Essay on Procurement Methods Available in the Construction Industry of Cyprus part 2

Essay on Procurement Methods Available in the Construction Industry of Cyprus part 2 Essay on Procurement Methods Available in the Construction Industry of Cyprus part 2 Essay on Procurement Methods Available in the Construction Industry of Cyprus part 2Essay on Procurement Methods Available in the Construction Industry of Cyprus part  1  Ã‚  Ã‚  Ã‚  Ã‚  Ã‚  Ã‚  Ã‚  Ã‚  Ã‚  Ã‚   Design and buildDesign and build obliges the contractor to undertake a large part of project works (preparation of a detailed project), while the investor provides only an outline of a project (Walker, Sidwell, Hampson 1999).   In such a way, the contractor practically prepares the project from the scratch and the customer just approves and covers the costs of the project, while all technical aspects are controlled and performed by the construction company. The development of the design and build procurement is accelerated now due to the increased demands of customers and attempts of construction companies to offer full service products to their customers, when companies take the full responsibility for the development and implementation of the construction project, wh ile the customer just needs to tell what he/she wants and the construction company offers possible options and different designs among which the customer can choose the most attractive one.There are several sub-types of design and build procurement, which have their own specificities but still operate within the design and build framework, the design and build procurement may be direct. In this case no competition is obtained in tenders. Some appraisal of the possible competitors may be made before tendering but only one tender is obtained (Mortledge, Smith, Kashiwagi 2006). The competitive design and build method implies that tenders are obtained from documents that are prepared to enable several contractors to offer competition in designs and in prices. In addition, there is the develop and construct design and build method, when consultants design the building required to a partial stage, often referred to as ‘scope design’, then competitive tenders are obtained from a select list of contractors to develop and complete the design and construct the building (Mortledge, Smith, Kashiwagi 2006). The amount of consultant design can vary depending on the client’s needs. The use of the design and build method is efficient and help to develop effective procurement that allows construction companies to develop construction projects from the beginning till the completion of the construction. In such a way, construction companies can develop effective and personalised approaches to each customer meeting customers’ needs and wants.Package deal is the method that is often used where the contractors competing will use a significant part of their own or another proprietary building system or they will be constructing variations of a repetitive theme. There is limited scope for innovation when this method is used. Some contractors may offer to find a site, to sell, mortgage or lease their product, obtain approvals etc at a risk to themselves or a t a charge to the client (Mortledge, Smith, Kashiwagi 2006). The package deal is effective, when customers need universal solutions and they are looking for the ready solutions from construction companies. In such a way, construction companies use the ready-made design projects which they offer to their customers and customers choose the project, which they like the most or that matches their current needs, wants or available financial resources.Novation is another method which sometimes is referred to a design, novate and construct. This is where the contractor takes over from the client a previous contract for the design work, completes the design and constructs the work (Mortledge, Smith, Kashiwagi 2006). Novation implies the development of new construction solutions and innovative projects designed and introduced by construction companies, which customers can choose and buy from construction companies.At the same time, the major drawback of the design and build method is the hig h costs of the implementation of this method because construction companies offer the wide range of services. In fact, construction companies offer the full services to the company. In such a way, construction companies can offer a variety of services that meet needs of customers but customers should come prepared to pay the high price for such construction.  Ã‚  Ã‚  Ã‚  Ã‚  Ã‚  Ã‚  Ã‚  Ã‚  Ã‚  Ã‚   Construction managementConstruction management the contractor acts as a consultant, and even though they manage the construction works undertaken by subcontractors, they are not directly responsible for subcontractors. The major advantages of construction management are as follows (Mortledge, Smith, Kashiwagi 2006):Reduced confrontation between the design teams and the team responsible forsupervising construction;early involvement of construction management expertise;overlap of design and construction;increased competition for construction work on large projects due to work packaging a nd splitting the construction activities into more digestible chunks;more even development of documentation;fewer contract variations;no need for nominated trade contractors; andpublic accountabilityAt the same time, along with the aforementioned advantages, the construction management has certain drawbacks. For instance, customers of a construction company rely heavily on construction companies. As a result, customers can little options to choose from options offered by the chosen construction company. If customers have little expertise in the development of construction projects, they may have substantial problems with the adequate assessment of recommendations provided by the construction company, if the latter wants to maximise its profits at cost of the customer.Management contractingManagement contracting is a hybrid form being a fusion between traditional method and construction management. The client appoints an independent professional team, and also a management contractor . Their involvement at pre-construction stages will be as adviser to the team, and during construction they will be responsible for executing the works using direct works contracts. With this type of contract it is possible to make an early start on-site and achieve early completion (Mortledge, Smith, Kashiwagi 2006). Because of its flexibility, it allows the client to change the design during construction because drawings and