procurement guide - introduction

Introduction:


There are numerous issues that need to be considered when deciding upon the means of procurement for a construction project.  The decisions made will of course ultimately determine the Form of Contract used to define the obligations and responsibilities between the Parties. Procurement is the term used to enable the process of creating a contractual relationship. There are four essential elements:

  1. Offer
  2. Acceptance
  3. Consideration
  4. The intention to create a legal relationship

Factors which influence the procurement process include:

  • the experience of client and the business case for the project including any particular requirements that the client may have
  • the client’s desired programme for development, including the timing of the start and finish dates
  • the nature, size and complexity of the project
  • the state and completeness of the designs
  • the degree of cost certainty, or conversely the requirement for risk aversion
  • the need for competitive prices
  • the apportionment of risk between client and contractor

In the UK there are eight main generally recognised procurement routes:

  1. traditional (bills of quantities; schedules of work; specification and drawings; and the like)
  2. target cost
  3. design and build; and target cost design and build
  4. design, manage and construct
  5. management contracting
  6. construction management
  7. engineer, procure & construct (turnkey) - not dealt with here
  8. partnering (also a process – see below)

With the exception of partnering, all of the above routes can be used with:

  • a single stage process (tendered or negotiated)
  • a two-stage process
  • as a process to define a GMP – guaranteed maximum price

Footnote:

Additional specialised routes have also been and in some cases continue to be used by public authorities.  These are:

  • PFI – the private finance initiative;
  • PPP - Public Private Partnership; and
  • PRIME contracting. 

In the latter case variants of PRIME contracting have been adopted by the NHS, Defence Estates and several ‘blue chip’ private sector organisations.  PFI, PPP and PRIME are not dealt with here.