Procurement Systems

Introduction

• Dynamic systems vs closed systems

Tools to improve procurement process

• Organizational learning

• Web technologies

• Flexible procurement strategy

Developmentally oriented procurement systemsProduct vs. Process considerations

• Clients becoming more active

• Value for money

• Sustainable construction

• External rather than internal considerations (value for money)

Inappropriateness of the TPS in the developmental context

Wells (1986) identified several problems in developing countries:

• Inadequate capacity• Lack of procedural norms• Lack of skilled labour• Lack of suitable materials • Lack of plant and equipment• Absence of support industries• Problems identified in the UK model of the construction

industry were more pronounced in the developmental context

Socio-economic imperatives

• Sustainable employment creation

• Affirmative action

• Promotion of SME’s

• Development of public sector capacity to manage the delivery process

• These imperatives become the criteria for procurement selection

Procurement activity and evaluative criteriaMateru’s success factors (1986):• Active community participation at design and

implementation stages• The concurrent consideration of design, maintenance

and cost recovery • Provision of economic opportunity for project participants

not only in terms of immediate job creation but also in terms of longer-term skills development and capacity growth

• Flexible management, contractual and payment procedures which are appropriate to an intensely uncertain and indecisive environment

Lessons from case studies

• The use of available local resources to complement the existing resources in the formal construction industry.

• Align the formal sector interests with that of the less formal.

Procurement reform in South AfricaKey reform components:• Removal of the barriers to entry by improving

access to tendering information, simplification of documents and procedures and the establishment of procurement advice centres

• Breakout procurement (unbundling large projects into smaller packages for SME’s) employing local people and providing them with sustainable skills

Organizational learning

• A process (individual learning is much easier)

• Knowledge-based industry

• “Knowledge is power”

• Retaining project experiences

• Process and product innovation

• Eg. British Petroleum and Mobil

Organizational learning (2)

In building construction?

• Not formalized; unique projects

Benefits

• Process innovation

• More competitive

Model

Organizational double loop learning

Design

Change

Evaluate

Plan

DoAct

Check

Procedures

Challengeoperatingassumptions

Activitygroups

Investment with technology change

Hardware

Software

Humanware

100%

0%

Investment

LearningEnterprise

TraditionalEnterprise

Critical Success Factor

• Leadership by Client

– Knowledge-based deliverables

Mechanisms

Post-project evaluation

• Formal mechanism for facilitating org. learning

• Provides project background

• Highlights significant events

Project debriefing workshops

Significant investment in resources!

Web technologies

Impact of I.T. on construction procurement in HK and Australia

• CAD

• VR (4D)

• Email / E-transfer of files

• Video / Voice

• Internet / Intranet

Australia

• Pilot study 1997 (17 firms)

Methodology

• Survey questionnaire directed at senior management

Australia (2)

I.T. All PM QS CM

Email 4 4 4 5

File transfer 4 3 3.5 5

Voice mail 3 2.5 3.5 4

Video conferencing

3 2.5 2 4

Intranet 4 4 2.5 2

Internet 4 3.5 3 5

Awareness

(1= very unaware, 5= very aware)

Australia (3)

Results of I.T. Awareness

• Awareness is generally moderate

• Higher utilization of technologies by contractors than consultants

• Contractors used technologies for routine communication

• Consultants rely on face-to-face contact to foster trust

Australia (4)

Web Technology

All PM QS CM All PM QS CM

Email 4 3.5 4.5 4 5 5 5 5

File transfer 4 3 3.5 5 5 5 5 5

Voice mail 2 1.5 3 5 4 4 4 5

Video conferencing

1 1 1 2 3 2 3 5

Intranet 2 2.5 2 1 4.5 5 4 5

Internet 3.5 2.5 4 3.5 5 4 5 5

Current Use Next 2-3 yrs

Patterns of Use

(1= no use, 5= regular use)

Australia (5)

Video / Voice technologies

• No significant advantage of virtual meetings

• Inhibiting trust and relationship building

• Construction is a ‘people’ industry favoring personal contact

Australia (6)

Main Use of I.T. (Competitive)PM • Planning and coordinatingQS• Estimating Contractors• Communication• Marketing / Recruitment

Australia (7)

Concerns

• Security of data

• Training and support for I.T.

• Cost

Client role for I.T. intake

Hong Kong

• 1998 (84 contractors)

Methodology by Betts and Shafagi (1997)

• 28 questions to assess use and mgmt of I.T.

• Survey questionnaire to public works contractors

Hong Kong (2)

Results

• Higher use of I.T. among Group C contractors

• Overall I.T. performance is good

• Use of I.T. is not aligned with company objectives

• I.T. staff, resources are limited

Strategic benefits of I.T.

• A wealth of information

• 24/7

• Reduce communication cost

• Deliver project status

• Visualization technologies

Multiple Delivery Methods for infrastructure projects• Use of full range of delivery and finance

methods over the past decade – mixed strategy

• Choice of delivery method impacts a range of elements

Delivery options

Direct (Finance)

IIIII

IV I

Segmented Integrated

Indirect (Finance)

Build-operate-transfer (BOT)

Design-bid-buildTurnkeyParallel Prime

Build-own-operate (BOO)Design-build-operate-transfer (DBOT)

Design-build-operate (DBO)Turnkey with financePure operate and maintain

Design-build-operate-maintain

Build-own-operate-transfer (BOOT)

Construction management

Fast trackDesign-build

US Infrastructure procurement strategy

Direct

Segmented Combined

Indirect

IIV

III II

1850

1900

1950

3 quad procurement strategy

Indirect

Combined

Direct

Segmented

IIV

IIIII

3 quad procurement strategy (2)• Promotes sustainability

• Promotes competition

• Promotes transparency

3 quad procurement strategy (3)• Continuous evaluation of the entire

procurement process

• Leads to better, faster, cleaner, cheaper

Effects of 3 quad strategy

• Innovation

• Diversity of specialists

• Capital availability

3 quad procurement strategy

• Diet – eat from all the food groups

• Purely public or private delivery mechanisms are unreliable, unstable, and averse to innovation

• Promotes sustainable improvements in technology and quality

• Contingency theory

Links

Intelibuild – BIM consultants

http://intelibuild.com/