry when bidding for contracts using due process procurement method includes;

Presentation Problems; Most contractors with excellent performance records may not have impressive scores during assessments. This is largely attributable to presentation problems. It is either that the intending contractor does not have good understanding of how to present basic data required for assessment of his firm or that the client’s requirements are ambiguous. For instance, evidence of past performance does not mean pictures of executed projects; assessors expect copies of letters of awards and certificates of practical completion on similar jobs executed in the last five years. Commendation letters from previous clients may also be an added advantage. Moreover, when contractors are requested to present details of plants and equipment intended for the work, the list of plants and equipment by name, location, age, ownership details and availability details are required, not pictures and plant catalogues. Sometimes, information required for prequalification may not be limited to primary information contained in company profile; contractors may need to review company profiles to conform to the required size of information at every point in time. Therefore, smaller firms with specific verifiable documents are more likely to be considered at the expense of the larger and more competent firms.

Vulnerability of paper based prequalification; basically, guide for prequalification is based on contractors’ information and evidence given on paper records. This provides avenues to present the firm’s capabilities on facts based on documents showing relevant past experience and peculiar reputation in such projects. In most cases, public contracts are procured within a valid annual budget. This means most decisions in the construction process must be made within a year. Perhaps, due to time limitations during procurement processes, consultants usually do not have the time and resources to confirm the state of some of the claims of the contractors.

Formation of Cartels; some contractors may form fictitious claims on ongoing and recently executed projects, this leads to possibilities that cartels are formed in the process. The problem associated with cartels in public contract procurement system is such that a group of contractors can connive in such a way as to debilitate the competition processes.

False claims; technical capacities of contractors are usually measured based on the credentials of key technical and support staff on the payroll of the contractors. In most cases, assessors are misinformed. Perhaps, due to skill shortages, fictitious lists and credentials are presented. This implies many firms may lay claim to a single individual, without his consent or to untraceable persons (dead, bankrupt, and illegal entities) as the technical members of their firm. Evidently, many contractors do not have the capacity to sustain the required number of qualified professionals in their payroll and may not use them on the projects.

Fake or unrealistic financial statements; Bank financial statements are parts of the documents used for the assessment of contractors and indication of huge credit balance may not always signify the credit worthiness for a contractor. This is because it may be difficult to separate contractor’s liabilities from his credit base in relation to his intended commitment for the project. Regrettably, information provided in annual audited accounts cannot be effective in communicating this. This may mean that contractors would wait for mobilization from clients after award of contract, before they mobilize on site. Unfortunately, amortization of mobilization may be difficult; leaving the client with very limited options of effective project funding – for the project to progress, some financially weak contractors may need to be paid upfront throughout the project.

Prequalification of consultants: Arguably, the problems with the construction industry are not limited to contractors alone (Latham, 1994; Egan 1998). However, consultants on construction projects are mostly over-protected from prequalification. Perhaps, due to limited time, many construction contracts have been executed without prequalifying consultants. This implies there is no basis for the validation and physical assessment of records regarding the capacities claimed by consultants. Moreover, contractors may be spared the full responsibilities for some problems in the construction process e.g. design error, professional negligence, professional misconduct, corruption and so on. Thus, prequalifying the capacity and competence of consultants will improve project delivery process in construction.

Prequalification and continuous growth of the construction industry; Assessment of contractors’ competencies and capabilities are based on credible financial bases, convincing records of past performance on relevant projects and strong technical strengths. Evidently, this may put new and keen contractors at serious disadvantage. For instance, that a firm is new and has not undertaken many projects does not mean the firm will fail if given an opportunity. If the technical strength of the firm under assessment is composed of real and experienced professional, innovation and growth of the industry may be motivated. On the other hand, the fact that a firm performed on a similar project some years ago is not, in itself, an indicator that the same firm can perform again. Thus, to a reasonable extent, there is a limit to discriminating contracting firms based on records of past performance. Interestingly, work environments are not perfectly identical, while the industry remains dynamic.

Cumbersomeness of prequalification criteria; the construction industry requires objective assessment criteria to guarantee an effective procurement system. However, it has been a critical challenge for the construction industry to generate universal assessment criteria (Hatush et al, 1997). This has significantly affected procurement processes for construction and supply projects. Evidently, similar prequalification models are still being used for both construction and supply projects in many cases. Whereas, desire and risk variables for both are very different. For instance, most supply projects may have a shorter initialcontractperiodwhen compared to an average construction project. Thus, considerations for risks variables in terms of insurance, bonding arrangements, equipment, and method related technologies, etc are different.

