Sourcing Strategy – Construction Company

Segment 6.9 Developing Global Sourcing
Level: Professional
Theme: Sourcing
Knowledge: Will know and understand

Capabilities: Will be able to

The importance of creating competitive
advantage, including reduced costs,
improved quality, reduced time to
market, and product and service
differentiation through global sourcing
and low-cost country sourcing

Evaluate opportunities for global and low
cost country sourcing to contribute to the
creation of competitive advantage for the
organisation

How to identify value added activities
and the value chain in global sourcing by:
Reducing costs
Improved quality
More reliable delivery
Innovation
Sustainability

Analyse potential global supply chains to
ensure that external organisations
contribute value

How to assess supply chain risks in
global sourcing, such as:
Country risk
STEEPLED factors
Export and import controls and
sanctions
Bribery and corruption
Fraud
Counterfeiting
Disruptive technologies
Cyber attack

Monitor potential risks across global
sources in order to develop and
implement risk assessment and risk
mitigation strategies for global sourcing,
taking actions to exploit market
opportunities

Generated on 22nd November 2024 via globalstandard.cips.org

Knowledge: Will know and understand

Capabilities: Will be able to

Positioning in local, regional and global
supply chains

Create and implement plans for the use
of ethical procurement

Sourcing decisions in supply chains and
the sourcing of rare earth commodities
and other bottleneck items

Develop appropriate sourcing strategies
for categories of procurements including
the mitigation of potential supply chain
risks

The co-ordination of commitments with
different suppliers to balance supply
chain risks across the global supply chain

Establish plans that co-ordinate and
share allocations of expenditures across
different suppliers when relevant

The use of ethical and sustainable
practices in global sourcing, including fair
pricing and payment terms, and
recognising relevant labour standards in
global sourcing

Create and implement plans for the use
of sustainable procurement

Legal and regulatory requirements for
successful International trading
relationships

Advise colleagues and internal
stakeholders of changes in international
trading, legal issues and regulations

Generated on 22nd November 2024 via globalstandard.cips.org

Knowledge: Will know and understand

Capabilities: Will be able to

Standards that apply to human rights,
ethical and sustainable sourcing such as:
the United Nations (UN)
Trafficking Protocol
the International Labour
Organisation (ILO)
the Ethical Trading Initiative (ETI)
the Social Accountability
International Standard SA8000
ISO 20400 Sustainable
Procurement
ISO 26000 Social Responsibility

Monitor compliance with human rights,
ethical and sustainable practices and
standards taking appropriate actions in
the event of any breaches

Related CIPS Knowledge Links
Global Supply Chains –
Stakeholders –
Risk Analysis and Management –
Sustainable and Ethical Procurement –

Generated on 22nd November 2024 via globalstandard.cips.org

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QS & Construction
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RICS Professional Guidance, UK

Developing a construction procurement
strategy and selecting an appropriate route
1st edition, guidance note

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rics.org/guidance

This RICS guidance note is out of print and on isurv
for information purposes only

Developing a construction procurement
strategy and selecting an appropriate
route
RICS guidance note
1st edition, UK (GN 109/2013)

This RICS guidance note is out of print and on isurv
for information purposes only

Published by the Royal Institution of Chartered Surveyors (RICS)
Parliament Square
London SW1P 3AD
UK
www.rics.org
No responsibility for loss or damage caused to any person acting or refraining from action as a result of the material included in this
publication can be accepted by the authors or RICS.
Produced by the Quantity Surveying and Construction Professional Group of the Royal Institution of Chartered Surveyors.
ISBN 978 1 78321 021 3
 Royal Institution of Chartered Surveyors (RICS) May 2013. Copyright in all or part of this publication rests with RICS. No part of this
work may be reproduced or used in any form or by any means including graphic, electronic, or mechanical, including photocopying,
recording, taping or Web distribution, without the written permission of the Royal Institution of Chartered Surveyors or in line with the rules
of an existing license.
Typeset in Great Britain by Columns Design XML Ltd, Reading, Berks
Printed by Page Bros, Norwich

This RICS guidance note is out of print and on isurv
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Contents

RICS guidance notes
1 Introduction
2 General principles (Level 1 – Knowing)
2.1
Procurement routes…………………………………………………………………………………………
2.1.1 Introduction ………………………………………………………………………………………..
2.1.2 General principles………………………………………………………………………………..
2.2
Traditional (lump sum) ……………………………………………………………………………………..
2.3
Traditional (‘remeasurement’ or ‘measure and value’)………………………………………….
2.4
Design and build …………………………………………………………………………………………….
2.5
Construction management……………………………………………………………………………….
2.6
Management contracting …………………………………………………………………………………
2.7
Partnering ………………………………………………………………………………………………………
2.8
Public Private Partnerships (PPP)……………………………………………………………………..
3 Practical application (Level 2 – Doing)
3.1
Introduction ……………………………………………………………………………………………………
3.2
Identification of primary objectives and parameters ……………………………………………
3.3
Procurement strategy………………………………………………………………………………………
3.4
Selecting a procurement strategy ……………………………………………………………………
4 Practical considerations (Level 3 – Doing / Advising)
4.1
Introduction …………………………………………………………………………………………………..
4.2
Primary objectives …………………………………………………………………………………………
4.3
Project Execution Plan (PEP) …………………………………………………………………………..
4.4
Factors outside the control of the project team………………………………………………….
4.5
Client resources ……………………………………………………………………………………………..
4.6
Project characteristics……………………………………………………………………………………..
4.7
Cost issues…………………………………………………………………………………………………….
4.8
Value for money ……………………………………………………………………………………………..
4.9
Ability to make changes ………………………………………………………………………………….
4.10 Project timing …………………………………………………………………………………………………
4.11 Construction times ………………………………………………………………………………………….
4.12 Performance …………………………………………………………………………………………………..
4.13 Accountability…………………………………………………………………………………………………
Appendix: Procurement strategy selection checklist

1
3
6
6
6
6
7
9
10
13
15
17
18
20
20
20
21
22
23
23
23
24
26
26
26
27
27
27
27
28
28
29
30

DEVELOPING A CONSTRUCTION PROCUREMENT STRATEGY AND SELECTING AN APPROPRIATE ROUTE | iii

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Acknowledgments

RICS would like to thank the following for their
contributions to this guidance note:
Technical author: Roy Morledge (Nottingham
Trent University)

Black Book Working group: Chair: Andrew
Smith (Laing O’Rourke)
Christopher Green (Capita Symonds Ltd)
David Cohen (Amicus Development Solutions)
Jim Molloy (Department of Health, Social
Services and Public Safety NI)
John G Campbell (BAM Construction Limited)
Kevin Whitehead (McBains Cooper Consulting
Limited)
Michael T O’Connor (Carillion Construction
Limited)
Michelle Murray (Turner & Townsend PLC
Stuart Earl (Gleeds Cost Management Limited)

Contracts Steering Group:
Chair: Jon Close (BPE Solicitors LLP)
Julie Stagg (Fenwick Elliott LLP)
Peter Barnes (Blue Sky ADR Ltd)
Steven Thompson (Telereal Trillium)
Darren Talbot (Davis Langdon, an AECOM
company)

iv | DEVELOPING A CONSTRUCTION PROCUREMENT STRATEGY AND SELECTING AN APPROPRIATE ROUTE

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RICS guidance notes

This is a guidance note. Where recommendations are made for specific professional tasks, these are
intended to represent ‘best practice’, i.e. recommendations which in the opinion of RICS meet a high
standard of professional competence.
Although members are not required to follow the recommendations contained in the note, they
should take into account the following points.
When an allegation of professional negligence is made against a surveyor, a court or tribunal may
take account of the contents of any relevant guidance notes published by RICS in deciding whether
or not the member had acted with reasonable competence.
In the opinion of RICS, a member conforming to the practices recommended in this note should
have at least a partial defence to an allegation of negligence if they have followed those practices.
However, members have the responsibility of deciding when it is inappropriate to follow the
guidance.
It is for each member to decide on the appropriate procedure to follow in any professional task.
However, where members do not comply with the practice recommended in this note, they should
do so only for a good reason. In the event of a legal dispute, a court or tribunal may require them to
explain why they decided not to adopt the recommended practice. Also, if members have not
followed this guidance, and their actions are questioned in an RICS disciplinary case, they will be
asked to explain the actions they did take and this may be taken into account by the Panel.
In addition, guidance notes are relevant to professional competence in that each member should be
up to date and should have knowledge of guidance notes within a reasonable time of their coming
into effect.
This guidance note is believed to reflect UK case law and legislation applicable at its date of
publication. It is the member’s responsibility to establish if any changes in case law or legislation
after the publication date have an impact on the guidance or information in this document.
It is the member’s responsibility to be aware of changes in case law and legislation since the date of
publication.

