CONSTRUCTION PROCUREMENT

Construction Procurement

Construction Procurement

Cost Calculations

The resources demands for three types of major transportation of manufactured goods project investigated during the period when Davis Belfield & Every Ltd. is faced with problems related to expansion of business.

For each project, the cost in billions of dollars, the engineering manpower requirement for basic design in thousands of hours, the engineering manpower requirement for detailed engineering in millions of hours, the skilled labor requirement for construction in millions of hours and the material requirement in billions of dollars are shown in Table. To build such a project an order of magnitude concurrently could drive up the costs and strain the availability of all resources required to complete the projects. Consequently, cost estimation often represents an exercise in professional judgment instead of merely compiling a bill of quantities and collecting cost data to reach a total estimate mechanically.

Resource Requirements

Time

Cost

Performance

Cost   ($ billion)

2.5

4

8 to 10

Basic design   (Thousands of hours)

80

200

100

Detailed engineering   (Millions of hours)

3 to 4

4 to 5

6 to 8

Construction   (Millions of hours)

20

30

40

Materials   ($ billion)

1

2

2.5

Major Risks

Moreover, the chosen payment strategy is Target Cost (Open Book) since, the uncertainty in contract scope requires flexible payment terms, non adversarial based on trust and openness, incentive system can be put in place to reduce waste hence higher return as risk sharing is potential The Lump Sum was not chosen because there can be inflexible for changes in scope, cost driven and not conducive for partnering, overlapping of design and construction required and that the actual cost may not be known. The corporate procurement function is no longer all about controlling costs and ensuring availability as the procurement executives are moving to boost their teams' skill levels, adopt new organizational structures and employ useful strategies and systems infrastructures. While, the procurement organizations are still focused on reducing costs and ensuring process availability, there's now a heightened emphasis on contributing to market expansion, product innovation and regulatory compliance. There can be such advances in procurement process, data sanctions and goal classification that have helped in supporting the procurement adjustment for the decisions being made. (Veleva 2003 107-119)

The objectives and constraints of each building project are frequently interdependent, and will therefore need to be considered concurrently. This approach will highlight the objectives and constraints that critically impact upon the planned delivery of the project and facilitate the selection of the most suitable procurement strategy. In some cases, however, it will be clear that one objective or constraint takes precedence over all others due to its critical impact upon project outcomes (for example, a constraint to complete a new school building before the commencement of a new school year). This critical objective or constraint should then be used to determine the most suitable procurement strategy for the project.

The second factor that may influence selection of a procurement strategy is the risk associated with the building project. In the context of this guideline, risks are events, both known and unforeseen, that might occur during the delivery of a building project and which will usually adversely affect ...