Level of Firm Professionalism; in the Nigerian construction industry, there is still confusion as to the level of content of professionalism a construction firm should have. For instance, a technically sound construction contracting firm should have fully registered professionals like Architects, Quantity Surveyors, Engineers and Builders. However, in a supply project having to do with the procurement of equipments, the firm may only need to demonstrate convincing expertise in relevant instrumentation and equipment supply and installation. There may be basic academic provisions but insisting on professional qualifications may be very cumbersome.

Other challenges include corruption, bribery and extortion by individuals in charge of due process and this has largely contributed to failure of the procurement system in Nigeria.

IMPACT OF VARIOUS PROCUREMENT SYSTEMS ON COST MANAGEMENT AND DELIVERY

Procurement systems and project organizations provide the framework for implementation and development of projects and they have been well studied and established for major developments in developed countries in particular. When these systems are used in developing countries for major commercial, social and infrastructure developments, appropriate results are seldom achieved. This may be due to a variety of factors, which include systemic, environmental, cultural, economic, legal, political and socio-cultural amongst other things. Notwithstanding this, a major challenge lies in the establishment of appropriate and sustainable procurement systems and project organizational models for low-cost housing and infrastructure.

Project performanceis influenced by many environmental factors due to the interactions and interrelationships of the stakeholders. According to Yng (2002), project owners’, contractors’, and consultants’ characteristics, procurement systems and other factors affect project performance. Chua et al, (1999) identified location as a factor influencing both schedule and quality performance because it invariably determines construction methods adopted and availability of resources. Konchar et al, (1998), posits that location determines the type of foundation to be used, which may account for variations and cost growth. Building types, size of the project, and the level of project complexity are also variables that affect overall project performance and outcome.

Cost managementincludes the process required to ensure that the project is completed within the approved budget. It consists of 4 integral parts according to the Project Management Institute (PMI) documents: resources planning; cost estimating; cost budgeting; and cost control. In the design phase, costs are planned, estimated, evaluated and analyzed as design progresses in order to determine the most cost effective solution. In the construction phase, costs are controlled in order to deliver the project within budgeted costs. An effective project cost from the owner’s perspective must align with the scope, quality requirements and the milestone (schedule) estimate for verification and control purposes.

Schedule managementestablishes a timeline with schedule milestones to be followed in delivering a project in order to avoid schedule slippage. Milestones (dates) are set as a control tool in the construction phase to keep track of work progress. Schedule management interfaces directly with scope, cost, and quality management when team member roles and activities are defined, coordinated, and continually monitored. The PMI document (2000) highlights 5 areas in project time management: activity definition, activity sequencing, activity duration estimating, schedule development, and schedule control.

Quality managementincludes the process required to ensure that the project will satisfy the needs for which it was undertaken. The design phase begins with an initial specification of the quality level, matching it with both the project budget and scope for a realistic plan. In the construction phase, the planned qualities are controlled and managed through adherence via a program of inspections, tests, and certifications. It requires coordinated performance among the entire project team for a completed building program to fully satisfy a client's expectations. The PMI (2000) highlights 3 major quality requirements:

Quality planning

Quality assurance

Quality control

Impact of Traditional Procurement System on Cost Management and Delivery

Due to its linear or sequential approach, the traditional procurement system has been identified as the slowest project delivery approach. However, this approach is more preferable because it provides clear accountability and better design and construction control by the client. Since the pre-contract stage of this system is longer, more time is available for the client and the project team to scrutinize and review the design before construction.

In terms of cost management, this system provides more price certainty to the client at the very early stage of the project. It also gives the client firmer and more competitive price because the design plus the complete working drawings have been fully developed and detailed out prior to tendering. It eliminates any design or construction ambiguity or uncertainty which often causes the contractors to unnecessarily inflate the price later on in the course of project execution. In cases where bill of quantities is used, the bidding also tends to be fair invariably making the project cost lower. The system also has better cost control as all forms of indiscriminate cost increase due to variations is minimized, however works were often disrupted when there are too many variations due to unforeseeable problems and this may cause the cost inflation in the course of executing the project. (Masterman, 1996).

