Procurement

“The Best Procurement System to Use in Sri Lanka”

Arafath A

May 2015

“E!ect "here state# other"ise$ this %issertation is &ase# entire'y entire'y on the author(s o"n "ork”

Acknowledgement

I wish to thank everyone who has offered fullest support and cooperation for my successful project. I express my indebtedness to each and every ever y individual who has spent time to make this project in shape for our career.

First and foremost, I would like to express my appreciation to my Supervisors Ms. Vajira dirisin!he for their !uidance throu!hout the preparation of this dissertation. I would also like to extend my deepest !ratitude to all my friends who have helped me directly and indirectly as well.

Finally, I would like to extend my sincere thanks to all the individuals from the industry who had !iven me all the necessary information re!ardin! the project.

"able of #ontents

$cknowled!ement

i

"able of #ontents

ii

The Best Procurement Procurement System to Use in Sri Lanka Lanka 2

I wish to thank everyone who has offered fullest support and cooperation for my successful project. I express my indebtedness to each and every ever y individual who has spent time to make this project in shape for our career.

First and foremost, I would like to express my appreciation to my Supervisors Ms. Vajira dirisin!he for their !uidance throu!hout the preparation of this dissertation. I would also like to extend my deepest !ratitude to all my friends who have helped me directly and indirectly as well.

Finally, I would like to extend my sincere thanks to all the individuals from the industry who had !iven me all the necessary information re!ardin! the project.

"able of #ontents

$cknowled!ement

i

"able of #ontents

ii


%ist of $bbreviations

v

#&$'"( )* +.+

ack!round ack!round..... .......... .......... .......... .......... .......... ......... ......... .......... .......... .......... .......... .......... .......... .......... .......... .......... .......... .......... .......... ......... ......... ...............- + -

+.

$im....... $im............ .......... .......... .......... .......... .......... .......... .......... .......... .......... .......... .......... .......... .......... ......... ......... .......... .......... .......... .......... ........... ................ ................- / -

+./

)bjectives.. )bjectives....... .......... .......... .......... .......... .......... .......... .......... .......... .......... .......... .......... .......... .......... .......... .......... .......... .......... .......... ............ ................. ............- / -

+.0

Methodolo!y Methodolo!y..... .......... .......... .......... .......... .......... .......... .......... .......... .......... .......... .......... .......... .......... .......... .......... .......... .......... .......... .......... .......... ........... ......-- / -

+.0. +.0.+ +

Intr Introd oduc ucti tion on11 1111 1111 1111 1111 1111 1111 1111 1111 1111 1111 1111 1111 11..-/..-/-

+.0. +.0. 

(ese (esearc arch h $ppro pproach ach11 1111 1111 1111 1111 1111 1111 1111 1111 1111 1111 111. 1... ..-/-/-

+.0. +.0./ /

(ese (esearc arch h 'roc 'roces ess11 s1111 1111 1111 1111 1111 1111 1111 1111 1111 1111 1111 11.. .. -0-0-

+.0./.+ +.0./.+ %iterature %iterature (eview111111 (eview111111111111 111111111111 11111111111 111111..-01..-0+.0./. +.0./. (esearch (esearch 'roblem 'roblem Statement1111 Statement1111111111 111111111111 1111111111. 1111.-0-0+.0././ +.0././ #ase Study 2esi!n11111 2esi!n11111111111 111111111111 111111111111 1111111-01-0+.0./.0 +.0./.0 2ata #ollection #ollection1111111111111111111111111.-31111111111111111111111111.-3+.0./.0.+ 2ata #ollection "echni4ue111111111111111111111-3"echni4ue111111111111111111111-3+.0./.0. Interview Structure and 'rocess111111111111111111...-3-

+.3

+.0.0 +.0.0

2ata 2ata $naly $nalysis11 sis11111 111111 111111 111111 111111 111111 111..1 ..1111 1111.. 1..-3-3-

+.0.3 +.0.3

Summary Summary111 111111 111111 111111 111111 111111 111111 111111 111111 111... ...-5-5-

Structure Structure of the the Study..... Study.......... .......... .......... .......... .......... .......... .......... .......... .......... .......... .......... .......... .......... .......... .......... .......... .............. ...............- 5 -

#&$'"( "6) .+

Introduction Introduction..... .......... .......... .......... .......... .......... .......... ......... ......... .......... .......... .......... .......... .......... .......... .......... .......... ............ ................ ................... ..............- 7 -

.

Importance Importance of of procureme procurement nt systems.. systems....... .......... .......... .......... .......... .......... .......... .......... .......... .......... .......... ......... ......... ............ ...........- 8 -

./

uildin! uildin! 'rocur 'rocurement ement System..... System.......... .......... .......... .......... .......... .......... .......... .......... .......... .......... .......... .......... .......... ............. ....................- 9 -


..+

Separate Separate 'rocurement 'rocurement System..... System.......... .......... .......... .......... .......... .......... ......... ......... .......... .......... .......... .......... ............. ..............- +: -

..

Inte!rated Inte!rated 'rocurement 'rocurement Systems..... Systems.......... .......... .......... .......... .......... .......... .......... .......... .......... .......... ............. ........................- ++ -

../

Mana!ement Mana!ement )riented )riented 'rocurement 'rocurement System..... System.......... .......... .......... .......... .......... .......... .......... .......... .....................- + -

..0

#ollaborativ #ollaborativee 'rocurement 'rocurement System..... System.......... .......... .......... .......... .......... .......... .......... .......... .......... ......... ........... ...................- +/ -

.0

Factor Factorss which which *eed *eed to to be #on #onsid sidered ered for the the Selec Selectio tion n of 'roc 'rocure uremen mentt System System........- +/ -

#&$'"( "&( /.+

Introduction Introduction..... .......... .......... .......... .......... .......... .......... ......... ......... .......... .......... .......... .......... .......... .......... .......... .......... .............. ................... ........................- +5 -

/.

'rocurement 'rocurement Systems Systems 'ractice 'ractice in in Sri Sri %anka... %anka........ .......... .......... .......... .......... .......... .......... .......... .......... .......... .....................- +7 -

/./

(eason (easonss for non availab availabilit ility y of other other procu procureme rement nt optio options ns in in Sri %ankan %ankan #ontext #ontext.. - +9 -

/.0

arrier arrierss for $dap $daptin tin! ! $lte $lternat rnative ive 'rocu 'rocurem rement ent System System in in #onstr #onstructi uction on Indus Industry try of Sri Sri

%anka ............................................. .................................................................... .............................................. .............................................. .......................................................- : /./.+

Factors Factors (elated (elated to #lients.... #lients......... .......... .......... .......... .......... .......... .......... .......... .......... .......... .............. .................. ...........................- + -

/./.

Factors Factors (elated (elated to #ontractors. #ontractors...... ......... ......... .......... .......... .......... .......... .......... .......... .......... .......... ........... ............... .................-  -

/././

Factors Factors (elated (elated to #onsultants #onsultants..... .......... .......... .......... .......... .......... .......... .......... .......... .......... .......... .......... .......... .......................-  -

/./.0 /./.0

nviro nvironme nment nt of ;overn ;overnmen mentt and 'olitic 'olitical.. al..... ...... ...... ...... ...... ...... ...... ...... ....... ........ ........ ........ ........ ........ ........ ......- / -

/./.3 /./.3

Factor Factorss (elat (elated ed to to (esea (esearch rch and 2evelo 2evelopme pment nt <(=2 <(=2>> Instit Institute utess in Sri %anka %anka - / / -

/./.5 /./.5

Factor Factorss (elated (elated to 'rof 'rofessi essiona onall Institu Institutes tes in Sri Sri %anka. %anka.... ...... ....... ........ ........ ........ ........ ........ ........ ......- 0 -

/./.7 /./.7

Factor Factorss (elated (elated to Standard Standard #ondit #ondition ionss of #ontrac #ontract.. t..... ...... ...... ...... ...... ...... ...... ...... ...... ...... ....... ........ ......- 0 -

#&$'"( F)?( 0.+.

Introduction Introduction..... .......... .......... .......... .......... .......... .......... ......... ......... .......... .......... .......... .......... .......... .......... .......... .......... .............. ................... ........................- 3 -

0..

