The selection of a procurement method is critical to the success of any construction project. Furthermore, the type of procurement that construction businesses pick is a key determinant of their total profitability and is critical to the success of any construction project. Topography, logistics, weather, accessible technology, financing, labour availability, and services are all factors that construction businesses consider when choosing a procurement method. Before diving into the many forms of procurement, it’s vital to understand how the construction business works and who’s involved. A construction project typically involves five functions: design, construction, management, financing, and operation. In addition, the client, consultant, and contractor are the major players in a construction contract.
Procurement in the Old Ways
This is one of the most basic forms of procurement, in which a contractor’s obligation is confined to a building. A consultant or engineer is in charge of all design work and contract management. The fact that the construction sector has been using this approach for a long time is its most significant benefit, as it has developed metrics for evaluating the value for money of this type of procurement path. The primary drawbacks of this strategy are thought to be the contractor’s lack of control as an operating party over the design cost involved, as well as risk allocation.
Contracting with Management
One of the most essential kinds of procurement in the construction sector is management contracting. Consultants, contractors, and specialist contractors, in addition to the customer, become participants in this strategy. The contractor serves as the project’s management, while specialist contractors handle the actual construction in their expertise. In such initiatives, the customer is in charge of both finance and operations. When it is possible to identify projects in packages, this strategy is used.
Design and Construction (D&B)
In this sort of contract, the same contractor is responsible for both design and construction of the project, necessitating greater collaboration throughout the process and allocating all risks to the contractor. The contractor is generally in charge of design and construction. The scope of the consultant’s work is confined to contract management. Finance and operations are the responsibility of the customer.
Collaboration vs. Joint Venture
Barriers between parties can often lead to severe issues in a building deal. To overcome obstacles, several parties must create a working environment based on trust, common aims, cooperation, and risk and reward sharing. A memorandum of agreement between the parties concerned is crucial to the success of such procurements. In the joint venture procurement system, determining each party’s obligations is a little more challenging.