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Document status defined
RICS produces a range of professional guidance and standards products. These have been defined
in the table below. This document is a guidance note.
Type of document
Standard
International standard

Practice statement
RICS practice
statement
Guidance
RICS code of practice

RICS guidance note
(GN)

RICS information paper
(IP)

Definition

Status

An international high level principle based
standard developed in collaboration with
other relevant bodies

Mandatory

Document that provides members with
mandatory requirements under Rule 4 of the
Rules of Conduct for members

Mandatory

Document approved by RICS, and endorsed
by another professional body / stakeholder
that provides users with recommendations
for accepted good practice as followed by
conscientious practitioners
Document that provides users with
recommendations for accepted good
practice as followed by competent and
conscientious practitioners
Practice based information that provides
users with the latest information and/or
research

Mandatory or
recommended good
practice (will be
confirmed in the
document itself)
Recommended good
practice

Information and/or
explanatory commentary

2 | DEVELOPING A CONSTRUCTION PROCUREMENT STRATEGY AND SELECTING AN APPROPRIATE ROUTE

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1

Introduction

1.1 This guidance note discusses construction
procurement routes and the development of a
procurement strategy and offers an explanation
of procurement strategy and routes. The
strategy will relate to the decisions affecting the
selection of the team(s) and how they relate to
each other; the route selected will identify who
is responsible for each element of the project.
The guidance aims to help the professional
choose an appropriate route, by setting out the
various possibilities, with their advantages and
disadvantages, and by indicating the factors
that should be used in the decision-making
process.
In this guidance procurement includes the
selection of an appropriate strategy and
procurement route but excludes tendering and
contract selection which are addressed by
other RICS publications and guidance.
The first part of this note provides information
on the various routes that can be chosen. The
second part deals with the practical application
of the differing factors to be taken into
consideration in establishing a procurement
strategy, including identifying the client’s
primary objectives. The third part of the note
considers various practical considerations, and
importantly, indicates how to draw up a project
execution plan. The Appendix comprises
checklists to aid the professional advising a
client on the selection of a route.
Guidance is given under the following headings
which conform to the Assessment of
Professional Competence (APC):
+

General principles (Level 1 – Knowing)

+

Practical application (Level 2 – Doing)

+

Practical considerations (Level 3 – Doing/
Advising).

1.2 The aim of a procurement strategy is to
identify the best way of achieving the
objectives of the client. Project risks should be

taken into account, as should any constraints
established by the client or perhaps his
funders.
It should be remembered that the construction
project itself may only be a relatively small part
of the entire life cycle of the building or facility
as a whole. The procurement strategy for the
construction project therefore also needs to
take into account where and how the
construction project sits in relation to that wider
picture. The issue of ‘sustainability’, particularly
in respect of public sector works, is a major
factor that needs to be considered at this
stage. An appropriate procurement strategy will
help ensure that the client obtains the right
project at the right price in the right time.
1.3 The strategy adopted by the client and
project team will affect both the procurement
route selected and the relationships between
those engaged in the initiation, design and
construction of the project. In particular, it may
affect how these participants are selected, the
nature of their role and the extent of their
responsibility.
1.4 To ensure that the most appropriate
strategy is selected, the chartered surveyor
should first identify the relative importance of
the client’s primary objectives and the extent of
the client’s attitude towards associated risk.
For example the procurement team will need to
identify what the client’s attitudes and key
drivers are, and state them in a way and in a
language that is understood by the entire
project team.
Fundamental to the process is understanding
what the client requires from the project,
together with some key information as to how
much it wishes to spend, what quality it is
seeking to achieve, and by what time it
requires the project to be completed. This
process may take some considerable time, but
this is of vital importance given that there is so

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much that flows hereafter. It is usual, in many
cases, for the procurement team to assist the
client with the formulation of their own ‘brief’
for the project.

+

risk: the likely impact to the client
organisation of risks inherent in the project
processes associated with time, cost and
function; and

1.5 Every project will have a business case
justifying it and explaining how it fits with the
client’s business. Various factors, relating to the
strategic fit of the project within the client’s
business and financial structure, will underpin
the project. These may include:

+

type of project: the nature of the project
may influence the procurement strategy.
For example, a relatively simple factory unit
on a greenfield site will require different
considerations to a complicated city-centre
refurbishment of an operational retail facility

+

funding: both the total funds at the client’s
disposal for the project, and the availability
or readiness of these funds as the project
progresses, with regard to contractual
obligations to make payments

+

time: the required completion date, any
important interim milestones when certain
stages must be achieved, and any flexibility
between the desired completion date and
the absolute last delivery date

+

performance: the required functional
performance of the final product and any
indications of standards of quality

+

capital versus operational costs: whether a
balance is to be struck between capital and
running costs or whether initial capital cost
is the primary factor

1.6 Some of these factors may be in tension
dependent upon the extent of their weighting:
greater emphasis on speed or on the certainty
of a completion date may influence project cost
and may affect design development; emphasis
on cost certainty or price level may have an
impact on speed to completion or design
quality; while an emphasis on project
performance may affect both cost and project
pace.
1.7 This is illustrated in Figure 1. Also shown is
the tendency for emphasis to change during
the project, from the initial focus on
performance, followed by an emphasis on the
cost of the project, to a focus on when the
project will be completed. Once completed, it
will again be the performance of the building
which is most important.

Figure 1: relationship between time, performance and cost

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1.8 In addition, public-sector procurement
displays different characteristics to
procurement in the private sector when value
for money could be a prime criterion. This
guidance does not address public procurement
which is subject to separate RICS guidance.
1.9 Many clients may not be experienced in
the process of construction procurement and
may need both advice and guidance. The
client’s level of experience and his or her ability
or willingness to engage with the procurement
process may be another important factor to
take into consideration.
1.10 An understanding of the characteristics of
procurement routes will enable the chartered
surveyor to evaluate which strategies will be
most appropriate for the project and client, by
matching the advantages and disadvantages of
each and the extent of associated risk. The
various procurement routes are discussed in
detail in section 2 of this guidance note. In due
course, there could well be the need for further
refinement of the project data in the light of the
client’s strategic changes. Such refinement and
reworking of the outputs may undergo a
number of alterations before the client arrives
at a point where the project proposals are at an
acceptable level.
1.11 The successful implementation of the
recommended strategy may also depend upon
the availability of contract documents to assure
effective adoption. Standard forms of contract
are available that can be used with each of the
commonly adopted procurement routes. These
formalise the responsibilities of the parties for
the design, construction and management of
the project.

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2

General principles (Level 1 – Knowing)

2.1 Procurement routes
2.1.1 Introduction
This section covers the primary information
required to satisfy the ‘knowing’ requirements
of the Level 1 competency of the RICS
Assessment of Professional Competence
(APC).

In the selection of a route, a potential danger is
that only the most obvious course of action
may be considered – this is not necessarily the
best in the longer term.
Common routes can differ from each other in
relation to:
+

the client’s exposure to financial uncertainty

+

the degree of control that the client has
over the design and construction processes

+

the extent of design information at the time
of tender

+

the information required at the time that
construction work can commence

+

the extent of involvement by the contractor
and the supply chain in the design stage,
when these parties may be able to
contribute to the design and planning of the
project

+

the organisational arrangements that
distribute risk, responsibility and
accountability; and

+

the sequential character of the process.

This section covers the following aspects:
+

the characteristics of the most commonly
adopted UK procurement routes. These are
explained and illustrated. The primary
advantages, disadvantages and risks
associated with their adoption are provided.

+

the principles associated with collaborative
procurement arrangements, including
partnering.

+

particular principles associated with public
procurement are highlighted.

2.1.2 General principles
It is recommended, firstly, that all the factors
influencing a project are identified and the
project requirements analysed. The final
procurement route for the design and
construction of the project can then be
developed.
Some routes select the design and
construction teams separately and provide little
opportunity for integration or collaboration
during the design process. Other strategies
enable the design and production processes to
be closely integrated.
It is likely that there will be more than one route
that can be adopted to achieve the aims of the
client and the requirements of the project. It is
advisable carefully to consider each option, as
each will address the various influencing
factors to a different extent.

