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An Introduction to
Building Procurement Systems
Also available from E & FN Spon
Facilities Management
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The Construction Net

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Understanding JCT Standard Building Contracts

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The Marketing Department, E & FN Spon, 2–6 Boundary Row, London, SE1 8HN. Tel: 0171 865 0066
AN INTRODUCTION
TO BUILDING
PROCUREMENT
SYSTEMS
J.W.E.Masterman

E & FN SPON
An Imprint of Chapman & Hall

London • New York • Tokyo • Melbourne • Madras

Published by E & FN Spon, an imprint of Chapman & Hall, 2–6 Boundary
Row, London SE1 8HN

This edition published in the Taylor & Francis e-Library, 2003.

Chapman & Hall, 2–6 Boundary Row, London SE1 8HN, UK
Van Nostrand Reinhold Inc., 115 5th Avenue, New York NY10003, USA

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Melbourne, Victoria 3205, Australia

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First Edition 1992

© 1992 J.W.E.Masterman

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Apart from any fair dealing for the purposes of research or private study, or criticism
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this publication may not be reproduced, stored, or transmitted, in any form or by
any means, without the prior permission in writing of the publishers, or in the case
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to the publishers at the London address printed on this page.
The publisher makes no representation, express or implied, with regard to the
accuracy of the information contained in this book and cannot accept any legal
responsibility or liability for any errors or omissions that may be made.

A catalogue record for this book is available from the British Library.

Library of Congress Cataloguing-in-Publication data available.

This work is dedicated to my wife Miki, who throughout this venture,
and many others, has selflessly supported my endeavours.
CONTENTS

Acknowledgements ix
Preface xi
Introduction xiii

1 The concept of procurement systems

1.1 Terminology 1
1.2 Categorization of procurement systems 2
References 5

2 The evolution of contemporary procurement systems

2.1 Introduction 7
2.2 1945–1972 8
2.3 1973–1979 9
2.4 1980 to the present time 12
2.5 The level of use of procurement systems 13
Summary 18
References 20

3 Separated and co-operative procurement systems

3.1 Introduction 23
3.2 The conventional method 23
3.3 Variants of the conventional method 40
Summary 49
References 52

4 Integrated procurement systems

4.1 Introduction 55
4.2 Design and build 56
4.3 Variants of design and build 69
Summary 73
References 75

5 Management-orientated procurement systems

5.1 Introduction 77
5.2 Management contracting 78

vii
viii CONTENTS

5.3 Construction management 96

5.4 Design and manage 107
Summary 116
References 119

6 The British Property Federation system

6.1 Introduction 121
6.2 Genesis 122
6.3 Share of the market 124
6.4 The Process 124
6.5 The Product 133
Summary 135
References 136

7 Clients and their needs

7.1 Categorization of clients 137
7.2 Client’s needs 139
Summary 149
References 150

8 The selection of procurement systems

8.1 How clients actually select the procurement systems they use 151
Summary 158
8.2 The methods clients should use to choose their procurement 160
systems
8.3 Guides and aids to the selection of procurement systems 165
Summary 180
References 181

9 The future
9.1 General 183
9.2 Individual procurement systems 185
Summary 187
References 188
ACKNOWLEDGEMENTS

Grateful acknowledgement is made to following publishers and authors for their

permission to quote or reproduce extracts from the works listed below:
Walker, A. (1984) Project Management in Construction, Blackwell Scientific
Publications.
British Property Federation (1983) Manual of the BPF System, prepared by a
Working Party chaired by Mr Stanley Honeyman.
Waters, B. (1983) The BPF System, in: Building, Building (Publications) Ltd.
Centre for Construction Market Information (1985) Survey of Management
Contracting.
Skitmore, R.M., and Marsden, D.E. (1988) Which procurement system?
Towards a universal procurement selection technique, in: Construction
Management and Economics, Chapman & Hall Ltd.
Franks, J., and Harlow, P. (1990) Building Procurement Systems, Chartered
Institute of Building.
Building Economic Development Committee, NEDO (1983) Faster Building
for Industry, Controller of Her Majesty’s Stationery Office.
Building Economic Development Committee, NEDO (1985) Thinking About
Building—A Successful Customers Guide to Using the Construction Industry.
Jones, G.P. (1984) A New Approach to the JCT Design and Build Contract,
Longman Group UK Ltd.
Hillebrandt, P.M. (1985) Economic Theory of the Construction Industry, The
Macmillan Press [© Patricia M.Hillebrandt].
Fraser, I. (1980) AMM Case Study, Architects Journal, MBC Architectural Press
Ltd.
Centre for Strategic Studies, University of Reading (1988) Building Britain
2001, National Contractors Group (a sector of the Building Employees
Federation).

