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To cite this article: P.E.D. Love, M. Skitmore & G. Earl (1998): Selecting a suitable procurement method for
a building project, Construction Management and Economics, 16:2, 221-233
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Construction Management and Economics (1998) 16, 221± 233
Building procurement has become a fashionable term with industry practitioners and researchers. It deter-
mines the overall framework and structure of responsibilities and authorities for participants within the
building process. It is a key factor contributing to overall client satisfaction and project success. The selec-
tion of the most suitable procurement method consequently is critical for both clients and project partici-
pants, and is becoming an important and contemporary issue within the building industry. The problem,
nevertheless, lies in the fact that there has been limited empirical research in this ® eld of study. Postal ques-
tionnaire surveys of 41 clients and 35 consultants were carried out, and were used to obtain experience
of and attitudes to a variety of procurement methods and the criteria used for selection. The ® ndings indi-
cate that a simple set of the criteria generally is adequate and suf® cient for procurement path selection, and
that there is a reasonable consensus on the appropriate weighting for each path. Moreover, it is shown that,
contrary to expectations, similar clients generally do not have similar procurement needs.
A common leitmotiv of the construction industry is the budget and to be of the highest quality. However, some
proliferation of de® nitions of a procurement system. clients stress that certain criteria are more important
The terms `contractual arrangement’ and `procurement than others. There are numerous derivatives to each
system’ are usually used synonymously. The de® nition procurement method. However, those which have been
adopted here is that a procurement system is `an orga- categorized are considered to be the most popular
nizational system that assigns speci® c responsibil- methods at the time of evaluation.
ities and authorities to people and organizations, and
de® nes the relationships of the various elements in the
Selection of procurement methods in Australia
construction of a project’ .
The most commonly used procurement methods in
(1) Procurement systems can be categorized as:
Australia, based on Ireland (1982) and Barclay (1994)
(2) traditional (design± tender± construct) methods:
are:
design and construct methods; or
(3) management methods. (1) single lump sum contracts and full documenta-
tion;
Sub-classi® cations of these systems proliferate within
(2) provisional or partial quantities;
the Australian industry (Figure 1). Novation and
(3) cost reimbursement;
design and manage methods are some examples. It is
(4) package deals/turnkey;
common for procurement systems, contract forms and
(5) construction management; and
price determination mechanisms to be regarded as
(6) management contracting.
synonymous or inextricably related (Fellows, 1993;
Hibberd and Basden, 1996). Project management is excluded as it is considered that
Procurement systems have become increasingly a project manager could be applied to any procurement
¯ exible. Fellows (1993) suggests that the interchange method. In other words, to dispel a common miscon-
that exists between such systems has made it essential ception, project management is not a procurement
to distinguish the procurement system from the formal method (Bennett, 1986, p. 5). The term merely means
subsystem. It is suggested further by Fellows that the that the client has employed an agent to assist in under-
subsystem may be used interchangeably to enable taking a supervisory and coordination role within the
the procurement system to be tuned to the clients’ project. To the above list can be added novation, design
circumstances and requirements. A primary issue that and manage, and contractors design and build.