Increasingly, experienced clients, or clients with
regular demand for construction, are realising
the importance of building integrated project
teams. These collaborate with and provide
mutual benefit for the client and the members
of the project team. These may be framework
arrangements where the established
relationship is sustained for a fixed period of
time, or partnering arrangements which are
focused on a series of projects.
Initial consideration must be given to the key
aspects of function, cost, time and associated
risk.
The cost of the project is usually of paramount
importance to the client, in that often a
business investment decision is based upon
the balance between the return or benefit to be

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achieved against the investment to be made.
This is often considered as being two sides of
an equation which must always balance each
other out – with the surplus (as added value)
being the difference between the resource
input (the investment) and the benefits to be
obtained. There may be a need to reduce
construction project costs because of other
cost pressures in the overall development
spend profile.
Project function will relate to the needs and
expectations of the client; function may be of
more importance than time or even cost where
the outcome is a long standing building to
serve a very specific purpose.
Time is likely to be a very important factor for
the client. The financial benefits of undertaking
the project in the first place will usually be
based upon certain programme constraints.
The projected financial outcome will therefore
only be achieved in full, if the project
commences the ‘delivery’ of its benefits in line
with a particular timescale.
Risk is inherent in the construction process.
The way that risk is to be dealt with is a
fundamental issue when considering
procurement strategies and procurement
routes.
The client’s attitudes and drivers may change
over time, as various risks begin to materialise.
This is a factor that must be considered in the
choice of a procurement route during the initial
strategy meeting.
Generally, those risks that are external to the
project are less able to be controlled in the
timing or extent of impact upon the
construction project, while those risks that are
internal to the construction project can be more
easily managed and can be allocated to the
appropriate party in the construction project.

2.2 Traditional (Lump Sum)
2.2.1 A commonly adopted UK route,
particularly for inexperienced or occasional
construction clients, is that known as
‘traditional’ It is seen as the ‘least risk’
approach, as there is a level of certainty about

design, cost and duration inherent in the
strategy if it is properly implemented. The
sequential nature of the strategy, which is
necessary to assure low risk, does mean that it
can be relatively slow prior to the
commencement of construction.
2.2.2 Under the traditional procurement route,
design should normally be completed before
competitive tenders are invited and before the
main construction contract is let. (To a limited
extent, however, a contractor can have some
design liability for part of the Works specifically
identified and usually the subject of a
provisional sum or part of a contractor’s design
portion).
Consequently, the client will usually select and
appoint the design team prior to the selection
of the contractor. Selection may be on the
basis of experience or fee – usually both.
The contractor is generally selected on best
value. Importantly, this does not always mean
the lowest price.
2.2.3 Assuming no changes are introduced,
construction costs can be determined with
reasonable certainty before construction starts.
This may be particularly attractive to clients
with a strictly limited budget or a limit to their
borrowing powers.
2.2.4 The tender documents for the selection
of the contractor should include drawn designs
and a specification of workmanship and
materials which the contractor should use in
the preparation of a price. In many cases, the
client will arrange to appoint a quantity
surveyor to measure the quantity of work to be
done in order to satisfy the demands of the
design.
2.2.5 In such cases, it is usual for each
contractor to submit a price based upon the
same work extent. The client is responsible for
the accuracy of these quantities, prepared in
the form of a bill of quantities (although the
client can, via the contract, transfer this
responsibility to the contractor).
2.2.6 The contractor assumes responsibility
and financial risk for the construction of the
building works to the design produced by the

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client’s architect, for the contract sum agreed,
and within the contract period. The client takes
the responsibility and risk for the design and
for the performance of the design team.
2.2.7 In this route, clients are usually able to
influence the development of the design to
meet their requirements, because they have
direct contractual relationships with the design
team. When construction begins, they generally
have a single contractual relationship with a
main contractor, but are usually only able to
influence (and not to control) the construction
process through their architect (or project
manager), acting as their agent for this
purpose.
2.2.8 The route may fail to some degree if any
attempt is made to appoint a contractor for the
work before the design is complete. Such
action could result in many post-contract
changes, which may delay the progress of the
works and increase the costs.
However, it is possible to have an accelerated
traditional procurement route, where some
design overlaps construction. This can be
achieved by letting a separate, advance works
contract; for example, by allowing ground
works (site clearance, piling and foundations) to
proceed to construction once planning
permission has been obtained and while the
design for the rest of the building is completed,
and by tendering the above-ground
construction separately. This should reduce the
total time to complete the project, but at the
risk of losing certainty of cost before
construction starts. More importantly, a
substantial risk is created in that the contractor
who builds the superstructure has no
responsibility for the foundation works carried
out by another contractor.

competition or by negotiation with a chosen
contractor. A two-stage process also generally
enables the chosen contractor to be consulted
as the design develops. In this case, the
certainty of end-cost is lost in the search for a
faster start, but the other risks are usually still
contained.
2.2.10 The main advantages of a traditional
procurement route are:
+

competitive fairness, as all tendering
contractors are bidding on the same basis

+

the fact of being design-led, with the client
able to have direct influence, thus
facilitating a high level of performance and
bespoke quality in the design

+

reasonable price certainty at contract
award, based upon market forces (subject
always to design changes or client-led
changes, which will have cost implications)

+

where public expenditure or audit demands
are rigid, a satisfactory strategy in terms of
public accountability, as it is transparent
and based upon competition

+

well-known procedures, ensuring
confidence in those involved throughout the
supply chain; and

+

changes are reasonably easy to arrange
and value where the design needs vary due
to changes in client demands or technology
(though this ease can prove a disadvantage
as price certainty may be less secure).

2.2.11 The main disadvantages are that:
+

if an effort is made to speed up the
process by producing tender documents
from an incomplete design, this can result
in less cost and time certainty and can be
the cause of expensive disputes

+

the overall project duration may be longer
than for other strategies as the strategy is
sequential and construction cannot be
commenced prior to the completion of
design (with no parallel working possible)

+

there is no input into the design or planning
of the project by the contractor and supply
chain, who will not be appointed at the
design stage

2.2.9 Another alternative is to let the work in a
two-stage process, allowing the contractor to
be selected before the design is complete. This
reduces the pre-construction time involved.
Ordinarily, in adopting this approach, the price
is based upon the predicted cost of known
major works elements, with the detail
negotiated later, this can be done in

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+

the strategy is based upon price
competition, which can result in adversarial
relationships developing

+

for certain types of project (for example, in
a city-centre refurbishment of an
operational retail facility), where it is difficult
accurately to define the full scope of the
project, the strategy is likely to result in the
client paying a high-risk premium; and

+

the designers and contractor have little
incentive to advise the client on factors that
may benefit the operational costs of the
completed facility.

The organisational structure of a traditional
strategy is shown in Figure 2.

2.3 Traditional
(‘remeasurement’ or ‘measure
and value’)
2.3.1 Except for civil engineering projects,
where there is a level of uncertainty in terms of
the ground conditions, this procurement route
is only occasionally used. It can be considered
as a variant to the ‘traditional’ route for building
work.

2.3.2 With a measurement contract, the
contract sum is only established with certainty
on completion of construction, when
remeasurement of the quantities of work
actually carried out takes place. It is then
valued on an agreed basis. Measurement
contracts are sometimes referred to as
‘remeasurement’ or ‘measure and value’
contracts and are based upon the principle that
the work carried out is measured and valued at
prices for each type of work tendered by the
contractor.
2.3.3 The contract is not a lump sum
arrangement, in that there is no contract sum.
Instead, the bill of quantities effectively
constitutes a schedule of rates for each unit or
item.
2.3.4 The most effective use of a measurement
contract is where the work has been
substantially designed, but final detail has not
been completed. Here, as with civil engineering
projects, a tender based on drawings and a bill
of approximate quantities is mostly satisfactory.

Figure 2: Procurement strategy: traditional

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2.3.5 Measurement contracts allow a client to
shorten the overall programme for design,
tendering and construction, but usually with the
result of some lack of early price certainty, as
the approximate quantities reflect the absence
of information on exactly what is to be built at
the tender stage. The scope of the work, the
approximate price and a programme should be
clear at the contract stage. Measurement
contracts provide more risk for the client than
lump sum contracts, but can generally have
some programme advantages.
2.3.6 The organisational structure of a
measurement contract strategy is identical to
the traditional lump sum approach, except that
it is not a lump sum contract.

2.3.8 The main disadvantages of the route are
that:
+

the route offers poor certainty of price, as
the cost to the client will not be accurately
known until the works are complete. Cost
certainty will depend upon the level of
assurance in the approximate quantities
used in the tendering process or the
sufficiency of the schedule of rates

+

there is no contractor or supply-chain
involvement in the early planning or design
stage, when the most expensive decisions,
or those likely to have an impact on time,
are made

+

there is a potential for adversarial
relationships to develop, as with all
strategies that are price-dependent. This
may be more likely with this route, unless a
willingness to negotiate is evidenced by
both the contractor and the design team or
client; and

+

any established project programme could
be affected while the works are not fully
designed.