ix
x ACKNOWLEDGEMENTS

University of Salford (1988) ELSIE Expert System—Users Manual

(Commercial Application, Version 1.0), Royal Institute of Chartered Surveyors.
(The ELSIE software package is now being sold, maintained and further
developed by IMAGINOR Systems—current version is 4.0)
Brandon, P.S., Basden, A., Hamilton, W.I. and Stockley, J.E. (1988) Expert
Systems—The Strategic Planning of Construction Projects .
PREFACE

Research has revealed that the way in which many clients, and their advisors,
select the method used to control the design and construction of their building
projects, i.e. the procurement system, can be haphazard, ill-timed and lacking
in logic and discipline.
As it has also been recognized that one of the principal reasons for the
construction industry’s poor performance is the inappropriateness of the
procurement systems that have been chosen in this way, it is essential for the
future success of individual projects and the industry as a whole that, at a time
when such systems are proliferating and where building projects are becoming
more complex, the correct choice is made.
While there is much available literature relating to individual methods of
procurement, little has been done to provide an introduction to the subject and
a single source of reference which describes, examines and compares all of the
main procurement systems being used in most of the United Kingdom.
This book attempts to satisfy this need by providing information on the
history, procedures, use and characteristics associated with each of the major
procurement systems and their variants, and offering guidance to the reader
on the principles of selection of the most appropriate method of procurement.
For the sake of clarity the term ‘building’ here relates to industrial,
commercial, retail, leisure, educational and other similar facilities but not civil
engineering projects or petrochemical and process engineering installations.

J.W.E.Masterman

xi
INTRODUCTION

An examination of the historical background to the use of procurement systems

shows that in the post-war period up to the early 1970s, despite all relevant
official reports and studies recommending otherwise, the majority of building
work was carried out by conventional methods of procurement with only a
relatively small number of projects being implemented by means of, what were
then, non-conventional methods such as negotiation, serial tendering and the
use of package deals.
Because of this, many clients saw the implementation of a building project
as an expensive and risky adventure with work taking a long time to get started
and delays, disputes and extra costs prolonging the agony.
This discontent came to a head during the period of recession which ran
from 1973 to the beginning of the 1980s when for the first time client
dissatisfaction with the construction industry’s inability to meet their needs was
publicly expressed and this phenomenon, together with the financial and
practical consequences of the dramatic increases in oil prices, resulted in the
much greater use of management contracting and the design and build
procurement system.
In the period from 1980 to the present day, which has mainly been a time
of post-recession recovery, there has been a changed pattern of demand for the
industry’s resources, a lack of skilled labour and public finance and new client
attitudes to the organization of the management of the design and construction
of projects and the financing of development schemes.
However, despite the increased use of unconventional procurement systems,
and with the exception of some mega projects in the south-east of the country,
the building industry’s general performance, in terms of the usual criteria of
time, cost, functionality and quality, has continued to be mediocre and, although
it is accepted that the correct choice and use of the most appropriate
procurement system is not the only reason for inefficient project management,
there is little doubt that it has been a contributory factor in the industry’s
apparent inability to achieve a higher level of project success and overall
performance.
In order to enable the choice and subsequent use of the correct procurement
system to be made, it must first be understood that there is no standard solution,
or ‘best buy’, amongst procurement systems. Client organizations are complex