#ase StudyStudy- 2ivisio 2ivisional nal &ospital &ospital at at @attankudy @attankudy..... .......... .......... .......... .......... .......... .......... .......... ............ .......................- 3 3 -

0..+

#lientAs #lientAs (e4uirements (e4uirements..... .......... .......... .......... .......... .......... .......... .......... .......... .......... .......... .......... .......... ............. ................. ...................- 5 -

0..

'roject 'roject #haracteristic. #haracteristic...... .......... .......... .......... .......... .......... .......... .......... .......... .......... .......... .......... ........... ............... ................... ..............- 5 -


0../

2etails of the project.........................................................................................- 7 -

0..0

(eason for the Separated 'rocurement System for this 'roject........................- 8 -

0..3

(eason for $voidin! the )ther 'rocurement Systems......................................- 9 -

0./.

#ase Study- ase &ospital at #hilaw.......................................................................- /: -

0./.+

Satisfactory of 'roject (esult............................................................................- /+ -

#&$'"( FIV 3.+

Introduction..............................................................................................................- / -

3.

"raditional 'rocurement System..............................................................................- / -

3..+ 3./

2esi!n and uild 'rocurement System....................................................................- /0 -

3./.+ 3.0

$dvanta!es and 2isadvanta!es of "raditional 'rocurement System................- // -

$dvanta!es and 2isadvanta!es of 2esi!n and uild 'rocurement System.....- /0 -

$nalysis the @attankudy 2ivisional &ospital 'roject under 2= procurement system ..................................................................................................................................- /3 -

#)*#%?SI)* $*2 (#)MM*2$"I)*S .............................................................. - /8 (F(*#S ...................................................................................................................- 0+ -

%ist of $bbreviations The Best Procurement System to Use in Sri Lanka 5

PSP

B 'rocurement Selection 'arameters

)*TA%

B Institute for #onstruction "rainin! and 2evelopment

SL

B Sri %anka

U+

B ?nited @in!dom.

%,B

B 2esi!n and uild

P-)

B 'rivate Finance Initiative.

PPP

B 'ublic 'rivate 'artnership

./

B Coint venture

B

B ill of Duantity

BT

B uilt, )perate, "ransfer

B

 uilt, )perate, )wn

BT

 uilt, )perate, )wn, "ransfer

3%P

B ;ross 2omestic 'roduct

B)

B oard of Investment

4,%

B (esearch and 2evelopments

A%B

B $sian 2evelopment ank

#&$'"( + I*"()2?#"I)* 11

Back6roun#

In any country, the construction industry plays a major role, which is !iven that considerable contribution to the national economy <(ameeEdeen, ::>. "hus well bein! of national construction industry is of paramount importance for economic development and lon! term !rowth of a country. $ccordin! to Macdermott and (olwlinson <+999> the ac4uisition of new buildin!s or space within the buildin!s, either by directly buyin!, rentin! or leasin! from the open market or by desi!nin! and buildin! the facility to meet a specific needG.

The Best Procurement System to Use in Sri Lanka 6

ach and every project in construction industry has its own style. Suitable procurement systems should be chosen for the construction industry projects so that we can avoid unwanted problems and can 4uickly achieve the desired !oal. Selectin! the wron! procurement system may cause project failure and dissatisfaction of overall performance <(ameeEdeen, ::5>. #lientH consultant should consider various factors which are influencin! the procurement systems in re!ard to the project. It is possible to reduce the overall project construction cost by the avera!e of 3 throu!h the appropriate procurement system <$lhaEmi and Mc#affer, :::>. Selection of appropriate procurement system is very difficult for the clients as each procurement system has its own characteristics and disadvanta!es. Selectin! the ri!ht procurement system is crucial and is a very complex task for the client andHor the project team. $ccordin! to research, when selectin! procurement system the clientH consultant should consider various factors, such asJ client re4uirements, objectives and external environment factors <*2) et al., +983, cited %uu et al., ::/>. #lients are presently usin! different types of procurement routes due to !reater advanta!es bein! achieved by alternative procurement systems. "his new procurement method has shown, when implemented to !ive much better results than the previous system therefore the new method is now been introduced <#heun! et al., ::+>.

"he instantaneous need in the Sri %ankan construction industry the selection criterion for a procurement method is very vital. $ccordin! to *ajeeb <::3>, (ameeEdeen <::7>, various different procurement systems are rarely used in Sri %ankan construction industry. $ review of

current practice of procurement system in Sri %ankan construction industry reveals that the majority of projects are procured usin! traditional Measure and 'ayG procurement method <(ameeEdeen, ::7>G

"he clients are hesitant to choose a procurement method other than the traditional measure and pay in Sri %anka. It can be reasoned out as the poor awareness, afraid to take the risk on the other systems and the knowled!e about the procurement systems existin!. Furthermore, it can be said the industrial practitioners are not willin! to implement the different types of procurement. "his premonition should be taken out from the industry for its constant development in future.

The Best Procurement System to Use in Sri Lanka 

S% construction industry use I#"$2 document, published by the Institute for #onstruction "rainin! and 2evelopment . In the ?nited @in!dom construction industry many routes are used includin! 2esi!n and uild. $ccordin! to (oyal Institute of #harted Surveyors <(I#S> research, in ?@ 2esi!n and uild <2=> procurement is used since +993.

12

Aim

Identify and analyEe the factors influencin! the "he est 'rocurement (oute to ?se in Sri %ankaG.

17

&8ecti9es

+. Identify and analysis the different types of procurement systems which are used in the construction industry and identify the factors to be considered for the procurement selection. . $nalyse and identify the current procurement systems in Sri %anka and the barrier for alternative procurement system. /. Identify and analyse the selection of suitable procurement system for two projects and investi!ate the factors that were considered before selectin! the procurement system also investi!ate the satisfaction of overall performance. 0. #ompare the traditional desi!n and build procurement system and analyse the @attankudy hospital project under 2esi!n and uild procurement system.

The Best Procurement System to Use in Sri Lanka !

1:

Metho#o'o6y

1:1 )ntro#uction "he aim of this chapter is to describe the research process of this study.

1:2 4esearch A!!roach (esearch approaches are about establishin! research activity, includin! the collection of data in accordance with the research aim <asterby-Smith et al ., ::>. "his research study adopted case study research methodolo!y in order to accomplish an in-depth investi!ation re!ardin! the selection of construction "he est 'rocurement System to ?se in Sri %ankaG. #ase study research method provides an opportunity for the depth of the analysis of many methods <@umar, ::3>. #ase study research method was selected mainly because it provides access to real context of the construction procurement practice and investi!ate to find out the best suitable procurement methods to construction project in Sri %anka.

1:7 4esearch Process "he research process of this study, which was based on case study research method covered the followin! sta!esB literature review, problem statement, case study desi!n, data collection, data analysis, and conclusion.

1:71 Literature 4e9ie" "he literature review was started with back!round study which was conducted to identify broader research area of procurement methods used in construction industry and problems for the interested study. "o address the research problem, aim, objectives, methodolo!y, scope and limitations for this study. "hen the comprehensive literature review was conducted to explore the theoretical status of the research such as definitions, types of construction procurement, selection of construction procurement method and effects of construction procurement. "he literature search was done in publications such as conference papers, web publications, thesis, dissertations, books and journal articles available in common databases

1:72 4esearch Pro&'em Statement

"he research problem emer!ed as what is the best suitable procurement method benefits the constrctuion projects Sri %ankaK. "his research problem was stren!thened throu!h a comprehensive literature review.

1:77 *ase Stu#y %esi6n

The Best Procurement System to Use in Sri Lanka "

In case study desi!n there were two aspects to be consideredB identification of case study analysis method and case selection. of case study analysis method was Lcontractin! or!aniEationA since this study was focused to investi!ate the methods used in the costruction project and to find out the best suitable procurement method . ecause, the investi!ation to be done within construction of different construction or!aniEations in order to achieve reliable outcome. Second step was selection of cases, where researcher obtains a sample that is uni4uely suite to the study. "hree Studies were carried out in completed hospital construction sites of #/ - #3 !rade contractin! or!aniEations in this research, based on access and time limitations. "his study selected multiple cases to provide multiple sources of evidence.