often is raised within the construction industry relates
to what clients want in order to be satis® ed with their
buildings and the means by which those buildings Selection of criteria
have been procured. Consequently, it is important to
evaluate the clients’ criteria, their importance and then The following criteria can be used to examine
seek performance to match the criteria. All clients client requirements and `experts’ preferences for the
require their buildings to be completed on time, within performance of each procurement method. NEDO
Procurement selection 223
(1985), Skitmore and Marsden (1988) and Singh seeking advice from a number of one or more pro-
(1990) suggest employing the following criteria to fessions. Clients of every kind need to recognize the
establish a pro® le of the clients’ requirements: positive and sustained contribution they have to make
if buildings of excellence are to be the norm rather
(1) speed (during both design and construction;
than the exception. Typically, clients who build on a
(2) certainty (price and the stipulated time and
regular basis may use a system that is compatible
knowledge of how much the client has to pay
with their corporate environment and from advice
at each period during the construction phase);
given from external consultants. Moreover, experi-
(3) ¯ exibility in accommodating design changes;
enced clients may establish a parochial approach to
(4) quality (contractors’ reputation, aesthetics and
building, utilizing those procurement methods that are
con® dence in design);
most familiar. Bresnen and Haslam (1991) de® ne such
(5) complexity (client may specify particular
an approach as `habituation’ , suggesting that this is
subcontractor, or constructability analysis);
inappropriate in situations where a different building
(6) risk allocation/avoidance;
type is required. Whatever decision a client makes
(7) responsibility (completion of program, price,
pertaining to their procurement selection it will have
product quality, design and construction);
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project (Masterman, 1992). Franks (1990) uses a Love (1996) found that a well established and
rating system based on the ability of each procurement prominent Australian project management organiza-
system to meet seven common satisfying criteria. A tion selected procurement methods for their clients
scale of 1± 5 is used, where 1 is the minimum and 5 using a systematic ® rst-principle analysis, by:
is the maximum. Masterman (1992) states that the use
(1) de® ning the project;
of this technique in determining clients’ needs is valid,
(2) determining the project needs;
but is ¯ awed with subjectivity.
(3) establishing a program;
Skitmore and Marsden (1988) and Singh (1990) used
(4) designing a delivery structure to meet the
the multi-attribute approach, which is a technique
project needs;
applied to measure a degree of objectivity to subjective
(5) allocating responsibilities within the project
areas. Both studies adapted the procurement path
structure; and
decision chart from NEDO (1985) to aid the deci-
(6) establishing a method of appointing for the
sion-making process. Bennett and Grice (1990) have
various participants involved.
undertaken similar work. Furthermore, Skitmore
and Marsden (1988) applied concordance analysis and Essentially, the organization would select the project
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discriminant analysis to their theoretical framework. structure and then adapt a contractual arrangement
Concordance analysis is used to measure the consis- to suit. Consequently, such an approach was found to
tency of experts’ ranking for each procurement against a stimulate teamwork in one particular project reported
set predetermined criterion. Discriminant analysis by Love (1996) inasmuch as project goals and objec-
examined data collected under a set of criteria that tives were clearly de® ned. Contrary to this approach,
are characteristics on which the various procurement Hibberd and Basden (1996) suggest that a contractual
methods are expected to differ. Thus, procurement arrangement initially should be selected so as to take
paths could be discriminated against for decision-mak- into consideration how risk will be transferred between
ing purposes. Skitmore and Marsden (1988) found from parties, therefore determining the nature of the
their exploratory work that the multi-attribute approach procurement method so as to ful® l the client’ s objec-
gave similar results to those using discriminant analysis. tives. In essence, Hibberd and Basden (1996) suggest
A cognitive perspective to procurement selection was that risk is the prominent criterion that will determine
proposed by Liu (1994). Organizational behaviour is the selection of a procurement method. Risk alloca-
modelled as an act-to-outcome process. The act-to- tion/avoidance cannot be overlooked; nonetheless,
product and product-to-outcome paths are the project whether or not clients do weight risk as their promi-
realization stage and post-occupancy stage of the nent criterion when procuring a building or other
building procurement process, respectively. Liu (1994) particular criterion will be explored in this paper.
states that organizational behaviour is governed by
organizational goals, and project goals affect the act-
Multi-attribute utility analysis
to-outcome process. A number of moderators such as
ability, task complexity and situational constraints Multi-attribute utility analysis is a methodology that can
affect this goal± performance relationship, thus affecting be used as a tool to measure objectivity in an otherwise
the act-to-product and product-to-outcome processes. subjective area of management (Fellows et al., 1983).
