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What are the main types of procurement in the construction industry?

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In the ZERO-PLUS project report “Analysis of the market potential within the EU28 for “nearly zero-energy” buildings constructed using the concepts developed in the project” the main types of procurement in the construction industry are documented and analysed. These procurement types are summarised below.

 

The selected procurement route will depend on a number of variables such as:  topography, logistics, weather, available technology, finance, labour availability, and services.

 

Traditional procurement: separates between design and construction processes. The contractor is allocated with the responsibility for the coordination of subcontracting of design. The poor influence the contractor, as the operational party, has over the design, cost and risk allocation is considered one of the main disadvantages of this approach. On the other hand, the fact that the industry has been working with it for a long time is its main advantage since it has established parameters to look at when assessing the value for money of this type of procurement path. Still, conflicts are possible and in fact, traditional procurement goes against the integration of the supply chain in construction and raises the risk of conflict as both parties may not have the same idea about the way the project should be delivered.

 

Design and build (D&B): the same contractor is meant to design and construct the project meaning that a closer collaboration is required in the process and all risk is allocated to the contractor. D&B project procurement has many variations. An example is the Novated D&B where a single design team is contracted until the planning permissions are ensured and then the team is transferred to the building team, in a process called “novation”. Another example of D&B is Prime Contracting, where the “prime contractor” must have a strong, established supply chain, which includes robust coordination between sub-contractors. The main contractor will be paid for the full cost of construction and will be responsible for all the risks.

 

Management Contracting (MC) and Construction Management (CM): the basic principle in both MC and CM is that one contractor manages a series of different “works” contractors. The main difference between MC or CM and Prime Contracting (described above) lies in the risk and responsibility that the owner of the building and the Management Contractor or Construction Manager (partial responsibility), or the prime contractor (full responsibility) share. The main strength of MC is that the Management Contractor can manage the “works” contractors, while the owner still has some control over them. The main weakness on the other hand is that there is not one single point of responsibility because the contracts are issued between the owner and the various contractors. CM is mostly used in large infrastructure projects where design and construction need to run in parallel. The Construction Manager will coordinate the project in terms of on-site operations.

 

Collaborative working: usually involves long-term relationships in the shape of framework agreements or strategic partnering and focuses on larger collaboration than a single project. Collaborative working has the advantage of better managing by avoiding re-bidding and of a better knowledge of the collaborators of how things are preferred to be done. On the downside, relationships can become too comfortable, without any motivation for improvement. Furthermore, collaborative working is not possible for small projects, and is basically restricted to companies or contractors with a large operational capacity.