xiii
xiv INTRODUCTION

and different categories of clients require discrete solutions to their procurement

needs, added to which construction projects vary so considerably, in every
respect, from one to another that no single method of procurement can be
suitable for every project for all time.
Secondly, it is essential that each project is analysed and its primary and
secondary objectives identified and incorporated into the technical brief for the
work. The client’s needs, expressed in the briefing document, must then be
compared with the characteristics of all available procurement systems and a
logical and disciplined choice made of the most appropriate method.
The range of available procurement systems has proliferated in recent years
as a result of the increased complexity of building designs, escalating costs, the
magnitude of projects and increasing demands of building owners, but despite
this the majority of clients continue to select the procurement systems they use
from a very small number of the wide range of available methods.
The intention of this guide is to provide the reader with sufficient information
about building procurement systems to ensure an awareness of all the methods
that are currently available and their main advantages and disadvantages.
No attempt has been made to describe in detail the way in which each system
is processed through the various stages of a project as this is not seen as the
function of this guide but rather that of the substantial amount of available
literature that deals with the various individual procurement systems on a
specific basis.
Specifically, Chapters 1 and 2 describe the concept and categorization of
procurement systems and the evolution of those methods currently in use. The
next four chapters deal with each of the various categories and the individual
systems themselves. Chapter 7 looks at the needs of clients in the context of
project success while Chapter 8 investigates the way in which clients decide
which method to use, then identifies the principles that should govern the correct
choice and the various aids that are available to assist clients during this process.
Finally, in Chapter 9 an attempt is made to forecast the future in the context
of procurement systems and their use.
It has been suggested that where there is a clearly defined and communicated
set of objectives, and an understanding and acceptance of their responsibilities
by each member of an expert and competent project team, construction projects
are much less likely to encounter significant difficulties whatever the
procurement methodology. Whilst this may be true, it is strongly advocated that
this combination of criteria is rarely achieved in practice and success can best
be guaranteed by the correct choice of the most appropriate procurement system
within the discipline and framework of which the project team are more likely
to achieve the necessary level of efficiency to enable them to bring the project
to a successful conclusion.
1
THE CONCEPT OF
PROCUREMENT
SYSTEMS

1.1 TERMINOLOGY

The fragmented nature of the building industry particularly the separation of

design and construction, the uniqueness of construction projects and the
resulting ephemeral nature of the project organization places great dependence
on the project team in setting up the building process and bringing the project
to a successful conclusion [1].
One fundamental aspect of the building process that requires early and
particular attention if success is to be achieved, is the selection of the most
appropriate organization for the design and construction of the project.
For the purposes of identification and communication it is necessary to adopt
a term to describe this organization. An examination of past research and
literature reveals that phrases such as ‘building procurement method’,
‘procurement form’ and ‘procurement path’ have been used by various
authorities when referring to this concept.
Franks [2] describes ‘the amalgam of activities undertaken by a client to
obtain a building’ as a ‘building procurement system’ and an examination of
the definitions of the last two words of the phrase confirms that when conjoined
they relate to the method or organizational structure used to acquire a product,
in this case a building project.
The term ‘building procurement’ system has therefore been adopted and used
throughout the succeeding chapters and it is suggested could, with benefit, be
generally accepted within the industry to describe:
The organizational structure adopted by the client for the management of
the design and construction of a building project.
The choice of building procurement systems available to clients is now so wide
that the need to carry out the selection process in a disciplined and objective
manner should be self-evident, but the fact that such a course of action is not

1
2 THE CONCEPT OF PROCUREMENT SYSTEMS

adopted by many of the construction industry’s customers suggests that the

philosophy and advantages of a systems approach to both the detailed and
general management of construction projects is still not widely accepted.