2.3.7 The main advantages of the
measurement route include the following:
+

potential for time savings at the preconstruction stage, with the later aspects of
the design still on-going as the works
progress on site

+

competitive prices, as the work is tendered
on standard approximate quantities or
schedule of rates, which are used to value
the completed work on site

+

some public accountability, where this is
required due to the competitive selection
process

+

the fact that the procedures are well
known, particularly in civil engineering
projects

+

changes may be made easily, as the later
stages of the design continue to progress

+

some parallel working is possible, as the
contractor is selected before the design
and project planning processes are
completed; and

+

for certain types of project, this strategy
may prevent the client paying a premium
for risk, as contractors may price for
‘unknowns’ (for example, a refurbishment
where there is a risk of asbestos being
encountered).

2.4 Design and build
2.4.1 Under a ‘design and build’ route, a single
contractor assumes the risk and responsibility
for designing and building the project, usually
in return for a fixed-price lump sum. Because
this approach includes the integration of
design, construction can start before all the
detailed design is completed and the overall
project duration is thus reduced.
2.4.2 There are a range of approaches that can
be referred to as ‘design and build’:
+

Sometimes the contractor will be left to
interpret the requirements of the client and
provide a building as a completed package.
In extreme cases, the contractor may be
responsible for obtaining planning
permission and even for project funding.

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+

Frequently, the client will employ a design
team to carry out some preliminary design
work and prepare the project brief and
other tender documents, including
‘Employer’s Requirements’ (a term used in
some standard contracts to describe the
basis for the contractor’s submission),
outlining the key objectives for the project
and significant criteria for a successful
outcome.

+

A variant, known as ‘develop and
construct’, describes a strategy where the
client appoints designers to prepare the
concept design before the contractor
assumes responsibility for completing the
detailed design and constructing the works.
In this case, the contractor develops the
design from the detailed brief or
specification, submitting detailed proposals
to the client to establish that they are in
accordance with the requirements of the
specification. Clients are, therefore, in a
strong position to ensure that their
interpretation of the specification takes
preference over the contractor’s.

+

Sometimes, the successful contractor will
assume responsibility for this design team
and use the preliminary information to
produce the detailed design. In many
cases, the contractor agrees in the tender
submission to ‘novate’ (effectively,
contractually, to switch) the contract the
client has with his or her designers to the
contractor. The basis of the appointment of
the design team should reflect this
possibility of novation. Some designers
resist this practice.

2.4.3 It has now been clearly established that
a design and build contractor may have a legal
duty to provide the employer with a building
that is fit for its purpose. This is a significantly
higher duty than that assumed by an architect
under a traditional route, where the requirement
is simply one of due skill and care. Design and
build contracts may exclude this fitness-forpurpose obligation. In these cases, the
contractor may undertake merely to design to
the same standard ‘as would an architect if the
employer had engaged one direct’. Some

clients are now, however, insisting on fitness for
purpose in their design and build contracts,
stating that where there is a discrepancy
between the employer’s requirements and the
contractor’s proposals, the statement of
employer’s requirements will prevail. To be
effective, however, the statement of employer’s
requirements must be clear, complete and
unambiguous.
Most clients will need guidance in writing such
a document from an experienced practitioner.
2.4.4 The imposition on contractors of fitness
for purpose in design is a matter of judgment
for clients and their professional advisers, even
though some tenderers in recessionary markets
are likely to agree to undertake such risks. The
requirement for insurance to cover a higher
than normal risk should be weighed against the
financial ability of contractors to meet design
default claims. It will usually be preferable, and
represent better value for money, to impose a
lesser, yet insurable, liability, which will be the
subject of an insurance payout in the event of
a design fault, rather than a fitness-for-purpose
requirement on a contractor of limited financial
assets. In addition, if some companies will not
accept fitness-for-purpose provisions, the
adoption of these may rule out contractors
whose bids might in other respects be optimal
for the client.
2.4.5 Design and build provides a range of
options, from a ‘package deal’, where the client
has little involvement in the design
development or procurement process
(effectively, a complete hands-off approach), to
a ‘develop and construct’ route, where the
client appoints designers to draw up his or her
brief to a level of sophistication, leaving the
design and build contractor to develop detailed
or specialist design elements. Standard forms
of design and build contract are available.
2.4.6 The main advantages of a design and
build route are as follows:
+

The client has only to deal with one firm,
giving single point responsibility, and
significantly reducing the need to commit
resources and time to contracting with
designers and contractors separately.

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+

Client risk is reduced due to the single
point responsibility

+

The strategy enables an integrated
constructor contribution to the design and
project planning.

+

+

Price certainty is generally obtained before
construction starts, provided the client’s
requirements are adequately specified and
changes are not introduced.
The total project time of a design and
construction route may be reduced,
because of overlapping activities.

+

The client is required to commit to a
concept design at an early stage; often
before the detailed designs are completed.

+

Bids are difficult to compare: each design
will be different, and prices and the project
programme will vary between design.

+

There is no design evaluation, unless
separate consultants are appointed by the
client for this purpose.

+

Client changes to the scope of the project
can be expensive.

+

Design liability is limited by the standard
contracts available.

+

Quality may be compromised as the client
relinquishes control to the design and build
contractor.

+

This route may result in a project having
less aesthetic appeal where price and
space dictate how the available budget will
be spent.

2.4.7 The disadvantages are as follows:
+

Difficulties can be experienced by clients in
preparing an adequate and sufficiently
comprehensive brief or set of employer’s
requirements, or in defining what they
require.

The project organisation structure for design
and build is shown in Figure 3.

Figure 3: Procurement strategy: design and build

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2.5 Construction management
2.5.1 Under a construction management route,
the client does not allocate risk and
responsibility to a single main contractor.
Instead, the client employs the design team,
with a construction manager engaged as a feeearning professional to manage, programme
and co-ordinate the design and construction
activities and to facilitate collaboration.
2.5.2 Construction work is carried out by trade
contractors, often specialists, through direct
contracts with the client for distinct trade or
work packages. Each trade contractor will be
appointed when their contribution is required.
The arrangement enables the design process
to overlap with the construction process to
some extent; this route is therefore usually
adopted where the primary objective for the
client is relative speed to completion.
However, this is a strategy with little cost
certainty for the client at the outset, because
the costs of the trade contracts will often be
unknown until that work is let.
2.5.3 In ‘pure’ construction management, the
construction manager supervises the
construction process and co-ordinates the
input of the trade contractors and the output of
the design team. The manager thus provides
professional construction expertise without
assuming financial risk. In practice, however, it
may be to the client’s benefit to have the
construction manager supply some of the
organisational items (preliminaries), such as
general safety scaffolding, producing a fixed
cost for these and for the construction
manager’s own staff. Similarly, in some cases,
it may be beneficial for a significant proportion
of the trade contracts to be let before the
project commences, to increase the level of
cost certainty.
2.5.4 On appointment, the construction
manager will usually take over any preliminary
scheduling and costing information already
prepared and draw up a detailed programme of
pre-construction activities. Key dates when
client decisions are required are commonly
established, to ensure time for decision-making
and the avoidance of consequential delay.

2.5.5 In adopting a construction management
route, the client will generally be closely
involved in each stage of design and
construction. The client should have
administrative or project management staff with
the time and ability to assess the
recommendations of the construction manager
and take the necessary action. It is advisable
for the client to maintain a strong presence,
through staff who are technically and
commercially astute, in addition to possessing
the necessary administrative capability (for
example, to pay the trade contractors). This
route is not, therefore, usually suitable for the
inexpert or inexperienced client.
2.5.6 With this route, design and construction
can overlap. As this speeds up the overall
project programme, construction management
is known as a ‘fast track’ route. However,
although the time for completion may be
reduced, price certainty is not achieved until
design and construction have advanced to the
extent that all of the construction (trade)
packages have been let. Moreover, design
development of later packages can affect the
construction work already completed. The
construction manager should, therefore, be
able to rely on the services of an experienced
quantity surveyor to prepare approximate
estimates and a cost plan.
2.5.7 A package is made up of work for which
one of the trade contractors is responsible: for
example, foundations, concrete, electrical
installation or decorating. These packages are
tendered individually, for a lump sum price,
generally on the basis of drawings and
specification.
2.5.8 Construction management is most often
adopted for large or complex projects, but
there is no intrinsic reason for this. It has
particular benefits for projects where there is a
high degree of design innovation, where the
client wants ‘hands on’ involvement, or where
design flexibility is needed throughout the
project process. As the client bears much of
the construction risk with this route, it is
prudent for the client to have adequate risk
management capability.

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2.5.9 The main advantages of a construction
management route are as follows:

+

An informed, pro-active client is required to
operate such a strategy.