It is suggested by Liu (1994) that, in selecting an Since a procurement system is the overall managerial
appropriate procurement method, the decision maker approach by which a client commissions and obtains a
should take into account the effect of these modera- building, the multi-attribute approach was considered
tors using conjoint analysis (a technique used to model to be the foremost technique appropriate for examining
a decision maker’ s judgement pro® le). the criteria of clients and the preferences of experts’
The procurement module of the `Elsie’ expert system weights for each method in the most objective way. By
computer package (Brandon et al., 1988) provides the indicating the relative utility of each client requirement
recommendations on the most appropriate procure- and procurement method against a numerical scale, it is
ment method via a software program. A series of possible to obtain a set of utility factors. Clients were
questions relating to the timing, quality, design cost invited to give a rating to the above criteria for the latest
parameters and other characteristics of the project is building project they had procured. Quantity surveyors,
posed by the program. On evaluation of the informa- architects, project managers and contracting organiza-
tion, recommendations are given by means of a list tions gave ratings for the above criteria against each pro-
of the most appropriate methods, ranked in order of curement method listed herein. Each procurement
suitability, together with an indication of the extent method and client criterion was scored on a scale of
to which the various methods will satisfy the client 10± 110 to avoid any possible imbalances due to the
requirements. occurrence of zeros (Fellows and Langford, 1980).
Procurement selection 225
project. Then this was compared with the procurement by two important characteristics: whether they are
method actually used for the project. `primary or secondary constructors’ and `their level of
project experience’ . Masterman and Gameson (1994)
suggest that clients should be classi® ed according to
The procedure for weighting criteria
their construction experience and whether they are
Different clients and different project circumstances primary or secondary constructors. When these two
demand different criteria weights. For example, if, for characteristics are combined, the following client types
one project, the cost is the most important aspect, then are created: secondary inexperienced; secondary expe-
we would weight the `cost’ criterion higher than the rienced; primary inexperienced and primary experi-
other criteria. For another project where the speed of enced (Table 1).
construction is the most important, we would weight Client experience will continually change. Every pro-
the `speed’ criterion higher than the other criteria. ject is different. Therefore it may be considered that
The procedure adopted for obtaining client priority there is no such thing as an `experienced’ client in the
weightings for each criterion follows Singh (1990). strictest sense, although clients may acquire a degree of
This involves the following steps. (1) The client knowledge and understanding of the environment
weights the relative importance of each criterion (i.e. within which the project is being procured. Further-
speed, certainty, ¯ exibility) on a scale of 1± 20. This more, it is critical that clients understand where their
relative importance score is termed a priority rating. boundaries of construction expertise lay (Masterman
(2) Rationalized priority ratings are then calculated (by and Gameson, 1994). The study described herein
dividing each priority rating by the sum of all the
ratings). The sum of the rationalized priority ratings Table 1 Masterman and Gameson’ s (1994) client type
then will always be equal to 1. (3) Each rationalized classi® cation
priority rating is taken in turn and multiplied by Classi® cation De® nition
a utility factor representing the extent to which a
procurement method satis® es a criterion. The utility Primary Clients such as property developers, whose
factors connect each criterion to each procurement main business and
primary income derive from constructing
method in a consistent way, irrespective of the project.
buildings.
Thus, the traditional procurement method, which is
Secondary Clients for whom expenditure on construct-
known to be fairly slow, is given a fairly low utility ing buildings is a small
factor score. The construction management procure- percentage of their turnover, and from
ment method, on the other hand, which is known to whom buildings are necessary in order
be fairly fast, is given a fairly high utility factor score. to undertake a speci® c business activity,
(4) The rationalized priority rating± utility factor prod- such as manufacturing.
ucts are added for each procurement method and the Experienced Recent and relevant experience of con-
resulting total ranked in descending order. The most structing certain types of building,
appropriate procurement method is taken to be the one with established access to construction
with the highest total. expertise either in-house or externally.