1.2 CATEGORIZATION OF PROCUREMENT SYSTEMS

As an aid to adopting a more logical approach to the selection of the most

appropriate method from the proliferation of systems currently available it is
suggested that the different methods need to be categorized and there are a
number of ways in which this can be achieved, for example:
1. by the amount of risk taken by all of the participating parties;
2. by the extent to which design and construction are integrated;
3. on the basis of the way in which the contractor is reimbursed;
4. in the way suggested by The National Economic Development Office
(NEDO), in their publication Thinking about Building [3];
5. by the approach suggested by Bennett [4] after Mintzberg;
6. in accordance with Perry’s categorization [5].
The adoption of the first and third methods would only result in categorizations
which would be based upon single characteristics of procurement systems and
thus provide an insufficiently wide basis for selection. The second method
touches upon a critical element within the design and construction process, i.e.
the relationship between the two processes but is again too narrow in its
approach.
The NEDO guide adopts a practical approach and identifies four different
basic procurement systems, or paths, i.e. traditional, design and build,
management, and design and manage, each of which have a number of variants,
but makes no attempt to establish a grouping of systems based upon common
characteristics.
Bennett [4] maintains that, from a construction-project management
viewpoint, there are three distinct idealized patterns of project organizations
each with consistent links with different types of projects:
1. programmed project organizations which relate to standard construction;
2. professional project organizations which relate to traditional construction;
and
3. problem-solving project organizations which relate to innovative
construction.
This approach is considered to be too academic for the purpose of
categorization, added to which it does not relate to any of the accepted
fundamental characteristics of procurement systems.
Perry’s [5] approach categorizes all procurement methods as:
 CATEGORIZATION OF PROCUREMENT SYSTEMS 3

1. divided management of design and construction;

2. co-operative management of design and construction;
3. special emphasis on management;
4. integrated management of design and construction;

and is considered to be, for the purpose of assisting in the simplification of the
selection of procurement systems, the most appropriate categorization relating
as it does to the critical interaction between the design and construction
processes.
Therefore for the purposes of use in this guide the following categories have
been adopted:
1. separated and co-operative procurement systems, where the responsibility
for the design and construction aspects of the project are the responsibility
of separate organizations, e.g. design consultants and contractors, but where
variants of the basic system may also be used which enable the contractor
to be appointed at an early stage so that he may co-operate with the client
in pricing, providing advice on construction methods and buildability and
accelerating the commencement and completion of the project;
2. integrated procurement systems, where design and construction become the
responsibility of one organization, usually a contractor and the client has
only one organization to deal with;
3. management-orientated procurement systems, where the emphasis is placed
upon overall management of the design and construction of the project with
the latter element usually being carried out by works or package contractors
and the management contractor having the status and responsibilities of a
consultant.

Figure 1.1, adapted from Perry’s [5] original diagram, illustrates this
categorization and shows the main choices of procurement systems that are
currently available. The non-categorization of the British Property Federation
system results from the fact that it is, in reality, a very detailed administrative/
managerial framework into which other procurement methods can be fitted
to suit the requirements of a particular project and thus does not exhibit the
specific characteristics which would enable it to be placed with any certainty
into any particular grouping.
These groupings and the individual systems are themselves discussed in
succeeding chapters but it should be understood that, while on the
majority of projects the use of one procurement system will normally
ensure that the client’s needs are satisfied, on larger and more complex
projects it may be necessary for several of the methods to be used in
combination, or singly on different geographical sections of the same
scheme, and it is not unknown for a bespoke procurement system to be
designed for a specific project.
Figure 1.1 The categorization of building procurement systems
Source: Perry [5]
 REFERENCES 5

REFERENCES

1. Sidwell, A.C. (1982) Paper to seminar on Management Contracting,

sponsored by the Institute of Quantity Surveyors, London, 1 December.
2. Franks, J. (1984) Building Procurement Systems—a Guide to Building
Project Management, CIOB, Ascot.
3. Building Economic Development Committee (1985) Thinking about
Building—a Successful Business Customer’s Guide to Using the
Construction Industry, NEDO, London.
4. Bennett, J. (1985) Construction Project Management, Butterworths,
London.
5. Perry, J.G. (1985) The development of contract strategies for construction
projects, unpublished PhD thesis, University of Manchester.
2
THE EVOLUTION
OF CONTEMPORARY
PROCUREMENT
SYSTEMS

