ADDIS COLLEGE

SCHOOL OF GRADUATE STUDIES

DEPARTMENT OF CONSTRUCTION TECHNOLOGY
& MANAGEMENT

Degree program: - M.Sc. in Construction Management

Course title: - Advanced Construction Procurement and
Contract Management
 Course Contents
Unit 1 – Introduction to construction Procurement &
Contract Management

Unit 2 – Procurement through public private partnerships

Unit 3 – public Procurement Law (Ethiopian)

Unit 4 – The practice of contracting in construction

Unit 5 – Claim and Dispute Management System

Unit 1

Introduction to construction
Procurement & Contract Management
 Introduction

➢ A project is successful when it achieves its objectives and

meets or exceeds the expectations of the stakeholders.
➢ Construction Industry involves procurement and contract
management systems in order to ensure fair competition and
distribution of obligation and rights among stakeholders.
➢ Public projects especially needs a strict manner of execution
based on the legal contract & applicable laws.
 General Description

Procurement:
➢ Procurement can be defined as the purchase of goods
and services at the best possible prices, delivery dates
and legal terms.
➢ Procurement is a process used to select the lowest
competitive and qualified bidder for procuring services
or works or goods from potential competitors based on
reasonable relevant criteria.
 Cont’d …

CONTRACT
➢ A contract as an agreement creating defining
obligations between the parties;
➢ A contract as an agreement enforceable at law made
between two or more persons by whom rights are
acquired by one or more to acts or forbearances of the
part of the other or others.
 Contract and procurement management

➢ Procurement and Contract Management involves

three major processes:
❖ Contract Planning,
❖ Procurement Management and,
❖ Contract Management
Cont’d …
 Contract Planning

➢ Procurement and Contract Management processes shall be based

upon the approved contract planning provisions; that is,
❖ the contract delivery system,
❖ the procurement method and
❖ Contract types decided upon.
➢ The approved contract provisions can only be changed following
the change process stated in the contract planning document
and if and only if:
❖ the Environment and Context considered are not
correctly analyzed or changed,
❖ their application can remarkably affect the
objective of the project, and
❖ Procurement management process justifies change
of the Contract Types.
 Procurement Management

➢ Procurement Management is a process of selecting

individuals or organizations to carry out the
intended services and / or works. It is based on
provisions made on contract planning phase.
➢ It involves

❖ the preparation of procurement documents

❖ invitation and submission of tender proposals
❖ Opening and Evaluation of tenders
 Cont’d …

➢ The following issues are necessary for a successful Procurement

Management phase:
❖ knowing and ensuring the implementation of
procurement related National and International laws,
rules and regulations,
❖ adherence to the provisions made during the contract
planning phase including their change processes,
❖ establishment of a flexible procurement team, and
❖ adhering to the principles of Proof of competition,
Impartiality, Neutrality, Accessibility and Formality.
 Contract Management

➢ Contract Management: is a process of reaching contractual

agreement for implementation, its administration and finally
concluding the contract. It based on provisions made on
contract planning phase.
➢ The following issues are necessary for a successful Contract
Management phase:
✓ knowing and ensuring contract related National and International
laws, rules and regulations,
✓ adherence to the provisions made during the contract planning phase
including their change processes,
✓ identifying, recognizing and involving all potential or key
stakeholders to form a contract team,
✓ understanding, mapping and monitoring all contract conditions
agreed upon, and
✓ ability to administer changes, claims and disputes.
 Purpose of Procurement Management

➢ Physical infrastructures are cost extensive and appropriate

savings obtained through competition are the main factor
behind the procurement process
➢ An effective and efficient procurement method ensures the
following rights called the "Five Rights". These are
The Right Quality,(technical expectation and economic
consideration)
The Right Quantity, (Take-off-Sheet Measurements and
Resources Allocations)
The Right Cost / Price /,(quality related and the right cost is
nearby cost, achieved mainly through competition)
The Right Counterpart (to guarantee that the parties shall be
fit to the job) and
The Right Time. (scheduling with regard to right timing is
essential)
 Cont’d …

The purposes of a Procurement Management System

can be summarized into two major points:

❖ To satisfy the need for economy and

efficiency,
❖ To provide equal opportunity to competitive
bidders.
 Procurement and Contract Delivery Systems

• Procurement and Contract Delivery system is the way Project

Owners together with Project Regulators and Financiers
determine the assignment of responsibilities to Project
Stakeholders along the Construction Process.
• A formalized contractual approach which allows an owner to
secure planning and design services and build a project,
assuring effective management throughout.
• Procurement and Contract Delivery system is often
determined during the Basic Planning phase of Construction
Project.
Methods of project delivery system

➢ Force Account,
➢ Design Bid Build (DBB),
➢ Design Build (DB) or Turnkey,
➢ Finance / Build Operate transfer
System (BOT),
➢ Construction/Facility Management
Consultancy
➢ Alliances and Outsourcing.
Force Account

➢ When the Project Owners engage themselves to undertake the

project, it is called a force account delivery system. This
system is promoted for
✓ Comparative advantage of cost, quality and time
✓ Scale of projects and technology (small)
✓ Remote projects
✓ spatially scattered and maintenance projects
Design-Bid-Build

(Two Separate Contracts for Design & Construction)

Design Build/Turnkey

➢ DB approach

➢ Enhance the Force Account System

➢ Reducing fragmentation, adversarial relations and Project
Owners’ risk
➢ Employ only one procurement process
➢ Single contractor to provide the entire Construction
Process (Design and Construction Implementations)
Cont’d …
 Cont’d …

➢ A design-build contract may also include responsibilities

that extend beyond the design and construction phases
of a project, shifting more performance risk to the
private sector. These have include