Inexperienced No recent and relevant experience of
An example is the procurement path decision chart
constructing buildings with no established
shown in Figure 2. In the chart the rationalized priority
access to construction expertise.
rating± utility factor products are entered in the column
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226
implemented a classi® cation whereby clients were clas- imately 25% were property and development compa-
si® ed according to their knowledge of the construction nies, 25% investors, 30% occupiers, and 20% local and
process, and market factors. Consequently, the follow- central government authorities (including 7% from
ing classi® cation of clients’ market and technical knowl- local authorities). These results indicate an even spread
edge of the construction environment was used: of clients. Once the deadline date for the return of the
questionnaires had passed, those clients who had
(1) good knowledge of both technical and market
replied to the questionnaires were contacted and inter-
factors;
viewed via telephone. All 41 clients cooperated in the
(2) good technical knowledge but limited or no
follow-up interview.
market knowledge;
(3) limited or no technical knowledge but a ® rm
understanding of market factors; and Consultants
(4) limited or no knowledge of both technical and
Questionnaires were mailed to 100 selected consultants
market factors.
throughout Australia. Consultants were given over one
Ideally, we would like the clients’ responses to be month to reply to the questionnaire. Only 10 ques-
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homogeneous so the data for the utility factor scores tionnaires were returned within the time allocated.
can be pooled for all of these classi® cation groups. Each consultant was then telephoned to establish
Concordance analysis is used to test this, and involves why they had not returned the questionnaire. As a
calculating the coef® cient of concordance (Kendall and result of the telephone calls, a further 10 question-
Babington-Smith, 1939) to see if the rankings provided naires were returned. Questionnaires also were mailed
by the client classes in weighting each criterion are to another 50 consultants throughout Australia who
in suf® cient agreement. This statistical technique were given one month to return the questionnaire.
measures the rank correlation for a number of rank- Fifteen questionnaires were returned, bringing the total
ings. The measure for the coef® cient of concordance sample size to 35.
is de® ned by:
W = 12Sw /m2(n3 ± n)
Findings
where Sw equals the sum of the squares of the devia-
tions of the total of the ranks assigned to each indi- Data from the questionnaires were extracted to derive
vidual from m(n)/2. The quantity m(n + 1)/2 is the weightings of utility factors. These weightings then
average value of the totals of the ranks, and hence Sw were examined to determine whether or not the
is the sum of squares of deviations from the mean. respondents gave similar weights for the same criterion
W varies from 0 to 1; 0 represents no community of for differing project types.
preference, and 1 represents perfect agreement. Using
Kendall and Babington-Smith’ s de® nition of the coef-
Clients
® cient of concordance in this study, it was applied in
the following way: m is the number of observers, n is The most common procurement method used by the
the number of procurement categories, and Sw is the client respondents is the traditional lump sum and
sum of the ranks for each procurement method, and documentation (56%), with novation the next most
the deviation of each sum from the average is then popular system (18%), and the management system
calculated. of design, manage and construct the least used (3%).
74% of clients procured their development less than
one year previously. Clients were classi® ed into
Data collection either investors, property and development companies,
local and central government authority or occupiers
Clients (Turner, 1990).
Clients weighted each criterion using the scale indi-
Questionnaires were mailed to 100 selected clients cated in the questionnaire. Each client type was classi-
throughout Australia (except for the Northern ® ed in terms of their experience of market and technical
Territory). Clients were given over one month to reply knowledge of the construction industry (Table 2). The
to the questionnaire. Initially only 20 clients returned time period as to when they had completed their last
their questionnaires, therefore a further 50 question- building project was used as the basis for verifying
naires were mailed to clients. These clients were given clients and their perceived satisfaction or dissatisfaction
two weeks to answer the questionnaire, resulting in a with the form of procurement method actually imple-
total of 41 being received eventually, of which approx- mented.
228 Love et al.
The classi® cations of building types which clients Table 3 Mean weights and ranks of client typesa
procured are as follows:
Criteria A B C D
(1) residential;
Weight Rank Weight Rank Weight Rank Weight Rank
(2) commercial;
(3) recreational; Speed 13 6 20 1 14 5 17 4
(4) administration and civic; Certainty 16 4 18 3 15 5 19 2
(5) industrial; Flexibility 15 5 12 7 9 8 14 6
(6) hospital; Quality 13 6 15 6 17 4 18 4
(7) educational; and Complexity 8 8 9 8 10 7 11 8
Responsibility 18 3 17 4 16 4 13 7
(8) other.