+

There is a relative time-saving potential for
the overall project time, due to the
overlapping of design and construction
procedures.

+

The client must provide a good-quality brief
to the design team. The design will not be
complete until the client has committed
significant resources to the project.

+

Trade contractors and the construction
manager are able to contribute to the
design and to project planning.

+

The route relies upon the client selecting a
skilful and committed team.

+

+

Roles, risks and relationships for all
participants are clear.

close time and information control is
required.

+

+

Changes in design can be accommodated
later than with some other routes, provided
that the relevant trade packages have not
been let and that earlier awarded packages
are not too adversely affected.

the route relies on a proficient and
committed construction manager or it may
become no more than a ‘post box’ system,
in certain circumstances.

+

The design team must be controlled and
kept on programme for delivery of design
when it is required. This is to ensure that
the work packages procurement are not
delayed nor the works on site.

+

The client has direct contracts with trade
contractors and pays them directly. (There
is some evidence that this results in lower
prices, because of improved cash flow
certainty.)

The organisational structure of a construction
management route is shown in Figure 4.

2.5.10 The disadvantages are that:
+

Price or time certainty is not achieved until
the last trade packages have been let.
Budgeting depends heavily upon design
team estimates, and duration upon the
sequence needed to construct the building
as designed.
Figure 4: Organisational structure of construction management route

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2.6 Management contracting
2.6.1 With this route, a management
contractor is engaged by the client to manage
the whole of the building process. The
contractor is paid a fee on top of the
construction costs for doing so. The fee is
based on the estimated costs of the works as
established by the quantity surveyor – usually
adopting a cost plan as the basis for
budgeting. Management contracting was
popular in the 1980s and 1990s, but this
popularity has diminished since then.
2.6.2 Construction works are carried out by
firms employed by the management contractor,
referred to as ‘works contractors’. Unlike
construction management, the management
contractor has direct contractual links with all
the works contractors and is responsible for all
the construction works. There is no contractual
link between the employer and the works
contractors.
2.6.3 The management contractor may provide
some of the common services on site, such as
office accommodation, tower cranes, hoists
and security, which are shared by the works
contractors; however, in ‘pure’ management
contracting, such works are let as a selfcontained work package.
2.6.4 The client employs the design team and,
therefore, bears the risk of that team delaying
construction for reasons other than negligence,
such as the late receipt of design information.
2.6.5 Management contracting is a ‘fast track’
route. The design work will not be entirely
complete before the first works contractors
start work, although the design necessary for
those packages must be finished. As design is
completed, subsequent packages of work are
tendered and let. Cost certainty is thus not
achieved until all works contractors have been
appointed. A high level of cost management is
therefore required, with reliance on the services
of an experienced quantity surveyor to prepare
approximate estimates and a cost plan.
2.6.6 In this route, with the agreement of the
client and the design team, the management
contractor identifies preferred bidders for
sections of the project and selects them by

competitive tender. The client reimburses the
cost of these work packages to the
management contractor, who, in turn, pays the
works contractors. The management contractor
co-ordinates the release of information from the
design team to the works contractors.
2.6.7 It is prudent, with this route, for the client
to have adequate risk management capability.
2.6.8 The main advantages of a management
contracting route are as follows:
+

There are programme benefits for the
overall project, due to the overlapping of
the design and construction processes.

+

The route enables the management
contractor and works contractors to
contribute to the design and project
planning.

+

Changes can be accommodated, provided
that the packages affected have not been
let and that there is little or no impact on
those already let.

+

Works packages are let competitively at
prices that are current at the time the work
is let.

2.6.9 The disadvantages are that:
+

the client must provide a good-quality brief
to the design team; the design will not be
complete until the client has committed
significant resources to the project

+

poor certainty of price is offered at an early
stage and the potential cost commitment
depends upon design team estimates

+

the route relies on a good-quality and
committed management contractor, or it
may become no more than a ‘post box’
system in certain circumstances

+

the route reduces resistance to works
contractors’ claims where such demands
are passed on to the client by the
management contractor

+

design must be closely managed to ensure
that package procurement is kept on
programme.

+

unless the contract is correctly completed,
especially where a proprietary management
contract is used (such as the Joint
Contracts Tribunal (JCT) form in the UK),

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the absence of the completed inter-related
forms of appointment in a management
contract will leave the employer open to
claim, or the contractor at risk, where
design liability has not been resolved
through to design subcontractors
+

there may be gaps in works contractor
packages that would normally be picked up
by a traditional contractor

+

the design team must be controlled and
kept on programme for the delivery of
design information when it is required to
ensure package procurement proceeds on
programme.

The organisational structure of a management
contract is shown in Figure 5.

Figure 5: Organisational structure of a management contract

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The crucial difference to the first approach
is that the parties are contractually bound
to working co-operatively; or

2.7 Partnering
Partnering is a concept that can be applied to
many procurement routes. Partnering is a cooperative relationship between business
partners formed in order to improve
performance in the delivery of projects. It is
not, in itself, a procurement route.
Partnering is best considered as a set of
collaborative processes which emphasise the
importance of common goals and raise such
questions as how such goals are agreed upon,
at what level are they specified and how are
they articulated.
Partnering is applied either in project situation
known as project partnering or in a long-term
relationship known as strategic partnering.
There are two views in the construction
industry regarding the role of the contract
between the client and the contractor in the
partnering process.
The first view is that partnering is all about cooperation, dispute avoidance and selfimprovement and that, as such, a successful
project partnering agreement can be
implemented independently of the contract,
even when the contract contains clauses that
are not in alignment with the co-operative
principles of partnering.
The second (and alternative) view supports the
use of the project contract to reinforce the
elements of a partnering arrangement. This can
be in the form of a traditional standard form
contract amended to enforce a partnering
agreement or in the form of partnering-type
standard contract.
Partnering is normally operated in one of the
following ways:
+

a traditional construction contract with a
separate partnering charter; or

+

a two-party contract aligned to partnering.
Under this method, the construction
contract chosen reflects the principles of
the intended collaborative relationship
between the parties. This remains a twoparty approach and relies on contract
conditions covering the partnering aspects.

+

a multi-party partnering contract. A major
difficulty in the acceptance of such a multiparty contract is the perceived complex
legal situation in regard to the
responsibilities and liabilities in a multiparty situation.

In the partnering approach, negotiation rather
than competitive tendering is the key.
The risks that both parties face as a result of
the project in question are made transparent at
the commencement of the project, and the
partners to the partnering approach share
those risks on the basis of which party can
best bear those risks and/or insure against
those risks.
The essence of any partnering agreement now
involves a duty of good faith, mutual cooperation and trust between all parties involved
in the construction process.
Some of the advantages of the ‘partnering’
approach are as follows:
+

a reduction in the number of disputes

+

the benefit of early supply chain
involvement

+

it is based on an open book and a win/win
culture

+

there is integration of the design process
with the construction process

+

the main benefits are generated from
strategic partnering (multiple projects)
rather than a single project.

Some of the disadvantages to be considered
are as follows:
+

the partnering process can be abused by
one of the parties

+

the partnering process requires more client
resource to compensate for the less
competitive environment, and the process
can collapse when one party becomes
disadvantaged

+

to be most effective, partnering needs to be
practised and learnt over a series of

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projects and typically requires an early
commitment in terms of management
resources and direct costs
+

there are the direct costs of workshops, of
training staff and of the more intensive early
involvement of management in establishing
the partnering approach.

covering more than 800 schools, 43 transport
projects and over 300 other operational
projects in sectors such as defence, leisure,
culture, housing and waste.
2.8.6 The private-sector participants in the
SPV will include:
+

construction contractors and service
providers

2.8 Public Private Partnerships
(PPP)

+

facilities managers

+

insurance companies

+

banks and bond investors

2.8.1 Public Private Partnerships are
arrangements where a project or service is
provided by the private sector in partnership
with the public sector. There are many such
arrangements; the most common in the
construction sector is known as Private
Finance Initiative (PFI).

+

equity investors, including pension funds
and insurance companies; and

+

professional advisors.

2.8.2 A PFI project involves a long-term
contractual arrangement (usually of 25-30
years) between public- and private-sector
parties through a concession agreement.
2.8.3 The private sector agrees to finance and
build and operate an infrastructure project such
as a hospital, school, road or prison. This
includes long-term life-cycle investment and
routine maintenance services, sometimes
together with ‘soft services’ such as catering
and cleaning. The public, or public sector, will
use the project without needing to engage with
its operation.