The traditional procurement system also provides a high degree of quality certainty and functional standards. This is because it is a system that provides opportunity for the building owner to combine best design, management and construction expertise between consultants and contractor. It also provides more time for client and consultants to review and fully develop the design and specification thus allowing better documentation preparation. However, this system does not provide opportunities for the contractor to contribute his construction technology and management expertise because they only come into the scene after the design has been fully developed and approved.

Impact of Design and Build; and Turnkey Procurement Systems on Cost Management and Delivery

Design and build and turnkey project procurement system are called “fast-tracking” or “build-it-fast” project delivery system where the design and construction are integrated. The design free pre-tender process allows for earlier construction date. It also allows the process of detailed designing and construction to run concurrently to each other, thus reducing the overall project development period considerably. As a single entity responsible for both the design and construction, the contractor is able to control not only the construction time but also the time reserved for the design of the project, thus reducing the overall contract duration. In this type of procurement system, the contractor has always been selected based on vast experience, knowledge and competency in construction, as such by giving it the design responsibility, the contractor very often is able to reduce construction time. This is done by him rationalizing the design, construction process and site activities.

Although, cost is fixed at the tender stage and is subject to design changes, it is often higher than the traditional contracting system. Apart from the fact that very limited contractors are invited to submit tenders, the lack of design and specification detailing during tender, has made the contractors to jack up the price to allow for many uncertainties. This is because once accepted, the tender price will be the final contract sum. It is not subject to change, unless there are variations required or instructed by the client. Such additional cost cannot be avoided because under this procurement system the contractor will take much of the financial risk.

However, as many researchers have claimed, the significant cost saving effort in this type of procurement system is reflected in the reduction of the overall development period. The cost of contractor’s uncertainty can be set-off by the reduction in loan interest and early financial return or benefits. Cost saving may also occur when the contractor applies his construction knowledge and experience to simplify design and work at inception of design. There can also be effective cost management when the client offers the contractor some form of incentive if he is able to cut significant amount of cost.

The integration of design and construction allows the contractor to utilize his knowledge and experience to develop much compacted and coherent work program and to come up with more efficient designs and project control programme. It also allows the contractor to be innovative enough at improving the construction process and techniques thus allowing for better work and overall process quality. However, it is often found that the quality of work under this contracting system tend to be questionable. The assigning of the designing and construction to a contractor has caused the client to lose control of the design and supervision of the work. This is especially so when the client does not have his own team of consultants. As far the contractor is concerned, they tend to cut corners in order to maximize their profit, especially when they feel that they have underpriced their quotations when tendering for the work.

Impact of Management Contracting; and Professional Construction Management Procurement Systems on Cost and Delivery

As earlier stated, the essence of these two methods of project procurement is that a contractor has the knowledge, experience and competency to better manage the design and construction of a project. It is a factor that allows for more efficient and effective coordination of works, materials, manpower and plants, thus making construction time shorter compared to other procurement systems. This is especially so, given the fact that the same management contractor is able to manage and contribute towards to contribute to the overall development of the design and to improve buildability or constructability.

The system also allows for early start of construction compared to the traditional approach. The preparation of simple or basic tender (bidding) document and the shifting of the schematic process and design details to the construction phase, allows for an early start of construction. Also, under these two systems, the detailed design (shop drawings) is carried out (either by the consultant or package contractors) during the construction stage. All these factors will bring about a considerable reduction of the overall project time compared to the traditional or even design and build contracting systems.

In terms of cost, any project procured using this system tends to be executed with lower costs than those using other procurement approach. This is because the cost of the project is actually the sum of prices quoted by the package contractors. With the management contractor being the consultant, no extra cost is being added up for main contractor’s profit margin. The only additional cost is the consultant fee that the client has to pay to the management contractor or to the construction management consultant.

As an agent responsible for the construction, the management contractor or the professional construction manager tends to be more serious with the standard and quality of the work done by the package contractors. Their experience as contractor or construction managers makes them more proficient and effective in ensuring delivery of high quality works. Their knowledge and experience also makes them more adept in selecting materials and components of the right type and quality. These factors have contributed to a better standard and quality of the completed construction products.