Arbitration
Each client’ s weights were ranked in order of prefer- and dispute 8 8 9 8 17 3 14 6
ence. The mean weights of each client type were calcu- Price competition 17 4 16 5 19 2 20 1
lated along with the corresponding mean rank (Table Risk allocation/
3), and the coef® cient of concordance W was calcu- avoidance 18 2 17 4 12 7 13 7
lated for each client type (Table 4). All the results are a
Key: A, investors; B, property and development companies; C,
below the critical value of 0.70, and therefore indicate occupiers; and D, local and central government authorities.
that there is insuf® cient consistency with the weight-
ings for the utility factors. As a result, it was concluded Table 4 Coef® cients of concordance for clients
that different clients have different needs.
The clients indicated their satisfaction with the Client type Coef® cient of
procurement method adopted, as shown in Table 5. concordance
(W)
It is indicated that 70% of clients who were satis® ed
with the procurement of their buildings used a design Investors 0.57
and build procurement system. Furthermore, it was Property and development companies 0.27
found that these clients utilized an independent project Occupiers 0.25
manager to act as their project representative and Local and central government authorities 0.64
Procurement selection 229
Table 5 Percentage of clients satis® ed with their procure- technical speci® cation and quality; (c) lack of feed-
ment method back from participants to the project’ s performance;
Client type Novation Design Contractors Traditional (d) lack of involvement throughout the project; (e)
and design and lump poor coordination and communication between partic-
manage build sum ipants; (f) con¯ icting advice from consultants; and (g)
no project manager to act as an integrating device
Investors ± ± ± 10
between participants.
Property and
Evidently, from the results obtained, there are partic-
development
companies ± 15 15 ±
ular factors that contribute to client satisfaction and
Occupiers 35 5 ± ± these should be considered prior to the selection of a
Local and central procurement method.
government A study by Walker (1994b) of the Australian con-
authorities ± ± ± 20 struction industry found that experienced or sophisti-
cated clients are more likely to achieve a successful
project outcome. From this research, a key factor
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Table 8 Coef® cients of concordance for consultants and construct method, tend to be consistent through-
out all the charts (ranks 3± 5, but on occasion exchange
Selection criterion Coef® cient of concordance
(W) places). Construction management, management con-
tracting, and design and construct occupied ranks 6, 7
Speed 0.73 and 8, with management contracting predominantly
Certainty 0.85 being ranked eighth and the positions of the remaining
Flexibility 0.99
management methods exchanging ranking positions.
Price competition 0.65
The traditional cost reimbursement form was ranked
Risk allocation/avoidance 0.96
Responsibility 0.86 ninth for all the charts.
Quality 0.70
Arbitration and disputes 0.61
Complexity 0.94 Conclusion
For the quantity surveyor, preparation of bills of quan- of course be due to the different nature of their indi-
tities has traditionally been their primary source of vidual projects; whether the same client has the same
income, and any change in the way in which projects needs for different projects is not examined here. There
are delivered may hinder their incoming ¯ ow of monies is a consensus, however, that the criteria proposed,
and pro® t. Clearly, consultants will recommend a and their weights, are themselves appropriate for each
procurement system that meets their needs, and not procurement method. It was surprising to ® nd that the
necessarily the immediate needs of the client. However, application of these weights in the procurement path
clients appear to be placing greater emphasis on single- decision charts resulted in the same procurement deci-
point responsibility, risk avoidance and ¯ exibility, sion (novation) to be the highest ranked for all the test
rather than on quality and cost, which are considered projects used, and suggests that a further study is
to be the fundamental attributes of the traditional lump needed to validate and understand this, perhaps by
sum method. Design and build systems appear to in-depth interview. It should be noted, however, that
accommodate these increasing needs (Bresnen et al., the two most common procurement methods used
1987), but whether or not consultants will recommend by the client respondents are the traditional and nova-
the use of design and construct is perhaps question- tion, and the procurement path decision chart found
able. Therefore, based on the ® ndings presented above these also to be the most appropriate, albeit in reverse
and to eliminate bias, we suggest that an independent order.