2.8.7 Among the public-sector participants will
be government departments (for example, the
Departments of Health, Transport and Defence,
and the Home Office) and local authorities (for
services such as schools, street lighting, social
housing, waste and local roads maintenance).
2.8.8 The advantages of this route include the
following:
+

The infrastructure project can be obtained
without placing a capital burden on the
public purse.

+

There is a transfer of risk to the private
sector.

+

There is engagement with the skills and
efficiencies of the private sector and
perhaps, therefore, better value for money.

2.8.4 A PFI project is usually achieved through
the creation of a company specifically created
for that purpose, known as a Special Purpose
Vehicle (SPV). In return, the SPV either collects
toll money (such as for the Severn Crossings or
the Dartford bridge and tunnel) or receives a
payment stream over the life of the concession
from the public sector, perhaps as an annual or
unitary payment. This will be subject to the
delivery of the services to the specification set
out in the concession agreement – there is no
payment for poor delivery or performance.

2.8.9 The disadvantages include the following:

2.8.5 PFI is possibly the largest infrastructure
sector in the UK. Some 600 projects, with a
capital value of over £60billion, have been
signed. This includes almost 100 hospital
schemes, over 100 education projects,

2.8.10 Typical arrangements are shown in
Figures 6 and 7.

+

It may be considered to be a relatively
expensive approach when compared with
other routes.

+

The costs of preparing bids can be
exceptionally high.

+

The government (in effect, the taxpayer) is
committed to making payments for the life
of the concession (typically 25-30 years),
unless the income flow is entirely
dependent on cash tolls.

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Figure 6: Example of PFI scheme – non-toll based

Figure 7: Example of PFI scheme – toll based

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3

Practical application (Level 2 – Doing)

3.1 Introduction
3.1.1 This section provides guidance to the
professional, so that he or she may put into
practice the general principles to satisfy the
‘doing‘ requirements of the Level 2 APC
competency.

3.2 Identification of primary
objectives and parameters
3.2.1 Decisions taken at the early stage of
project development will usually drive all future
choices and strategy. This is a vital but
complex stage. It occurs at a time when both
client and consultants wish to progress quickly,
but when the pace of co-ordination of the
issues and ideas is dictated by the ability to
predict, foresee and design.
3.2.2 Often, the client will be best advised to
appoint a chartered surveyor to co-ordinate the
client function from this stage, or to overview
the whole process, where the project is
particularly complex.
3.2.3 The application of value management
techniques can have particular merit. Value
propositions, such as what is to be achieved
and why identified at the early stage in a
project can form a good basis for the strategic
brief for the design.
3.2.4 While some fast-track procurement
solutions deliver speed of completion, other
criteria, such as cost certainty and
performance, may be less achievable within
these solutions. Similarly, where cost certainty
or performance are considered to be of highest
priority, other criteria may be affected.

Consequently, a structured approach to the
prioritisation of the project’s parameters is
recommended.
3.2.5 One approach that can significantly
assist the prioritisation of the client’s objectives
is to discuss with the client at the outset the
relative importance of each of the primary
objectives of the project.
It is likely that the impact on the client
organisation of failing to achieve each key
objective, as identified by the business case,
will be influential in establishing priorities.
3.2.6 Figure 6 illustrates this approach. It
shows how the first decision (on the
distribution of the importance of time, cost and
performance) can be extended to establish
other key objectives and to provide an output
on which procurement strategy can be based.
Many projects do not achieve client satisfaction
because of insufficient consideration of these
factors at the outset.
3.2.7 The outcomes that must be achieved in
order to satisfy each client will vary with the
business ‘mission’ and the primary objectives
for the project. For example, owner-occupiers
may want a facility that is functional,
aesthetically pleasing and relatively inexpensive
to run and maintain; developers, on the other
hand, may aspire to speed and simplicity, while
investors in property may look for buildings
with a long functional, physical and economical
life, which retain their marketability. Most
clients will also want low initial cost, but only if
a valuable output is achieved.
Given this variability of criteria, it is prudent to
undertake the process described above to
ensure that individual client needs are satisfied.

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3.3 Procurement strategy
3.3.1 The procurement strategy identifies the
best way of achieving the completion of a
construction project – often taking into account
the best value for money over the entire life
cycle of the building or facility.
3.3.2 The aim of a good procurement strategy
is to achieve the optimum balance of risk,
control and funding for a project. The choice of
a particular procurement strategy largely
depends on a client’s required balance of cost,
quality and time risks.
3.3.3 It should be remembered that the
construction project itself may only be a
relatively small part of the entire life cycle of
the building or facility as a whole. The
procurement strategy for the construction
project therefore also needs to take into
account where and how the construction
project sits in relation to that wider picture. The
issue of ‘sustainability’, particularly in respect
of public sector works, is a major factor that
needs to be considered at this stage.
3.3.4 To establish the procurement strategy,
the procurement team needs to establish what
the client’s attitudes and key drivers are, and
needs to state them in a way and in a language
that is understood by the entire project team.
3.3.5 Fundamental to the process is
understanding what the client requires from the
project, together with some key information as
to how much it wishes to spend, what quality it
is seeking to achieve, and by what time it
requires the project to be completed.
3.3.6 This process may take some
considerable time, but this is of vital
importance given that there is so much that
flows hereafter. It is usual, in many cases, for
the procurement team to assist the client with
the formulation of their own ‘brief’ for the
project.
3.3.7 Initially, it may well be that the client
does not know much about the construction
project, which is of course perfectly
understandable especially if the client is an end

user of the facility, but it will know the output or
outcome that it requires at the end of the
process. This output or outcome requirement
needs to be expressed in such a way that the
construction team can understand the client’s
needs and desires.
3.3.8 It may be useful for the procurement
team to check their understanding of the
client’s requirements by ‘playing back’ what
they believe the client is trying to achieve. As
part of this exercise, the team may offer the
client a selection of ‘high level’ construction
project outputs, for example:
+

a building at a stated cost;

+

a building of a certain size, shape,
appearance and performance; and

+

a building constructed to a defined
timescale.

Such statements would need to be suitably
qualified to cover any assumptions made so
that the client is aware of the parameters upon
which the guidance was being provided.
The appointment of certain consultants to
assist with this process at procurement stage
may be necessary and the client should be
made aware of the financial implications (if any)
of such appointments.
There is likely to be a period of reflection by
the client on the data presented to see if the
parameters of the project align with the
strategic objectives for the client or for its
organisation.
In due course, there could well be the need for
further refinement of the project data in the
light of the client’s strategic changes. Such
refinement and reworking of the outputs may
undergo a number of alterations before the
client arrives at a point where the project
proposals are at an acceptable level.
Eventually, the client’s attitudes and drivers can
be established through the above process, and
it is these attitudes and drivers that are behind
the choice of a particular procurement strategy
and procurement route.

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3.4 Selecting a procurement
strategy
3.4.1 The procurement strategy should be
developed from an objective assessment of the
client’s needs and the project characteristics.
Key to the appropriate selection of a strategy is
the identification of the primary objectives of
the client, the apportionment of risk, and the
decision as to who is responsible for design.
The assessment, based upon the business
case for the project, should identify the relative
importance of key elements, such as
performance, price and time, as judged against
the risk of under-performance, enabling a
suitable balance to be achieved.
A best-fit solution should be looked for; it is
advisable to ensure a client makes an informed
decision, based on sound advice, giving due
regard to the identified criteria and the
acceptable distribution of risk.

3.3.4 The client may wish to decide whether
collaborative strategies can be adopted,
including whether the constructors and
designers may agree to a partnering approach
with the client. This is more likely to be
adopted where the client is undertaking a
series of projects, through which the
performance of the contributors can be plotted
by measures such as key performance
indicators. This approach is seen as particularly
beneficial where mutual objectives can be
agreed and a largely ‘open book’ approach
taken to payment, including the disbursement
of incentives, where appropriate.
3.3.5 There are other strategies that enable
collaboration and involvement by constructors;
these are referred to in the descriptions of each
procurement route in section 2. The choice of
such strategies will depend upon the nature of
the business case and the client’s prioritised
objectives.

3.4.2 The selection process usually has two
components:
1

Analysis: identification of the relative
importance of the client’s primary
objectives and the extent of the client’s
attitude towards associated risk. (The
Appendix provides a set of checklists that
may be used to enable the objectives and
priorities of the client to be ascertained in
some detail.)

2

Choice: the consideration of possible
procurement options, the evaluation of
these, the identification of those strategies
that are inappropriate, and the selection of
the route that provides best fit with the
analysis.

3.3.3 It is recommended that any selected
route is reviewed again at key times during the
progress of the project, such as when planning
approval is given or before the construction
contract or contracts are let. This is to take
account of the possibility of design failing to
maintain the pace anticipated, or for
circumstances where the programme is
otherwise affected by unexpected occurrences.
Alternative procurement routes may become
more suitable if circumstances change.