1:7: %ata *o''ection 1:7:1 %ata *o''ection Techni;ue

Semi-structured interviewin! was used as a data collection techni4ue in this research study. Main purpose of semistructured interview is simply to collaborate certain facts that the investi!ator already thinks that have been established <in, +980>. In this research study semi-structured interviewin! was carried out amon! related professionals , conclusions include a note of key issues or findin!s of the research study. "herefore, the conclusion included all key findin!s throu!h the empirical study and su!!estions and recommendations for the improvement of particular context researched.

1:5 Summary "his chapter has presented research approach and research process use in this research study

15

Structure of the Stu#y

*ha!ter ne

"his chapter presents the back!round to the study, aim, objectives, methodolo!y and structure of the study.

*ha!ter T"o

"his chapter discusses the various types of procurement systems which are bein! used in the construction industry and identifies the factors that are needed to be considered before selectin! the appropriate procurement system.

*ha!ter Three

"his chapter discusses the current procurement systems used in Sri %anka and the barrier for the alternative procurement systems in terms of internal and external environmental factors.

The Best Procurement System to Use in Sri Lanka ##

*ha!ter -our

"his chapter discusses about the suitability and unsuitability of procurement system for two projects and the factors needed to be considered as well as analysis of the overall project satisfaction.

*ha!ter -i9e

$nalysis of the advanta!es and disadvanta!es of "raditional and 2esi!n = uild procurement systems and analysis of the @attankudy divisional hospital under desi!n and build procurement system.

*ha!ter Si

#onclusion and (ecommendation.

#&$'"(  ?I%2I*; '()#?(M*" SS"M

21 )ntro#uction "here are several definitions for construction procurement !iven by various sources. 'rocurement is understood simply as !ettin! thin!s doneG. $ccordin! to %ove et al. <+998>, Masterman <::>, Mc2ermott <+999>, describe client adopt the or!anisational structure to mana!e their construction project in terms of desi!n and construction . Further, Mohsini and 2avidson <+989> cited 'eter Mc2ermott <+999> defines the ac4uisition of new buildin!s or space within the buildin!s, either by directly buyin!, rentin! or leasin! from the open market or by desi!nin! and buildin! the facility to meet a specific needG.

The Best Procurement System to Use in Sri Lanka #2

"he increasin!ly complex and varyin! demands placed upon its construction industry by the clients not only come about from the need to offer more refined commercial and industrial workin! environments at minimum cost and maximum speed. ut additionally from the fact that client or!anisation are also complex with different cate!ories of customers re4uirin! discrete solution to their procurement needs . )n the other hand clients or property developers influence their professional advisers and the contractual arran!ements and select a contractor with ri!ht commitment to meetin! project tar!ets. Furthermore inexperienced clients are lead by their advisors and contractors and are offered what the construction team thinks is best. In balancin! all these difficulties proper selection of procurement is extremely vital. $ccordin! to ennett and ;rice <+999>, cited #han et al <::+>, the correct choice of construction procurement method will lead to a successful project endin!. &owever the result of a wron! choice of procurement method will lead to an overall !eneral dissatisfaction or even project failure. "herefore, the appropriate procurement method is essential to achieve the !oals and to also achieve the best value for money. "his chapter explains the !eneral classification of procurement methods, which is used all over the world. $nd briefly discuss the factors which are influencin! the section of appropriate procurement method.

22 )m!ortance of !rocurement systems

If one would like a second-hand buildin! the prospective owner can obtain one by lookin! at what is available on the market and at the price that it is marked at before then makin! a choice. )ne can even do this with certain kinds of new buildin! and buy a small home or a small industrial unit in the same way that one would buy a car or "V set. &owever, this method is not available in the case of other types of new buildin!s, which are desi!ned and constructed to individual order and it is the difficulties of procurement under these conditions.

2ifferent types of clients determine their project success by different criteria or by different wei!htin!s of the basic criteria, and it are necessary for members of the construction industry


to be aware of these various basic characteristics in order to assist them in the selection of the most appropriate procurement system for their particular project. "he choice of procurement system is a key strate!ic decision. #lients of the construction industry depend upon the advice !iven in order to decide the most suitable method of procurin! their project from start to end. "he clientNs re4uirements need to be matched however this can sometimes prove difficult as the client tends to be va!ue and inaccurate. "he capability of industry is important especially if customer satisfaction is to be attained and . ach method has different demands, risk allocations and responsibilities. "he studies of *2) <+983>, Masterman <::>, Frank <+998> and different authors has !iven different definition and accordin! to that they are summariEed in to four broader classifications in this study as follows,

27Bui'#in6 Procurement System "here are several standard routes or processes in relation to the construction sta!e. "hese need early deliberation when procurin! construction. ach method has different demands, risk allocations and responsibilities. "he studies of *2) <+983>, Masterman <::>, Frank <+998> and different authors has !iven different definition and accordin! to that they are summariEed in to four broader classifications in this study as follows, Se!arate#

)nte6rate#

Mana6ement riente#

*o''a&orati9e

Measure & Pay

Design and Build

Management Contracting

'artnerin!

Lump Sum

Package deal

Construction Management

Joint Venture

Prime Cost

Turn Key Develop & Construct Private inance !nitiative "P!#


igure $ Contract Procurement Categories "Source% Masterman '(('#

221 Se!arate Procurement System

"he separate procurement system is a very common contractin! method in the construction industry. It was popular until the +95:s, which it was then called a "raditional SystemG. "he main features of traditional system are ri!id separation of desi!n from construction .

?sually client appoints the consultant team to verify the desi!n. "his team will help to complete the project accordin! to the clientAs satisfaction. )nce the desi!n completed by the consultant team, then it is used as the basis of a competitive biddin! process to select an appropriate contractor .

%ead desi!ner of the project has to !o throu!h different sta!es such as desi!n development, tenderin!, contract administration, supervision of works and finally handover the completed project. "here are three sub-cate!ories under this system, namelyJ


•

Measure and 'ay #ontract "his contract is bein! used in world at lar!e. In this method, the contractor adopts some form of measurement and is paid for the work on the basis of 4uantity multiplied by rate, based on )Ds, which is prepared from drawin!s, specifications and a!reed by contractor <(ameeEdeen and Silva, ::>.

•

%ump Sum #ontract #ontractor enters into a contract for a fixed price, but in sin!le sum for the total contract work and not intended to be adjusted by variation or reimbursement <a!nal et al, +999>

•

'rime #ost #ontract "he contractor is appointed by competition or ne!otiation. "hey are receivin! only the a!reed cost of the work and an a!reed amount to cover profits. "here are several types of prime cost contracts available as #ost plus percenta!e cost plus fixed fee, tar!et cost .

222 )nte6rate# Procurement Systems

"his procurement system calls as implies, basically the desi!n and construction are inte!rated to!ether . "he consultant is appointed on the behalf of client, and then the consultant will !ive the responsibilities to the main contractor to complete the whole project accordance with the a!reed performance specification. "he contractor is then responsible for the desi!n and construction risk, which !ives !reater protection for client. "here are some variants under this system.

•

2esi!n and uild #ontract "he contractor delivers the project to the client throu!h the simultaneous work of desi!n and construction. For this system, the ideal buildin! projects are


those that can be well defined by the client durin! the biddin! and ne!otiation sta!e <&arris and Mc#affer, ::5>. •

'acka!e 2eal #ontract Sometimes this procurement system is called as 2esi!n and uild <$shworth, +995>. "he contractor is responsible for the whole project such asJ desi!n, plannin!, controls the construction and !enerally satisfyin! the clientAs re4uirements <$shworth, +995>.

•

"urn @ey #ontract 6hen the project is completed it can immediately start usin! the project since it will have been fully e4uipped includin! furnishin!s by the contractor

•

<$swroth, ::5> 2evelop and #onstruct #ontract "he client assi!ns desi!n consultants to prepare conceptual desi!n drawin!s . )nce assi!ned the contractor will complete the desi!n and construct the project .

