What are the main contract procurement methods?

The choice of procurement method will depend on the size, complexity and nature of the project, as well as the client’s specific needs and objectives. There are several contract procurement methods used in the construction industry. These include:

Traditional

This is the most common procurement method, where a client hires a design team to create drawings and specifications, then issues an invitation to bid to several contractors. The client then selects the contractor with the lowest bid.

Design & Build

In this method, a single contractor is responsible for both the design and construction of the project. This allows for a more streamlined process, with the contractor having more control over the design and construction process.

  • Turnkey procurement; this is a method where a client hires a single contractor to design, build, and fully equip a project, then hand it over to the client when completed, ready to use. This method is also known as “design-build-operate” or “design-build-finance-operate” (DBFO).

Management Contracting

Similar to construction management procurement, this method involves hiring a management contractor to manage the project and hire specialized contractors for specific tasks. The management contractor acts as a general contractor and is responsible for the overall management of the project.

Partnering

The principles of partnering include a decision making process, mutual objectives, and an overall improvement in performance. As more projects are worked on in tandem, a greater understanding of how to accomplish best practice, reduce costs and attain value for money is achieved.

  • Public-Private Partnership (PPP) procurement; this method involves a partnership between a public sector client and a private sector partner to finance, design, construct, and operate a project. This method is typically used for large-scale infrastructure projects.
  • PFI;
  • Target Cost;
  • Prime Contracting;

Framework

This is a method in which a client establishes a pre-approved list of contractors or suppliers to be used on a series of projects over a period of time. This method allows the client to have a known pool of suppliers or contractors to call on when a new project arises, rather than going through the tendering process again.

Summary

The table below, provides a summary of the pros and cons for each one of the contract procurement methods described above:

Method Advantages Disadvantages
Traditional
  • Certainty about design quality and cost
  • A low risk method of contracting for the client
  • Each party knowing where they stand, and who has responsibility for what
  • Can be slower than other forms of contracting
  • As the contractor is appointed only once the design is complete, they are not able to help improve the buildability and packaging of proposals as they develop
  • If design information is incomplete at tender, or if significant variations are required after the contractor has been appointed, the cost to the client can be significant
  • Disputes are common
Design & Build
  • Streamlined process: With design-build procurement, the client only deals with one contractor throughout the entire project, which can make the process more efficient and less time-consuming
  • Cost savings: By having the contractor responsible for both design and construction, it can lead to cost savings as they can coordinate the design and construction process to ensure that the project stays within budget
  • Risk management: The contractor takes on more risk in design-build procurement, which can reduce the risk for the client
  • Flexibility: The contractor can be more responsive to changes and modifications during the design and construction process, allowing for more flexibility
  • Limited control: The client may have less control over the design and construction process, as the contractor is responsible for these aspects of the project
  • Design quality: The client may not be able to ensure the same level of design quality as they would with a separate design team
  • Limited competition: This method limits the competition to a single contractor, which may result in higher costs
  • Limited transparency: As the contractor is responsible for both design and construction, it may be more difficult for the client to evaluate the design and construction process and identify any issues that may arise
Management
  • Early involvement in the project
  • The management contractor can also appoint trusted subcontractors they have worked with previously
  • Lack of a single point of responsibility for both design and construction phases, which opens the possibility for disputes to arise.
Partnering
  • Improved communication: Partnering procurement encourages open and effective communication between all parties involved in the project, which can lead to better decision-making and problem-solving
  • Increased trust: By forming a collaborative relationship, the parties involved in the project can build trust and mutual understanding, which can lead to better cooperation and teamwork
  • Reduced conflicts: Partnering procurement can reduce conflicts and disputes that may arise during the project, as all parties are working together towards a common goal
  • Increased productivity: Partnering procurement can lead to increased productivity, as all parties are working together to achieve shared goals
  • Time-consuming: Partnering procurement can be time-consuming, as it requires all parties to work together to establish shared goals and develop a collaborative relationship
  • Difficult to implement: Partnering procurement can be difficult to implement, as it requires a significant commitment of time, resources, and effort from all parties involved
  • Risk of failure: Partnering procurement may not be successful if the parties involved are not committed to the process, or if communication and trust are not established
  • Not suitable for all projects: Partnering procurement may not be suitable for all projects, as it requires a significant level of commitment from all parties involved

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