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4

Practical considerations (Level 3 – Doing /
Advising)

4.1 Introduction
4.1.1 This section identifies the more common
pitfalls or complexities that can arise from
practice that may influence the advice given or
the selection of a chosen route. This would
satisfy the ‘advising’ requirements of the level 3
APC competency.

4.2 Primary objectives
4.2.1 It is a reasonable precept that the greater
the concentration on defining the project and
linking the prioritisation of objectives to the
business case, the greater the likelihood of the
client’s objectives being achieved. It is
recommended that the relative importance of
the key objectives are discussed with the client
organisation, which can then highlight the
relationship between the initial business case
and the project priorities. This may then form a
sound basis for the brief and the preparation of
a project execution plan and should ideally
involve a range of stakeholders, including
future users.
4.2.2 Usually, when the business case is
developed, the most important criterion is
identified as that which, if not realised, is the
greatest risk to corporate strategy.
For example, where building use is most
important, performance in design will be vital;
where the building is being constructed to
enable a particular market to be served, time
may be critical; and in cases where the client
has a precise or limited budget, cost control
will be most important. In most cases, however,
more than one criterion is likely to result from
the business case. Owner-occupier clients may

emphasise function and price certainty,
developers may look for low cost and speed,
while investor clients may require quality of
design and speed.
Any risk which serves to increase the costs and
thereby reduce the ‘added value’ over the life
of the construction project, or which has an
effect upon the performance of the project, or
which can delay the delivery of the
construction project to the target timescale, will
adversely impact upon the client’s successful
outcome of the construction project.
The risks may appear in any number of
different ways, many of which are outside the
direct control of the client.
Such risks can occur at any point in the life of
the project and the earlier those possible risks
are recognised and taken into consideration
and allowed for within the chosen procurement
strategy and procurement route, the less
disruptive those risks will be if they actually
occur.
The source of the risks might include some or
all of the following:
Political or economic change (globally,
nationally or locally)
A change in government and/or a change in
the economic climate prevailing at the time
may result in a different landscape upon which
project decisions are to be made.
Legislative change-National or local
government changes in policy or law.
This is of particular relevance in industries
where the client’s affairs are highly regulated
and where such changes would have a

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fundamental impact on the manner in which
the client’s business is conducted.
Environmental influences
Over the course of recent years, the trend has
been to place a greater emphasis on
environmental issues, thereby forcing firms to
take account of such pressure in the conduct
of their business and in the products or
services offered.

effect a risk ‘premium’, being a premium that
(when recognised by the client) the client may
rather not face.
Categories of risks could include some or all of
the following:
+

strategic risks, such as failure to obtain
planning permission, or client funding
problems;

+

external risks, such as changes in the
environment;

+

project risks, such as overspends or delays
to the programme; or

+

discovery risks, such as poor ground
conditions or the like.

Social or technological change
A change in the social environment or some
technological advancement may result in the
client needing to amend his/her thinking behind
the entire justification for the project.
Competitive influences
Most companies within each industry or
business sector do not operate in a vacuum
and are therefore always seeking to react to
moves by competitors. On many occasions this
will involve the need to quickly respond with a
change in the product offered to the market.
Risks inherent in the construction process
There are certain features of construction
projects that create particular challenges and
risks for clients, contractors and
subcontractors. In addition, there are many
variables that can be impossible to predict
accurately in advance, yet have can have
enormous impact on the ultimate cost and
duration of the project.
Many risks may therefore need to be taken into
account in considering the appropriate
procurement strategy.
Risks can be accepted by the client, can be
transferred to another party by the client, or
can be reduced or mitigated; but risks cannot
and should not be ignored.
Ideally risks should be held by the party best
able to deal with that risk, and this is a factor
that should be taken into account when
considering the appropriate procurement
strategy.
Risks that are transferred from the client to the
contractor normally have attached to them a
cost and/or programme impact, and this is in

Generally, those risks that are external to the
project are less able to be controlled in the
timing or extent of impact upon the
construction project, whilst those risks that are
internal to the construction project can be more
easily managed and can be allocated to the
appropriate party in the construction project.
A chosen procurement route should be made
with a clear awareness of the likelihood of
occurrence and severity of the impact of risks.
If a procurement route is chosen in this way,
the project should be less severely impacted if
the risk event in question actually occurs.
4.2.3 As the project proceeds, emphasis may
temporarily change, as factors such as
progress, design aspects and cost receive
particular attention. Upon completion, however,
the client will usually be mainly concerned with
whether the primary objectives established at
the outset have been achieved. For some
clients it can be easy to lose sight of the initial
objectives as the project itself becomes a
distraction.

4.3 Project Execution Plan
(PEP)
4.3.1 The PEP has an important function in the
application of a procurement route. It aims to
ensure that the client’s objectives, as identified
in the strategic brief, are carried through to
reality. It is therefore a primary tool, which can

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financial mechanisms through which the
project will be controlled. In short, it should
define how the project will be managed. It
is prudent for this section to specify things
such as:

be used to ensure that the project is completed
to the satisfaction of the users, on time, within
budget and to the required quality standards.
The PEP is usually prepared by the project
manager, if appointed, but is intended for the
use of all members of the project team. To
some extent, the detail of a PEP will be
dependent upon the chosen procurement
route, and the format of the plan may well be
dictated by the client or by the constraints of
specific projects. The form and detail of the
plan may also change as the project evolves.
The key objective at all times should be to
ensure that the plan both documents what has
gone before, in terms of decisions that have
been taken, and looks ahead to set a
framework for future action.
4.3.2 The following is a generic list of the
topics that any PEP might include:
+

Overview: a short summary defining the
objectives and the scope of the project in
functional terms. This should specify the
problem that the project is intended to
address, the project goals and how the
project fits into the client’s business plans.

+

Specific objectives: identification of the
particular functional objectives to be
achieved. These should include time, cost
and quality constraints, as well as an
outline description of the kind of
accommodation required and the functional
standards to be achieved. The plan should
also define any constraints arising from the
need for transparency and accountability,
and should specify how much flexibility
there is in respect of the time and cost
constraints.

+

+

The proposed procurement route: the
choice of an appropriate procurement route
is perhaps the most important decision in
the entire process. The plan should
document not only what procurement route
has been chosen, but also provide the
underlying rationale, and the methods
which are planned for the selection of the
design and construction teams.
Project control mechanisms: this section of
the plan should provide details of the
planned administrative, contractual and

–

reporting structures, together with any
key dates for committee meetings, and
so on

–

procedures to accommodate on-going
project reviews and changes

–

any particular client requirements or
restrictions (for example, on the use of
subcontractors); and

–

value, quality and health and safety
management procedures.

+

Project time schedule: this should define all
aspects of the project timescale, including
critical dates and milestone events. The
project schedule will plainly evolve as the
project proceeds, and should eventually
comprise both outline long-term and
detailed short-term programmes. The
proposed time-scales should, of course,
meet the client’s delivery requirements, but
it is also important that they are realistic.
Imposing unrealistic time constraints simply
increases the risk to the client of failure to
meet key targets.

+

Project budget: project budgets should
usually include not only capital construction
costs, but also on-going and recurrent
expenditure during the project life-cycle.
The budget will probably become
progressively more detailed as the project
proceeds. A PEP should include details of
funding sources and document costmonitoring and review procedures.

+

Personnel and lines of responsibility: the
PEP documents who is responsible to
whom, and for what. A PEP should define
the limits of authority and responsibility for
all of the key players in the process.

+

It is particularly advisable to specify the
procedures for project completion and the
handing over of the completed facility to
the client. It is recommended that the PEP
specifies who will be responsible for taking

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possession of the building and its future
management, what documentation will be
required and what training needs to be
provided.
+

+

Evaluation methods: the PEP should
document the criteria against which the
completed project will be measured, and
note how the measurement will be carried
out. It is prudent for these issues to be
considered at an early stage, in order that
the project team know how the final
outcome is likely to be evaluated. Project
evaluation may be impossible unless the
evaluation criteria are fixed, but clients’
objectives frequently change between
project initiation and project handover. If
major changes are likely to occur, for
example, as the result of rapidly changing
technology, then the PEP should make
provision for these.
Potential problems: it is prudent to identify
potential areas of risk that might
compromise the successful completion of
the project, together with a note of
appropriate risk-management strategies.

4.4 Factors outside the control
of the project team
4.4.1 Consideration should be given to the
potential impact of economic, commercial,
technological, social, political and legal factors
that may influence the client and the project
team during the lifetime of the project. These
may include:

+

changes to legislation, affecting the design
of the works or the methods of achieving
that design.