•

'rivate Finance Initiative <'FI> It is a type of public private partnership <'''>G where project financin! rests with the private sector. "his allows combinin! with resource of the public and private sector in the 4uest of the more efficient service provision <a!nall et al., +999>. Major variants areJ   

)" O uilt, )perate, "ransfer )) O uilt, )perate, )wn ))" O uilt, )perate, )wn, "ransfer

227 Mana6ement riente# Procurement System

"he mana!ement orientated procurement system tries to brid!e the !ap between the desi!n and construction process <(ameeEdeen, ::>. "his famously has two widely practicin! variables in the industry all over the world. 6hich areB •

Mana!ement #ontractin!

The Best Procurement System to Use in Sri Lanka #

"he contractor appointed on the basis of fee in the early sta!e which means, heHshe enterin! in the desi!n sta!e to assist and advice the desi!n team. &eHshe is the responsible for the work carried out by separate work contractor <'otter, +993>. •

#onstruction Mana!ement "he contractor is appointed to mana!e the construction process on the basis of fee. &eHshe supervise the trade contractors and may coordinate the work of desi!n team <'orter, +993>

22: *o''a&orati9e Procurement System

"he basic feature of collaborative procurement systems is the collaboration between two or more parties to achieve successful project objectives throu!h fair dealin!, commitment, and shared investment ."here are two major variantsJ •

'artnerin! It is a lon! term contractual relationship between two or more or!anisation. "his relationship re4uires openness between the parties, trust and an understandin! of each otherAs individual expectations and values .

•

Coint Venture ?nder this contract client has to deal with not a sin!le contractor, but a !roup of contractors actin! as a sin!le contractor. )nce the contract is a!reed, there should be a central project mana!ement team in a place for the client to deal with so that the contract can be run normally <2enise, , ::/>.

2:-actors "hich
The Best Procurement System to Use in Sri Lanka #!

(ecently there have been si!nificant chan!es in the construction industry such as technical and economic condition. $t the same time basic re4uirements of clientAs also chan!e. "here are new procurement systems which have been developed in the construction industry to fulfil the clientAs re4uirements. #ost, time and 4uality are the three most important parameters of project performance. ven thou!h, there are other factors also contributin! directly or indirectly to the selection appropriate procurement strate!y in term of value for money for the project <@umaraswami and 2issanayake +998, #hen et al ::/, Seeley ::>.

Studies of Moshini <+99/>, Masterman and ;ameson <+990>, (owlinson <+999>, 6alker <+989>, $lhaEmi and Mc#affer <:::>, @umaraswami and 2issanake <+998> cited (ameeEdeen <::7>, overall factors affectin! the procurement selection can be !rouped under three main criteria.

igure B C onceptual )rame*orks )or t+e determination o) selection criteria "Source % Macro level )actors a))ecting t+e construction procurement selection% a multi criteria model#

"he type of buildin! procurement chosen by the client is of importance due to the complexity of the situation, with a wide ran!e of objective criteria and procurement arran!ement. 6hat

The Best Procurement System to Use in Sri Lanka #"

needs to be considered is vast for the client as they have to make the appropriate choice in re!ards to procurement arran!ement .

•

2esi!n inputB does the client want to influence the desi!n and, if so, to what extentK #lient controlB how hand-on does the client wish to be in the mana!ement of the

•

projectK #ost certaintyB what level of cost certainly does the client re4uire before si!nin! the

•

contract and on completion of the projectK (isk takin!B is the client prepared to accept the risk by direct mana!ement or does he

•

wish to transfer it to third partiesK FlexibilityB to what extent is the clientAs brief likely to be chan!ed durin! the

•

execution of the projectK Market conditionsB how are market conditions likely to chan!e durin! the course of

•

• •

the project with possible conse4uences for desi!n or constructionK 'ro!ramme securityB how crucial is the final completion dateK Value of moneyB does the client want to contribute to and take benefit from value mana!ement and value en!ineerin!, and how will any resultin! savin!s be sharedK

y usin! a list of criteria to come to a conclusion to the ri!ht procurement method for a buildin! project, allows the client to clearly see their key !oals and objectives.

The Best Procurement System to Use in Sri Lanka 2$

#&$'"( / '()#?(M*" SS"M I* S(I %$*@$

71)ntro#uction

Most of the procurement systems are briefly described in the previous chapter however there are limited numbers of procurement systems practiced in Sri %anka <*ajeeb, ::3>. "here are only limited choices of procurement system used durin! the early. $nd these procurement systems has several catalyst of chan!es which have occurred on the procurement systems durin! later part of the : th century to meet new re4uirements. "hese systems have a !reater demand from clients, contractors and the professions of Sri %ankan construction industry <"hanuja, ::9>. $lthou!h, any procurement systems can be used for any kind of construction project, they must be appropriate to the circumstances to !et maximum benefits. @umaraswami <+995> ar!ued that drawin! upon example from Sri %anka, the achievement of technolo!ical transferG from developed to developin! countries has been dissatisfied by the use of inappropriate procurement systems.

The Best Procurement System to Use in Sri Lanka 2#

"he liberalisation of the economy in +977 stimulated, additional private and public sector investment in buildin!s and other infrastructure projects in Sri %anka which !ave unprecedented opportunities for local and forei!n private contractors. #onse4uences of these chan!es were that limited choice of procurement systems evolved. &owever, chan!es have occurred in buildin! procurement because the clients are more conscious of the need to chan!e and they are lookin! for alternative procurement procedures. "his means client are able to !et the project completed 4uickly within a reasonable cost limit and acceptable standard of 4uality.

"he Sri %ankan construction industry !enerally remains poorly or!aniEed, hi!hly fra!mented and low in productivity and it is also not well established and advanced as in developed countries . ?nder these circumstances, Sri %ankan construction industry has four popular systems practiced in most of the projectsJ i.e. measure and pay, lump sum, prime cost and desi!n and build. "here are a fair few mana!ement oriented procurement systems used in Sri %anka, as identified throu!h the past survey .

72Procurement Systems Practice in Sri Lanka

#onstruction industry in Sri %anka is now becomin! more popular. It is 4uickly !rowin!. "oday it has now become a very influential and !overnin! factor of the construction industry. "herefore the !rowth in the property development could be re!arded as a key to the development of all sectors in the economy.

"he instantaneous need in Sri %ankan construction industry the selection criterion for a procurement method is very vital. In the context of the Sri %ankan construction industry, numbers of different types of procurement methods are bein! used very rarely compare to other country . Sri %ankan construction industry has not developed. "herefore, they are widely usin! traditional procurement method such as Measure and 'ay. The Best Procurement System to Use in Sri Lanka 22

$ review of current practice of procurement system in Sri %ankan construction industry reveals that the majority of projects are procured usin! traditional Measure and 'ayG procurement methodG <(ameeEdeen and Shiyamini, ::7>. "he reason for popularity of this procurement system is that due to the !overnment influence. ;overnment is the major client in Sri %ankan construction industry. Further they do not want to take alternative procurement method . $lso most of the time this unbendin! separation of the consultants and the contractors do not allow the emer!ence or the other procurement systems in the industry . "he followin! table indicate the trend of procurement system in Sri %anka, with research conduct by (ameeEdeen and (atnasabapathy cited $.%. Coseph et al. et at. <::8>.

Trend in met+ods o) procurement in Sri Lanka in year ,-.. to '((/ = of Use >A9era6e? Procurement System Measure an# Pay Lum! Sum Prime *ost %esi6n an# Bui'# Mana6ement *ontractin6 .oint /enture Tota' Source% !mpediments to t+e Development

1@ 

1@C2

1@C 

1@C

1@@

C1 D C @1 D @ D 00 33 3: 38 3: 50 + +: 8 7 +: +: 8 3 0 /  /+ 8 /3 + + + + + + : : : / + 100 100 100 100 100 o) Design and Build Procurement System

2001  07 7 3 +  : : 100 in Sri

Lanka

$ccordin! to above research, traditional procurin! method seems to be stron!. $lso Ma4dul <:+0>, $nuradha <:+0>, said this has not been chan!ed yet.