1. Design-Build-Warranty
2. Design-Build-Maintain
3. Design-Build-Operate e.t.c.
Build Operate Transfer

➢ Build - Operate – Transfer(BOT) is a form of procurement and

contract delivery system that promotes Public Private Partnership
(PPP) in which a private company is contracted to finance, design,
construct, and operate for a certain period (usually 10 years) and
transfer.
➢ the project owner is not responsible for any liability other than
force majeure and agreed upon claim adjustments.
➢ The Operation period between completion and transfer gives the
contractor an opportunity to verify the quality of the output of the
services and works
➢ BOT project involves a potentially complex contractual structure
Construction/Facility Management Consultancy

➢ Response to problems associated with DB and BOT

➢ Construction management consultancy firm is used to coordinate
all activities from concept inception through acceptance of the
facility.
➢ Facility management consultancy adds operation of facility during
operation to Construction Management Consultancy.
➢ CM is involved in the whole construction processes where as all the
others involve only during the implementation phase after major
decisions was made during the Basic planning phase
 Cont’d …

➢ Construction Management Consultants then represents Project

Owners to carry out the following services:
❖ Feasibility studies of Construction related services
❖ Plan and Monitor the Triple Constraints of Project
Performances
❖ Lead and Organize regulatory systems of the Construction
Industry
❖ Valuation, Quantity Surveying and Procurement and
Contract Management Services
 Cont’d …

➢ Construction management is a broad term covering a variety of

project delivery scenarios in which a construction manager
becomes an integral part of the team, at early stages in the
project, to oversee such elements as schedule, cost, and
construction methodologies and procurement strategies.

➢ The general Construction Management variations are

❖ Construction Management-at-Fee (CM at-Fee) and
❖ Construction Management-at-Risk (CM-at-Risk),
Partnering, Alliances

➢ Which focuses most on management of relationships and value

adding to ensure quicker, cheaper and quality services and
products with less disputes are recent developments.
➢ This is a method where an owner/developer and a contractor
agree to work together by freely sharing resources, risks and
knowledge during the course of the project
➢ These systems require to overcome cultural and behavioral barriers
among interest groups and control motivated performance based
management
 Reading assignment

❑ Types of Construction Contracts

❑ Construction contract use in Ethiopia
❑ Procurement methods
 Stages of procurement process

Procurement cycle
➢ It include the time frame between the identification of
requirement and the ultimate award of contract. The
followings are fundamental steps, to accomplish the
ultimate goal of procurement cycle.
 Cont’d …

A. Requirement identification
➢ The procurement cycle begins with identification of need
which creates a requirement.
E.g. a need to cross a body of water creates a requirement
to build a bridge.
➢ Budget allocation and fund availability are determined
before submission of requirements.
 Cont’d …

B. Procurement Planning:
➢ once requirements are defined and approved,
procurement planning begins. At this phase determine the
following;
✓ What is needed, when and what is the relationship to other
requirement?
✓ Is the requirement dependent or independent of other
requirements?
✓ if dependent, what is the relationship to other dependent
requirement
✓ When is the dead line to fulfilling the requirement.
✓ Is there sufficient time to fulfill the requirement given the project
schedule.
 Cont’d …

C. Procurement requisition processing:

➢ The first step here is to determine what the requesting
entity wants. This is done by reviewing specification or
description of goods or services or works required.
D. Determine procurement method:
➢ One must determine the appropriate procurement method
to fulfill the requesting entity's need in most expeditious
and cost-effective manner. This should ideally be done
during procurement planning stage.
However, if this was not the case, at this point the
procurement method needs to be determined.
 Cont’d …

E. Prepare and publish bidding document:

➢ Bidding process to begin after procurement method
determined
F. Pre-bid / meeting and site visit:
➢ Pre-bid meetings are held alone or in conjunction with a
site visit.
➢ Pre-bid meetings are held primarily for complex
requirements.
➢ The purpose of pre-bid meeting is to clarify the bid
documents.
 Cont’d …

G. Bid submission and opening:

➢ During the opening event the following needs to be
determined
▪ Is the bid received in a sealed envelope?
▪ Is the bid form completed and signed?
▪ Is the bid received on or before the submission date and
time?
▪ Is there a power of attorney mandating the authorized
representative to sign the bid?
▪ Is the bid security ( if any) in the form and amount
stipulated in the bidding document?
 Cont’d …

H. Bid evaluation: before the bid evaluation takes place,

an evaluation panel is formed and approved.
➢ Initial examination is done during the bid opening:
circumstances that could lead to the rejection of bid at
this stage are
✓ Compliance of documents received with the submission
requirements.
✓ Late bids
➢ Preliminary examination of the bid
✓ The responsiveness of the bid to the bid documents
➢ Detailed examination of the bid
✓ Price comparison is done to determine the lowest
qualified and responsive bidder
 Cont’d …

I. Award recommendation:
the contract award recommendation resulting from
evaluation of bids lead to a request for clearance/ no-
objection to award contract.
- If no-objection, the contract award recommendation will
be published and noticed.
- If there is any claim received, it will be reviewed and
investigated to determine validity.
- A valid claim may result in suspension of the intent to
award, in order to undertake detail investigation which
could lead to re-evaluation of bids or cancellation of the
evaluation process.
 Cont’d …

J. Contract negotiation:
Contract for goods or works procurement are not a usually
negotiated except under special circumstances the details
of which must be specifically stipulated in the bidding
document.
K. Contract award:
For goods and works procurement, contract award takes
place with the notification of the responsive bidder with
lowest evaluated price.
Such notification is done by the way of a formal letter of
acceptance to which the response must be received within
stipulated time period.
 Cont’d …

Post contract award considerations:

After contract signing, unsuccessful bidders have the right to request
debriefing by the procurement entity. The debrief can be done orally
or in writing.
End of Unit 1