4.4.2 If simple risk analysis is adopted, a
judgment can be made as to whether risk
allowances should be budgeted for in the
scheme, in order to cope with likely
occurrences of this nature. Where changes to
techniques or technology are anticipated, a
level of flexibility of design may be required.

4.5 Client resources
4.5.1 It is prudent to use the client’s
knowledge, the experience of the client
company’s organisation, and information
regarding the environment in which it operates,
in determining an appropriate procurement
strategy. It is advisable to ascertain the extent
to which the client is prepared or able to take a
full and active role. Whether involved closely or
not, the appointment of a client sponsor,
project manager or representative, with
authority to make or confirm decisions on
behalf of the client, is recommended, to avoid
delays in decision-making or confusion as to
authority.
4.5.2 It is advisable for clients to ensure that
they arrange project funding in a way that
reflects both their contractual commitments to
pay and their corporate business financial
structure. Land, legal, consultant and statutory
fees, along with payments for construction
work, may be required at different times; the
funds will need to be in place and available at
the appropriate times.

+

changes to the cost and availability of
finance

+

developments in existing technology or new
technological advances

4.6 Project characteristics

+

increases in the level of inflation, affecting
the products or trades used in the works

+

changes in the local or national demand for
construction, affecting tender price levels;

+

reduced ability of specialist trades/labour
resources at local or national level due to
construction projects undergoing at the
same time which can affect ability to meet
programme requirements and

4.6.1 In deciding upon a procurement strategy,
the size, complexity and location of the project
should be carefully considered, with particular
attention given to projects with novel elements.
If a proposed new building is especially large or
complex, there may be a greater risk of cost or
time overrun, or, a refurbishment of an older
property may run the risk of encountering an
unknown amount of asbestos. With any

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‘novelty’ factor, estimates of time, cost and
performance may be subject to greater error,
with an increased risk of one or more of the
project’s objectives failing.

4.7 Cost issues
4.7.1 Estimates of the cost of future buildings
made at an early stage are notoriously
inaccurate, but are usually necessary for
decision purposes. It is recommended that the
client is made aware of the level of likely
accuracy (or uncertainty) of any estimates and
understands the need for risk allowance.
4.7.2 Where there is the need for price
certainty, this can influence both project timing
and the procurement strategy to be used.
Generally, if price certainty is required, design
should be complete before construction
commences. However, as design can take
time, this may cause delay, except, in general,
where design and build strategies are adopted.
4.7.3 Inflation may also affect total cost where
there is a level of variance; increased price
clauses exist that can compensate the
contractor for such a variance.
4.7.4 Changes to design during the course of
construction should be avoided if cost certainty
is to be maintained. Changes, whether initiated
by the client or the design team, often have
cost and time implications on the project well
in excess of the change itself. It is therefore
advisable for the client to fix a date after which
no significant changes should be introduced, or
to select a strategy that enables such changes
and accepts the consequences (see 4.9).

4.8 Value for money
4.8.1 Clients will be keen to achieve good
value for money, but few outside the most
experienced group are likely truly to understand
how this might be achieved or measured.
Securing maximum value for money from a
construction project often requires a
fundamental re-evaluation of the client’s
underlying value system through the adoption

of value management techniques. This is
frequently a difficult and time-consuming task,
which many clients find very challenging, but is
nonetheless advisable if the project is to be
ultimately successful in terms of achieving
‘value for money’.
4.8.2 It is common for inexperienced clients to
ask for the highest quality at the lowest price,
to be completed in the shortest time. The
client’s project manager may have to devote
considerable time and effort to arrive at a
workable compromise that meets the client’s
real objectives.

4.9 Ability to make changes
4.9.1 It is preferable to identify the full needs
of a project during the early stages; however,
this is not always possible. In addition, rapidly
changing technology often results in late
changes.
4.9.2 Changes in the scope of a project very
often entail increased costs, especially if they
arise during construction. Changes introduced
after the design is well advanced or after
construction has commenced often have a
disproportionate effect on the project, in terms
of cost, delay and disruption, compared with
the nature of the change itself. In general, the
design process will go through a progressive
series of ‘freezes’ as it develops, but the client
or project team should set a final design
‘freeze’ date, after which no significant changes
to requirements or design are allowed.
4.9.3 Some procurement routes are better than
others at handling the introduction of changes
later in the project and reducing the possibility
of having to pay some form of specific
premium. A collaborative approach where cost
is subject to a target can offer benefits in this
area.

4.10 Project timing
4.10.1 Most projects are needed within a time
frame or by a specific date. This will influence
whether subsequent activity can occur as

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planned and in many cases may severely affect
those factors identified as critical or high
priority in the business case.
4.10.2 Setting unachievable programmes will
result in over-runs. The UK construction
industry may have a reputation for delivering
projects ‘late’. This can be the result of overoptimism, or a lack of reliable data. Realism
may frustrate an impatient client, but
unexpected lateness may have more severe
consequences such as where expected dates
to open new facilities are delayed.
4.10.3 The programme of the project can be
influenced by many factors; a particularly large
or complex project is likely to require more time
for design, specification and construction than
a simple small building. It is highly advisable to
allow for adequate design time in terms of the
total project, particularly if design is required to
be complete before construction commences
(where, perhaps, cost certainty is required).
4.10.4 Design can be a complex and lengthy
process, and it is not uncommon for this stage
to take as long as the completion of the work
itself. Design approval time-cycles should be a
consideration in this process.
4.10.5 When appointing a design team,
assurances should be obtained about resource
levels and the ability of the team to meet key
dates or to complete programmes. It is not
usual to impose contractual dates upon
designers, although their progress is probably
the key to the overall completion date.
4.10.6 Certain factors may influence the
planned or desired time for design, depending
on when they occur. For example, decisions to
progress with a project may be influenced by
the gaining of planning approval, by the
successful operation of a compulsory purchase
order, by land purchase or by some other nonspecific but critical factor (such as obtaining
funding approval).
4.10.7 As outlined above some procurement
routes (such as design and build, construction
management and management contracting)
enable an overlap between the design and
construction stages, with construction able to

start earlier than in sequential routes. This
offers the potential for earlier completion. It
may be prudent to review the planned
procurement strategy in the light of design
progress at key milestones in the project, such
as obtaining planning permission.
4.10.8 Time has both a cost and a value. If the
value of a completed project to the client on a
week-by-week basis is identifiable, the value of
relatively early completion can be assessed.
This may form an important factor in the
decision-making process and is often referred
to as the ‘time/cost trade-off’. For relatively
early completion, this may encompass early
income flow from a commercial market, and
should enable reduced interest and insurance
charges to be realised. Relatively late
completion is likely to attract greater interest
and insurance charges (among others) and
potential loss of opportunity. The development
of calculations that identify these sums can be
a useful management tool.

4.11 Construction times
4.11.1 Total construction time is generally
reliant upon design. More complex structures
will almost certainly take longer both to design
and to construct, and may require more
resources. Some general guidance on
construction times is available through the
RICS Building Cost Information Service (BCIS).
In most cases, design and other activities are
not included in these times.

4.12 Performance
4.12.1 The required performance of the
project, measured in terms of both its response
to the needs of the client (as expressed in the
business case), and the quality of individual
elements, should be clearly identified. If
performance is over-specified, a premium will
usually be paid for exceeding actual
requirements, thereby affecting the cost
objective.

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Over-specification may also lead to time
overruns. Conversely, failure to recognise the
true performance objective may lead to an
unsatisfactory product.
A post project review will evaluate whether the
client’s initial objectives have been met and
should capture learning for future projects.

4.13 Accountability
4.13.1 Another aspect to be considered at an
early stage is the level of accountability
necessary to meet the requirements of the
client organisation. For example, to whom will
the client have to justify expenditure? Must
every penny be accounted for (as in a publicly
funded project) or are the requirements less
stringent?
4.13.2 Often, both public- and private-sector
procurement strategies will be affected by
prescribed processes or financial
considerations. European tendering regulation,
Official Journal of the European Union (OJEU)
and NHS procedures such as Procure 21 are
typical examples.

DEVELOPING A CONSTRUCTION PROCUREMENT STRATEGY AND SELECTING AN APPROPRIATE ROUTE | 29

This RICS guidance note is out of print and on isurv
for information purposes only

Appendix: Procurement strategy selection
checklist

This checklist aims to establish information about client needs and the project under
consideration. This information can be further developed, taking into account the
characteristics of various procurement strategies and their associated risk. Time, cost and
design are key criteria in the selection mechanism, as is the inherent risk of a strategy and
the apportionment of this.

Checklist 1: Time…
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