matters of detail can be adjusted and finalised as the work proceeds.For a management contract to be successful there must be trust and good teamwork on the part of the client, the design consultants and contractor. The contractor should preferably be appointed no later than the outline design stage. The contractor can advise on the design programme, tender action, delivery of materials and goods, and construction programmes (Mortledge, Smith, Kashiwagi 2006). The management contractor will normally make a written submission which includes a proposed managemen t fee, and will be appointed after interviews with the client and the design team. The fee will include for the total management service, expressed as a percentage of the total project cost, and for a service to cover pre-construction stages should the project not proceed to site.The management contractor undertakes the work on the basis of a contract cost plan prepared by a quantity surveyor, project drawings, and a project specification. The client accepts most of the risk because there is no certainty about costs and programme. Competitive tenders for works packages follow later and they will usually, though not always, will be lump sum contracts with bills of quantities (Mortledge, Smith, Kashiwagi 2006).Private finance initiativePrivate finance initiative is a DB form used at large projects, where the contractor provides an investment in return for licence to charge fare for using it in a designated period of time. The private finance initiative is not frequently used because t his approach requires substantial financial resources. As the current economic situation in Cyprus is unstable, companies prefer refusing from the private finance initiative and focus either on smaller projects or projects that require less financial resources.  Ã‚  Ã‚  Ã‚  Ã‚  Ã‚  Ã‚  Ã‚  Ã‚  Ã‚  Ã‚   Public-private partnershipPublic-private partnership is a form of long-term cooperation between government and private organisations. This approach implies the close cooperation between the government and private organisations. This method is effect in a long-run business development and construction projects. As a rule, this method is applied in the development of public facilities, infrastructure and transportation system development, when contractors can count on stable government funding and contracts in a long-run perspective. In a short-run, contractors may face difficulties with the development of effective business relations because profitability of such projects is low and this is why they are not interesting for private companies, if they are developed in a short-run perspective. Instead, long-run projects provide construction companies with the possibility to have the small but steady profit in the course of a long time, when the contractor cooperates with the government.  Ã‚  Ã‚  Ã‚  Ã‚  Ã‚  Ã‚  Ã‚  Ã‚  Ã‚  Ã‚   Framework contractingFramework contracting involves methods used at large projects, where the contractors are chosen following selective criteria and not only the prices. It is usually connected with long-term cooperation contracts including many different projects (Mortledge, Smith, Kashiwagi 2006). In fact, this use of the framework contracting sets strict requirements which contractors should match. Therefore, companies operating in the construction industry should match specific requirements that often means the focus on the quality of the construction rather than on its costs. Hence, one of possible drawbacks of this method of procur ement is the high costs but the high quality and reliability of contractors outweigh high costs of such procurement method.  Ã‚  Ã‚  Ã‚  Ã‚  Ã‚  Ã‚  Ã‚  Ã‚  Ã‚  Ã‚   Prime contractingPrime contracting is an expanded traditional form including long-term partnership. The contractor is usually obliged to undertake construction works and further building maintenance. It is commonly used by governmental institutions (Mortledge, Smith, Kashiwagi 2006). This procurement is quite efficient because it allows customers to rely on construction companies, who can keep maintaining facilities, even after the end of the construction. At the same time, such procurement method is beneficial for construction companies too because they can receive long-run contracts and the stable source of income in a long-run perspective.GraphIn this regard, it is possible to trace the trend to different risks which are imposed either on construction companies or their customers. In this regard, the design and bui ld procurement are the most risky for construction companies because they are fully responsible for designing and implementing projects. At the same time, management contract procurement is the mist risky for customers of construction companies. In such a situation, traditional contracting procurement is in between and risks may vary from the higher risks for customers to the higher risk for construction companies depending on the sub-type of the traditional contracting procurement.  At the same time, the design and build procurement method grows more and more popular along with the construction management and management contracting. Therefore these procurement methods are likely to challenge the traditional contracting procurement, if current trends in the construction industry of Cyprus persist. The enhancement of new procurement methods that challenge the traditional contracting is the result of the changing business environment and new trends in the socioeconomic development o f Cyprus. At this point, it is necessary to take into consideration such factors as the development of new technologies that open new opportunities for customers and construction companies to design and build facilities from the scratch. In addition, the integration of Cyprus into the EU and world economy stimulates the adoption of new procurement methods which have already proved their efficiency in other countries.Research QuestionnaireThe research questionnaire will focus on two groups of participants: a group consisting of engineers, architects and other representatives of construction companies and a group consisting of customers of construction companies. The involvement of these two groups helps to reveal two standpoints on the current situation in the construction industry of Cyprus and the existing procurement methods that are applied to the construction industry in Cyprus. The questionnaires help to reveal the position of professionals working in the construction industry, on the one hand, and the position of customers of the construction companies, on the other.