"he desi!n and build

procurement system is a next alternative procurement option but it is not popular due to there bein! an inade4uate in-house desi!n teams in contractorsA or!anisation . In the case of desi!n and build contracts it takes time for desi!n approval by consultant with modification of developer . ut it will save the time at pre contract period in some sta!es. "he advanta!es of desi!n and build contracts cannot be achieved in Sri %ankan context due to non availability of talented in house desi!n team in contractors


. "hese types of contracts in small scale occurred in "sunami housin! construction projects in very low fre4uency .

774easons for non a9ai'a&i'ity of other !rocurement o!tions in Sri Lankan *ontet "urn @ey procurement systems are used in very luxurious construction projects <(osli et al, ::5>. #ondominiums and luxurious housin! projects which are directly use developerAsH clientAs money up to sellin! sta!e. $s a small poor country clients as well as developers are poor in relation to other developed countries. "his is the major reason for not choosin! to use this type of procurement system. ut this type of contract was used in small scale projects for "sunami housin! and this was used at a very low fre4uency <'athirana, Senior 'roject n!ineer at Sierra #onstruction %td, :+0>. Mana!ement )riented procurement system have been used in some projects in Sri %anka but it was not successful and did not meet the expected level of satisfaction. "he advanta!es of this system have not been clearly identified by developers and some implementation difficulties are present in the Sri %ankan context itself . "his procurement method is more suitable for experienced clients in fast tract projects . ?nfortunately Sri %ankan #lients and consultants have not identified the worth of this mana!ement oriented procurement option. #ollaborative procurement systems have not been successful unlike mana!ement oriented procurement systems in Sri %anka. It re4uires !reater need of professionalism and the risk present is very hi!h due to the amount of team work re4uired . #ollaborative procurement system was used by Sierra #onstruction for the international project <'athirana, Senior 'roject n!ineer, :+0>.

"he reason behind the Sri %ankan professionals usin! the conventional system is due to the dominance of the system in the market. It has been found that the public contractin! entities extensively use the Measure and 'ay rewardin! method for the desi!n and build system even thou!h that the lump sum techni4ue is conventionally used for desi!n and build system. In various instances they bid for lump sum contractual method and later chan!e to Measure and 'ay method, due to the difficulties faced after the commencement of the project. "his ensures the unfamiliarity of Sri %ankan public contractin! or!aniEations with the 2= system. In The Best Procurement System to Use in Sri Lanka 24

addition, most of the private contractin! or!aniEations have less experience with 2= projects due to the controllin! of the traditional purchase of !oods andHor services system in the market. #onse4uently, most of the contractorsA professionals are unwillin! to work for 2= projects in Sri %anka . In Sri %anka, the clients are hesitant to choose a procurement method other than the traditional measure and pay. Further, it can be a reasoned out to be due toB poor awareness, bein! afraid to take the risk on the other systems and the lack of knowled!e about the procurement system existin!. $lso, it can be said the industrial practitioners are not willin! to implement the different type of procurement. "his premonition should be taken out from the industry for its constant development in future.

7:Barriers

for

A#a!tin6

A'ternati9e

Procurement

System

in

*onstruction )n#ustry of Sri Lanka

"here is several alternative procurement systems used worldwide. For example, 2esi!n and build is very popular in many countries such as ?@, #hina, ?S$, etc. . In Sri %anka 2esi!n and uild <2=> contract document was published by I#"$2 few years a!o. ut it is not popular unlike traditional systems Coseph et al <::8> has identified several si!nificant factors for the barrier in terms of internal and external environmental factors. "hey are as followsB +. "he Sri %ankan !overnment does not !ive much support to alternative procurement systems . (esearch and development institutes only contribute a very small amount towards the development of alternative procurement systems in Sri %anka /. #lientAs lack of knowled!e in re!ard to alternative procurement systems 0. 'rofessional contractors are unfamiliar with alternative procurement systems which are available 3. #lientsA lack of experience with alternative projects 5. ;overnmentAs first choice that the desi!n and build procurement system is the only one considerin! time factor 7. #onsultants have their own power to select the procurement system for the projects 8. 'oor relationship between the clients and the consultants The Best Procurement System to Use in Sri Lanka 25

9. Inade4uate in-house desi!n team in contractorsA or!anisation +:. ffect of political environment in procurement selection ++. #onsultantsA professionals have ne!ative sense with alternative procurement methods. +. Inade4uate cover by the Standard #onditions of #ontract +/. Ministry of Finance contributes very little to alternative procurement system +0. 'rofessional institutes contribute very little to the !rowth of alternative procurement system in Sri %anka.

771 -actors 4e'ate# to *'ients

#lients are essential in the construction procurement selection. $ccordin! to Coseph et al. <::8>, clientAs lack of knowled!e re!ardin! alternative procurement systems is the major restriction to the development of alternative procurement system in Sri %anka. #ontractors and institutes are not willin! to educate their clients in alternative procurement systems. "herefore, the client does not chan!e the type of procurement system they re4uire and stick to the traditional procurement system as that is all they know .

Further, the client does not have much experience with alternative procurement systems. Most clients do not want to take an extra risk to choose alternative procurement systems also .

For example, desi!n and build procurement system is very popular and widely used in other countries but it is not popular in Sri %anaka. "his is due to the clientAs inade4uate knowled!e and lack of experience in desi!n and builds procurement system. "hese implement a ne!ative impact to the !rowth of desi!n and build procurement systems in Sri %anka . Furthermore the client is more concerned with keepin! costs down.

In Sri %anka, the !overnment is a major client in the construction industry and its policies and re!ulations sometimes restrict the choice of suitable procurement system by the client The Best Procurement System to Use in Sri Lanka 26

<(ameeEdeen, ::>. If a client or!anisation, which belon!s to the !overnment sector, decides to construct a buildin!, they have to adopt Institute for #onstruction "rainin! and 2evelopment condition of contract, which !overn all separated procurement systems. Few years a!o they have published 2esi!n and uild #ondition of #ontract document . "his is the major restriction to have other procurement system such as mana!ement oriented, collaborative procurement system in Sri %anka.

772 -actors 4e'ate# to *ontractors

In Sri %ankan construction industry contractorsA are not familiar with alternative procurement process. "his is the other barrier for the development of new procurement system . "he cause is that the traditional system is dominated the Sri %ankan construction market. "herefore contractin! or!anisations have lack of experience.

For example, in Sri %anka most of the contractors !o for the joint venture with desi!n teams for desi!n and build projects as contractors find it easier to outsource the desi!n team. $lso the contractorsN professionals are unwillin! to accept the chan!es when involvin! in 2= process due to the uncertainty and strict culture of the Sri %ankan construction professionals .

777 -actors 4e'ate# to *onsu'tants Coseph et al. <::8> points out that the consultantsA have the power to choose the procurement system. "herefore they do not use a proper defined method to select the procurement system for the projects. For that reason, the selection has been unfair and not a lo!ical approach. $s a result the consultants are selectin! the traditional procurement systems which are well-known to them. "his is the other restriction for the use of alternative procurement systems in Sri %anka.

77: En9ironment of 3o9ernment an# Po'itica'

The Best Procurement System to Use in Sri Lanka 2

"he ;overnment is a major client in the Sri %ankan construction industry . ;overnment policies have an impact on the economy and its re!ulations, which restrict the choice of a procurement system.

For example, the oard of Investment <)I> approval may affect the selection of procurement systems. $ccordin! to Coseph et al. <::8>, the !overnment started to procure more projects usin! desi!n and build procurement system from the year ::+, after publishin! LStandard iddin! 2ocumentA for desi!n and build contracts. ut biddin!s are not open to private sector or!anisations.

775 -actors 4e'ate# to 4esearch an# %e9e'o!ment >4,%? )nstitutes in Sri Lanka

Sri %ankan construction industry has a considerable contribution to the ;ross 2omestic 'roduct <;2', nearly 8.3> to the economy <#entral ank, :+0>. So, the construction industry is an important sector as it has an effect on the economy and this in turn means that it affects inflation rates and interest rates. "he (=2 institutes are very vital to construction industry compared to other countries where (=2 is not seen as so important. "he contribution of (=2 to develop alternative procurement systems impacts the construction industry and pushes the introduction of new chan!es to procurement systemsJ however this has not happened in the Sri %ankan construction industry . "his is another barrier for the development of alternative procurement system in Sri %anka.