project manager selects the procurement method by The low rankings for construction management,
systematically weighting client needs in accordance management contracting and cost reimbursement may
with their preferences. be due to the intrinsic uncertainty involved in these
methods. NEDO (1985) suggests that the management
methods system offers price certainty, although, at the
Procurement path decision chart
time of contract, the exact nature and detail of the
A procurement path decision chart (Skitmore and project generally are not established. In our view,
Marsden, 1988) was produced for each client respon- management methods are derived from prime cost
dent using the mean utility values of the consultants’ contracts and are thus lacking in price certainty.
weights from Table 6 juxtaposed with the clients’ The device of a guaranteed maximum price some-
criteria weightings. An example is shown in Figure 2. times is offered, but it is possible to obtain price
Each procurement method was ranked, with the certainty only if the maximum being guaranteed is high
highest result being ranked 1. Method F in this enough, in effect to contain a target ® gure that includes
example, with a total weighting of 84.59, represents suf® cient contingency. A maximum guaranteed price
the `appropriate’ form of procurement method. A total concept is not often possible to obtain before the time
of 41 charts were produced in this way, one for each when a construction contract needs to be signed.
client respondent, and in every case the appropriate The cost reimbursement form is a system whereby the
form of procurement system is the design and construct contractor is paid the actual or prime cost for an inde-
novation form, with the traditional lump sum and terminate amount of work, and in addition an agreed
documentation form ranked as the second choice, irre- fee is paid to cover management, overheads and pro® t.
spective of the type of client or building involved. It is possible that this form is not favoured as the resul-
The positions of ranks for the traditional methods tant ® nal cost to the client is dif® cult to determine.
with provisional quantities and the remaining design As with construction management and management
232 Love et al.
contracting, fees are paid on the actual cost of the work Gameson, R.N. (1992) An investigation into the interaction
undertaken. Moreover, Barclay (1994) found from his between potential building clients and construction profes-
studies that the design, manage and construct form has sionals, unpublished Ph.D. thesis, University of Reading,
not been used that extensively within Australia, hence UK.
Graves, F. (1978) Construction for an Industrial Recovery,
the lower weights and the low overall aggregate rank.
National Economic Development Of® ce (NEDO),
A simple set of criteria has been identi® ed as being
Steering Group on Industrial Building and Infrastructure,
generally adequate and suf® cient for procurement HMSO, London.
selection, and there is a reasonable consensus on the Hamilton, I.W. (1987) Developing expert systems for
appropriate weightings for each path. Moreover, the management applications, in Building Cost Modelling and
current trend in the literature urging greater involve- Computers, P.S. Brandon (ed.), E & FN Spon, London,
ment and interaction between client and consultants pp. 441± 51.
for a more effective procurement process is supported Hewitt, R.A. (1985) The procurement of buildings:
by the results of this study. The juxtaposition of design proposals to improve the performance of the industry,
and construct options with a project management orga- unpublished project report, College of Estate Manage-
nization is seen as a way of generally satisfying clients’ ment, Reading, UK.
Hibberd, P. and Basden, A. (1996) The relationship between
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for construction projects, Ph.D. thesis, University of that determine construction time performance, unpub-
Manchester. lished Ph.D. thesis, Royal Melbourne Institute of
Shockley-Zalaback, P. (1991) Fundamentals of Organisational Technology.
Communication. Longman, New York, pp. 7± 8. Walker, D.H.T. (1994b) Procurement systems and con-
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system for construction projects, in Proceedings of CIB W- International Procurement Symposium, East Meets West,
90 International Symposium on Building Economics and Department of Surveying, University of Hong Kong, 4± 7
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