77 -actors 4e'ate# to Professiona' )nstitutes in Sri Lanka

The Best Procurement System to Use in Sri Lanka 2!

$ccordin! to Coseph et al. <::8>, 'rofessional institutes contribute a very small amount to the !rowth of alternative procurement system in Sri %anka. ecause few professional institutes do not su!!est desi!n and build procurement system as to protect small and medium contractors from involvin! in desi!n and uild projects.

"his is another restriction for

development of alternative procurement system in Sri %anka.

77 -actors 4e'ate# to Stan#ar# *on#itions of *ontract

I#"$2 si!nificantly contribute to the choice of procurement systems chosen by implementin! some re!ulations. "he condition of contract used in Sri %anka is applicable for separated type of procurement systems and 2esi!n and uild 'rocurement system only . "his is another barrier preventin! introduction of a lternative procurement system in Sri %anka.

#&$'"( 0 The Best Procurement System to Use in Sri Lanka 2"

#$S S"?2IS

:1

)ntro#uction

ach and every procurement systems has its own style and appropriate procurement system which help avoid problems which may occur. "o achieve the specific !oals of the project, one needs to choose an appropriate procurement system for the project. "his is important for the entire construction project <(ameeEdeen, ::5>. Selection of procurement systems is influenced by clientsA re4uirement

<;ordon

,+990J $mbrose and

"ucker ,+999J

(owlinson,+999>, clientsA characteristics , project characteristics <#hen et al., ::/> and external environment factors <6alker ,+989J &u!hes,+989J Sheath et al ,+990J $lhaEmi and Mc#affer ,:::J @umaraswami and 2issanayake,+998>. "he clientsA re4uirement is the most important factor which influences the procurement selection <"urner, +99:>.

"he case study has been taken from the buildin! project. It is a hospital project, which was constructed under traditional measure and pays procurement system and desi!n and builds procurement system.

:2

*ase Stu#y %i9isiona' Fos!ita' at +attanku#y

'roposed 2ivisional &ospital at @attankudy is procured under separated procurement system. "he separate system, where the main elements of the project-implementation process and the desi!n and construction are responsible by other separate or!aniEations. For example, desi!n consultants, 4uantity surveyor, and contractor. "he client is responsible for the fundin! of the project as well as the operation of the facility once completed. $lso the client has to work alon!side the project team.

:21 *'ient(s 4e;uirements


"he Sri %anka (ed #ross Society and Internal Federation of (ed #ross = (ed #rescent Societies have planned to construct a 2ivisional &ospital at aticaloa district. "he client is expectin! the followin! features to!ether with utilities, landscapin! and all services which includeB electricity, water supply and disposalB • • • • • • • •

Main buildin! )peration theatres 2octors 4uarters *urses 4uarters Minor staff 4uarters Mor!ue buildin! @itchen buildin! 'arkin!

"he client is expectin! the project to be finished within +8 months. &e is expectin! medium 4uality within a reasonable price ran!e.

:22 Pro8ect *haracteristic

In the construction industry there are several types of projects such as commercial, industrial, residential, recreational, social and lar!e infrastructure projects. "his is a kind of social project and it is a two story buildin!.

:27 %etai's of the !ro8ect

'roject

B @attankudy 2ivisional &ospital, aticaloa 2istrict.


mployer

B Sri %anka (ed #ross Society = International Federation of (ed #ross = (ed #rescent Societies.

2onor #onsultant Main contractor #ontract Sum "ype of contract #ommencement of work 'eriod of completion (etention 2efect liability period 'eriod of interim payments $scertained li4uidated dama!es 'eriod of final measurement

B *orwe!ian (ed #ross B $rchitects #o-'artnership <'vt.> %td. B Sierra construction %td B 07: million (upees B Measure and pay B +8th March :+: B +8 #alendar months B +: of valuation B + calendar months B + calendar month B +H0::: of contract sum per calendar day B  calendar months from the date to practical #ompletion.

2ate of completion

B +8th September :+

'eriod of Maintenance

B + calendar month

:2: 4eason for the Se!arate# Procurement System for this Pro8ect

Sri %anka (ed #ross Society and International Federation of (ed #ross and (ed #rescent Societies <(#S> and the $rchitect #o-'artnership <'vt.> %td. had decided to !o for separated procurement system and use Measure and pay system because the work had been desi!ned for a public client. "he same client and consultant carried out a successful project at $mpara in the past year. "hrou!h the experience from the previous project the partiesA wanted to procure this project as a separated system. $nother reason why they wanted to !o for separated procurement system was the duration of this project bein! ei!hteen calendar months, so this procurement system was the most suitable for this kind of project. "he tenderin! method used for this project is an open tender, therefore only M+ contractors were capable to bid this project. It may help to select 4ualified and experienced


contractor for this project and that have competitive characteristics. 2ue to hi!h competition, the contractors offer more prices that are accurate.

In addition, it serves detailed documents in tenderin! as well. "he desi!n has to be fully developed and all uncertainties must be cleared up before tenders are invited then only can tenderin! costs be minimiEed, proper competition ensured and then the final project cost can be seen as lower than the other procurement methods. In our case client is more concern about the final cost of the project. "herefore, when payments are made, there will be fewer disputes. In this arran!ement the existence of a priced ill of Duantities enables interim valuations to be assessed easily and variations to be 4uickly and accurately valued by rates. "he use of this method provides a hi!her de!ree of certainty that 4uality and functional standards will be met. Further, separate procurement system need more time to achieve the desired tar!et so this kind of arran!ement is suitable for this hospital project. $ separate system can identify the separation of desi!n and construction. "he disadvanta!e for this procurement system is low team spirit and buildability. Further this will lead to conflicts between the both parties. ut there are number of project members involved for this project so team spirit is a key factor for a successful project. $nother disadvanta!e is the lack of communication between clients and the project team. $ccordin! to this separate procurement system, no mistakes can be made by the desi!ners because complete work drawin!s have been developed fully and detailed out prior to tenderin! this is another advanta!e for this procurement system. "he client expected a low level of risk mana!ement throu!h the procurement system because the risks are !enerally fair and balanced between the parties to the contractor. So the client needed to !et the project completed on the expected time, which is +8 calendar months after the time from bid. "he client is expected a medium level of speed. "he aim of this hospital project is to provide a valuable service to the people. "his construction is affected by the external environment factors which are weather condition, civil war, market competitiveness, etc. "he main disruptin! factor is the weather condition and civil war.

6hen the client does not have any experience about the


construction of such a project, the client risk is !reater. ut the client of this project has knowled!e about similar kind of projects. 6hen considerin! this aspect, this procurement system is suitable for this project, to some extent.

:25 4eason for A9oi#in6 the ther Procurement Systems

"he Separated System has been established in the S% many decades a!o. "herefore clients of the industry have been used to usin! it and since non-traditional methods are newly introduced there is little awareness of the clients which are attracted towards them . "here is lack of firms to undertake projects with non-traditional procurement systems. Since non-traditional methods are not lon! introduced the numbers of firms which actually undertake projects with non-traditional procurement systems are very few and far between. In non-traditional systems sometimes the power of the $rchitect and the 2esi!n n!ineer may be much less. "herefore they may not favour to move from the separated systems. *ontraditional systems such as 2esi!n and uild, Mana!ement )riented, #ollaborative Systems and 'artnerin! are more complex. "herefore these systems are needed more professionalism and because of the complexity the client may not understand these systems. "his creates a barrier which prevents developin! these systems and therefore because of these reasons client and consultants decided to adopt measure and pay procurement system for their projects.

:7

*ase Stu#y Base Fos!ita' at *hi'a"

;overnment decided to build a base hospital at #hilaw. "he client re4uired a three storied buildin! for )'2, clinic and paramedical unit, cafeteria and car parkin!. "he total cost of this project was + Million Sri %ankan (upees and the construction period took two years. "he consultant of this project was (. Susil 6eddikkara = $ssociates %td and the contractor is Ma!a n!ineerin! <'vt.> %td. #lient and consultant decided to !o throu!h


desi!n and build procurement system and was a two-sta!e tenderin! method <$nuradha, :+0>. "he !overnment decided to !o throu!h the desi!n and build project due to sin!le point responsibilities. It meant clients had to deal with one sin!le or!anisation this was an advanta!e for the client. Since client had specific re4uirements there was little uncertainty and the final project cost could be achieved and this cost was less than what it would have been if another type procurement system was used. $nother factor was the use of an inte!rated procurement arran!ement which enabled the desi!n and construction to be overlapped which resulted in improved communications bein! established between the client and the contractor. "hese two characteristics enabled a shorter, overall project to be achieved and project mana!ement efficiency to be improved. "his was a hu!e advanta!e for the project because it !ave the client time to finish this project 4uicker <0 months>. $lso there was direct communication between the client and contractor. "herefore the contractor could respond to the clientAs re4uirements 4uickly. )ften it can be that the clientAs brief is ambi!uous and they do not communicate their wishes precisely to the contractor. "his can lead to !reat difficulty in evaluatin! proposals and tender submissions. ut in our case the client had specified his re4uirements clearly, therefore there were not any problems. In this arran!ement the absence of a ill of Duantities makes the valuation of variations difficult and limits the freedom of clients to make alterations to the desi!n of the project durin! the post-contract period. "his is one of the bi! disadvanta!es of this system. "he client should have awareness re!ardin! the variations before he !oes into the contract and he should make sure to minimiEe those variations. ut in this case client clearly specified his re4uirements <$nuradha, :+0>.

:71 Satisfactory of Pro8ect 4esu't

"his project was completed on time. "he reasons for this wereB




#lient O very effective mana!ement and !ood brief, multi-headed client problems had



been overcome 2esi!ner O clear documentation, competent clientAs advisors, ade4uate desi!n



information and !ood site supervision and ade4uate coordination details #ontractor and desi!ner O sin!le or!anisation effective mana!ement, !ood team work spirit

"his desi!n and build procurement system was established to be an effective procure process and !ood project mana!ement of desi!n and construction from all participants. "he whole team !ave better attention to coordination of services as time. "herefore the project outcome was successful. "he reasons for this wereB    

Suitable procurement method had been chosen Suitability of project mana!ement #areful selection of desi!ners and contractors $de4uate project pro!ramme

#&$'"( 3 $*$%SIS

51)ntro#uction

6e were briefly discussin! the traditional and inte!rated procurement system in chapter two. "his chapter will now cover the advanta!es and disadvanta!es of "raditional and 2esi!n and The Best Procurement System to Use in Sri Lanka 36

uild procurement systems. $lso analysis the @attankudy 2ivisional &ospital 'roject under desi!n and build procurement system.

'ast studies of Masterman <::>, Morled!e et al. <::5>, Mark <::7>, 2ebbie et al. <::3>, and #onstruction xcellence <::3>, listed several advanta!es and disadvanta!es of each systems.

52Tra#itiona' Procurement System "raditional 'rocurement systems have been used in the ?@ since the early nineteenth century . "his system is still popular in Sri %anka. $ccordin! to #onstruction xcellence <::0>, 2ebbie et al. <::3> this system is not suitable for fast track projects but suitable forB    

$ll clients, includin! inexperienced clients #omplex projects $ developin! brief Duality and desi!n development



521 A#9anta6es an# %isa#9anta6es of Tra#itiona' Procurement System

$ccordin! to Masterman <::>, Morled!e et al. <::5>, Mark <::7>, 2ebbie et al. <::3>, and #onstruction xcellence <::3>J $dvantages% +. "enders are on a like-for-like basis . Scheme fully pre-desi!ned and specified /. arly commitment to maximum price 0. (educed estimatin! risk 3. 'rovides contractually a!reed prices for valuation of variations, cost control and analysis The Best Procurement System to Use in Sri Lanka 3

5. asy to control the standards 7. "wo-sta!e tenderin! allows contractor to have input in to desi!n and buildability and helps team-buildin!, thereby helpin! avoid future adversarial attitudes 8. $ number of readymade contracts available for use dependin! on siEe and complexity of the scheme and the pre-construction desi!n timescale available - cost plus, schedule of rates, bills of 4uantities .

Disadvantages% +. %en!th of time from inception throu!h to completion. . 'rojects over-runnin! their contract periods Final costs bein! hi!her than expected. /. Separation of responsibility for desi!n and construction can delay a teamwork approach and lead to adversarial attitudes if problems occur. 0. %ate Involvement of the builder can limit his contribution.

57%esi6n an# Bui'# Procurement System "he desi!n and build procurement system is very popular in the ?@, #hina, #anada, etc, but not in the Sri %ankan construction industry which was discussed in chapter three. $ccordin! to #onstruction xcellence <::0>, 2ebbie et al. <::3> this system is not suitable for an uncertain or developin! client brief and complex buildin! but it is suitable forB 

$ll clients, includin! inexperienced clients and also clients who do not want to be



involved in their projects #ost certainty Faster track



The Best Procurement System to Use in Sri Lanka 3!

571 A#9anta6es an# %isa#9anta6es of %esi6n an# Bui'# Procurement System

$ccordin! to Masterman <::>, Morled!e et al. <::5>, Mark <::7>, 2ebbie et al. <::3>, and #onstruction xcellence <::3>J $dvantages +. Sin!le point of contact between client and contractor. . If a clientAs re4uirement is precisely specified, accuracy of the final project cost is achieved which is less than other procurement methods. /. 2esi!n and construction is overlapped which results in better communication bein! established between the contractor and the client. "hese two characteristics permit shorter, overall project periods to be obtained and project mana!ement efficiency to be much improved.

Disadvantages +. "he clientAs brief is often unclear and does not illustrate exactly what he is proposin! to the contractor. . ?nder this procurement system there is no bill of 4uantity. It is very difficult to calculate the valuation of variations and also the client cannot make any chan!es in the desi!n. /. #ompared to other procurement systems, clients have less power to control the features of desi!n and aesthetics of the buildin!.

5:Ana'ysis the +attanku#y %i9isiona' Fos!ita' Pro8ect un#er %,B Procurement System

"his &ospital project took more than +8 months to complete , it was completed and handed over on the / rd of Culy :+. If the client and consults chose the 2esi!n and uild procurement system, it would have been possible to complete the project within the time period this is because this type of procurement system could have reduced the time consumption while inte!ratin! the desi!n and construction to!ether, also makin! the coordination for different parts of desi!n and construction easier. )n the other hand, early The Best Procurement System to Use in Sri Lanka 3"

involvement of contractor could have reduced the time re4uired and inte!ration of the desi!n of different parts, enablin! easier communication and reducin! the complexity and eliminatin! the unnecessary delay .

$ccordin! to Mark et al. <::7>, from the client point of view, time, cost and 4uality are the basic criteria. Most clients want hi!h 4uality, at a lower cost, in the shortest time frame however this is not always possible. ach procurement system has a different time, cost and 4uality scenarios

Variations on the eternal triangle, shows the different priorities /ariation on the Priority

trian6'e

"ith

eterna' #ifferent

4esu't

!riorities ua'ity %ost

Time

<$de4uate time is allowed for desi!n and specification in order to

#ost will rise in both counts.

&uality

achieve best 4uality> Time

Time

%ost

oth 4uality and cost may both have to suffer.

&uality

%owest *ost %ost

Time

"ime

may

not

prejudiced &uality


ut Duality will suffer.

be

Source% T+e $0ua 1roup 1uide to Procurement Tendering & Contract $dministration

"he traditional procurement system is a conse4uently slow process. "his is due to the separation of desi!n and construction . ut the 2= procurement system is faster than the traditional procurement system.

$ccordin! to Ibiyemi <::8>, the use of desi!n and build is ever increasin! with many clients perceivin! it as providin! better value for money and !ivin! rise to fewer disputes than other procurement methods. Further, Saxon <:::> and anik <::+> cited Ibiyemi <::8> ar!ued that

inte!ration of desi!n and construction offers better performance in time and cost resultin! in lesser defectsG ,In this case clients do not expect hi!h 4uality .

The Construction Process

Source% T+e $0ua 1roup 1uide to Procurement Tendering & Contract $dministration

$ccordin! to Samuel <:+:>, 2esi!n and uild procurement systems are suitable for all clients, includin! inexperienced clients. ut our clients have experience in the construction industry. Further, client has to deal with a sin!le or!anisation because of the sin!le point responsibility <(osli, ::5>. "herefore, clients can transfer the risk to the contractor


. In addition if there are any problems which occur the clientH employer does not have to claim a!ainst different parties .

Further, under the desi!n and build procurement process, all members come under one contractor, which means they have a lon! term relationship. In traditional procurement system, it is difficult to mana!e the desi!n and construction team however it is easier in desi!n and build procurement system.

#)*#%?SI)* $*2 (#)MM*2$"I)*S

"he comprehensive investi!ation attempted to identify the best procurement route to use in Sri %anka as the "raditional procurement system dominates the whole construction industry. "his trend needs to chan!e and the introduction of alternative procurement systems in the construction market needs to occur.

"he 'roject outcome should fulfil and satisfy the clients. "he success behind every construction project depends on the procurement system that is used to procure the buildin!. "he selection of an appropriate procurement system is very important and is influenced by several factors such as client re4uirement, project characteristics, external environmental factors etc.


"his study was based on lecture reviews and case studies. "he lecture review was obtained throu!h published books, journals, ma!aEines, and the internet and from people who are worked at site construction industries such as 'roject n!ineers and Duantity surveyors.

Most of the procurement systems which are practiced around the world are indentified throu!h the literature review. ased on lecture reviews and conversations with people workin! in the construction industry in S% it can be said that the traditional procurement system is very popular and widely used for both public and private sectors until now. Further, the Sri %ankan !overnment is responsible in providin! all public constructionJ they are the lar!est client to the construction industry in Sri %anka.

"here are several barriers for the introduction of alternative procurement systems. Such asB clients have inade4uate knowled!e re!ardin! alternative procurement systems also construction professionals are unwillin! to chan!e themselves. "hus, alternative procurement systems do not contribute to the professional institutes and research and development.

$ccordin! to these case studies, choice and use of an unsuitable procurement system is not the only reason for an unsatisfied overall performance. )ther reasons includeB the coordination of buildin! team is also vital for the success of a project. "raditional procurement systems do not have a power of coordination process due to separation of desi!n and construction. #lients have to deal with many coordination problems. ?nder desi!n and build procurement system, all problems in relation to coordination still exist but they would pass to the contractor side. "herefore, project success can be enhanced by a !ood team spirit and hi!h de!ree of cooperation between the project participants .

"hrou!h these case studies we are su!!estin! 2esi!n and build procurement system best for Sri %anka. It is very popular in many countries such as the ?@, #anada, ;reek, etc. . #ompared to traditional systems, it has many advanta!es and is


suitable for all clients. $lso it has !ood team spirit, which is possible for the lon! term partnerin! for future projects such as hospitals, schools, etc.

"hrou!h these studies we have identified the major causes for poor performance within the construction industry and it is due to the poor selection of appropriate procurement systems. It is due to the feebleness of existin! procurement systems that cause this poor performance of the construction industry. "o overcome this displeasin! nature, several alternative procurement systems were evolved. "hese chan!es reflect the Sri %ankan construction industry as well. "he followin! can be recommended to the probable solutionJ



Measure and pay is still practiced in construction industry for hu!e number of projects. In the !overnment projects, this type of systems is probably used with. "he !overnment rules are a!ainst the alternative procurement systems, it re4uires the measure and pay to be subjected based on I#"$2 conditions of contract. "his should be avoided to increase the usa!e of new procurement systems.



Mana!ement oriented system still in initial sta!e in major projects, which are considered under this study. If the project mana!ement firms had been considered then the mana!ement oriented systems could have been in a hi!h de!ree of use. In addition, to create harmonic environment for mana!ement oriented systems especially for mana!ement contractin! sub contractors need to be stren!then.



xperienced clients try to avoid followin! the tr aditional systems rather than usin! the alternative systems such as 2 = , mana!ement oriented systems, etc. Inexperienced clients, who donAt have proper ideas, they can !et the assistance from experts.



Most of the professionals are committed to lack of knowled!e and miss proposals over the procurement systems. So, awareness pro!ramme and seminars should be scheduled to 6orld ank or $sian 2evelopment ank <$2> and I#"$2.


(F(*#S $shworth, $. <::5> in 3 Contractual Procedures in t+e Construction !ndustry2 &arlowB 'earson 'rentice &all. $lhaEmi, "., Mccaffer, (., <:::> N'roject 'rocurement Systems Selection ModelN, Journal o) Construction 3ngineering and Management +5 , pp. +75 - +8/. rian a!nall, ). ., Cohn #avilla, (ichard )akes, Duentin 'ickard, ;eoffrey 'oole Friba, $ 4evie* o) Some o) t+e Principles2 P)nlineQ. $vailable atB httpBHHwww.thkp.co.ukHmediaHbulletins-newH2esi!n:and:uild:[email protected] <$ccessedB +H+:H:+0>. #heun! Sai-)n, .-6. 6., "sun-Ip %am, Mei-un! %eun! <::+> N$nalytical &ierarchy 'rocess ased 'rocurement Selection MethodN, Management and 3conomics +9 <0>, pp. 07 - 0/7. %e!al = 'roperty Service P)nlineQ. $vailable atB httpsBHHcms.wiltshire.!ov.ukH2ataH#abinet :H::3:59H$!endaH(:7-::3R:5R9.pdf <$ccessedB +H+H:+0>. P)nlineQ. $vailable atB www.abayomiibiyemi.nlH'()#?(M*":'$'(.doc <$ccessedB /H+H:+0>. !nstitute )or Construction Training and Development "!CT$D#2 P)nlineQ. $vailable atB httpBHHwww.ictad.lkH <$ccessedB +:H:8H:+0>.


Masterman, C.6.., ;. (, <+990>, 5Client c+aracteristics and needs in relation to t+eir selection o) procurement systems6 . InB (owlinson, S. 'roceedin!sB ast Meets 6estG 'rocurement systems Symposium, #I 'ublication +73, 0O7 2ecember, &on! @on!. Masterman, C. 6. . <::> in  $n !ntroduction to Building Procurement Systems2 %ondon B Spon. Morled!e (oy, 2. ". @., $drian Smith <::5> in Building Procurement2 )xford B lackwell Science. *ajeeb, $. %. <::3> actors $))ecting Construction Procurement Selection% Study o) 'otter, M. <+993> in Planning to Build7 % $ Practical !ntroduction to t+e Construction Process2 %ondon B #onstruction Industry (esearch and Information $ssociation. Procurement2 P)nlineQ. $vailable atB www.constructin!excellence.or!.uk <$ccessedB +:H++H:+0>. (. (ameeEdee, S. (. <::5> $ Multiple Decisive actor Model )or Construction Procurement System Selection C8B4$ '((9 . ?niversity #olle!e %ondon 7-8 September. (I#SB "he construction and buildin! research conference of the (oyal Institution of #hartered Surveyor. (aufdeen (ameeEdee, (. S., Inoka ;ama!e Macro Level actors $))ecting t+e Construction Procurement Selection% $ Multi Criteria Model2 P)nlineQ. $vailable atB httpBHHwww.irbdirekt.deHdatenHicondaH#I00/8.pdf <$ccessedB +:H+H:+0>. (osli $bdul (ashid, I. M. "., 6an asiron 6an $hmad, Md. $srul *asid, 6an *ordiana 6an $li, ainab Mohd ainordin <::5> 3))ect o) Procurement Systems on t+e Per)ormance o) Construction Pro:ects2 P)nlineQ. $vailable atB httpBHHeprints.utm.myH79:H+H'rocurementRperformance(osli.pdf <$ccessedB +:H+H:+0>. (ameeEdeen, ::7, %ecture &andout, ?niversity of Moratuwa Sri %anka Sachie ;unathilak, &. S. C. Developing 4elational $pproac+es to Contracting% T+e Sri Lankan Conte;t2 P)nlineQ. $vailable atB httpBHHwww.bear::8.or!HpostH+7/.pdf <$ccessedB 7H+H:+0>.


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