2.1 INTRODUCTION

Having established the concept of procurement systems the evolution and level
of use of contemporary procurement methods over the past half century is now
examined in some detail using the numerous official and semi-official reports
that were produced during this period.
The vast majority of construction projects prior to the Second World War
(1939–1945), were implemented by conventional methods of procurement that
had remained unchanged for over 150 years. Since that time, however, the
number of different available procurement systems has substantially increased,
often as a result of importation from the USA, and perhaps more significantly,
the willingness of an increasing number of client organizations to sponsor and
use these new methods.
Three phases in the development of contemporary procurement systems can
be identified. The first was a period of sustained economic growth when the
use of conventional methods of procurement still prevailed; the second was a
period of recession characterized by an increased use of non-conventional
procurement systems; and the third and final period, which has recently ended,
was a time of post-recession recovery during which the most experienced clients
of the industry designed and implemented their own procurement systems and
more generally, although conventional systems still predominated, design-and-
build and management-orientated procurement methods increased their share
of the available workload.
Chronologically, these periods broadly relate to the years 1945 to 1972,
1973 to 1980 and 1981 to the present time—nearly half a century during

7
8 THE EVOLUTION OF CONTEMPORARY PROCUREMENT SYSTEMS

which the changed attitudes and needs of client organizations have resulted in
a substantial increase in the number and type of procurement systems
available.

2.2 1945–1972

Following the end of hostilities the demands placed upon the building industry
rapidly increased in both complexity and workload. Despite this, the pattern
of organization of projects remained largely unaltered, particularly in the public
sector, with the majority of work still being let on the basis of open competitive
tendering even though the Simon Report [1] of 1944 had strongly recommended
the use of selective bidding.
The Phillips Report [2] published in 1950 reiterated this recommendation
and in addition highlighted the need for greater co-operation between all of
the parties involved in the construction process although by now some
innovations in procurement systems, such as negotiated tenders and design and
build, had begun to be used to a very limited extent by the private sector and
central government.
Criticism of the lack of liaison and relationships between consultants,
contractors and their mutual clients was contained within the 1962 Emmerson
Report [3] which commented:
In no other important industry is the responsibility for design so far removed
from the responsibility for production.
Emmerson also came to the conclusion that there was still a general failure to
adopt enlightened methods of tendering in spite of the recommendations of
earlier reports, but also noted the growth of the package deal and ‘other forms’
of placing and managing contracts although no examples of such forms, other
than serial tendering, and a passing reference to the ‘Clasp’ system of
industrialized building, were provided.
In 1964 the Banwell Report [4] was published, followed in 1967 by a
review, Action on the Banwell Report [5]. The former document expressed
concern at the failure of the industry and its professions to think and act
together or to reform its approach to the organization of construction projects.
The document also reiterated the recommendations of the Simon Report [1]
and other previous committees and working parties in that the use of selective
tendering should be more universally applied together with the use of non-
conventional methods such as negotiated and serial tendering where
appropriate.
The 1967 review [5] found that some progress had been made since Banwell
on the pre-planning of projects, although the professionals had done little to
de-restrict their practices. An increase in the use of selective tendering was noted
 1973-1979 9

and the industry was again urged to increase the use of serial and negotiated
tendering.
A number of guides intended to assist clients in the planning and organization
of construction projects were published in the decade prior to 1965 although
these had not, according to Action on Banwell [5], been widely publicized or
circulated. In that year Higgins and Jessop [6], in a pilot study to examine
communications in the industry sponsored by the National Joint Consultative
Committee (NJCC), were probably the first to suggest that overall co-ordination
of design and construction should be exercised by a single person, or
organization.
The evidence therefore suggests that the early to mid-1960s were a time of
considerable activity within the industry with regard to its performance and
organization, and that this was probably induced by a combination of economic
expansion, rapidly developing technology, changing social attitudes, the
demand for more complex and sophisticated buildings and, not least, the client’s
increased need for faster completion at minimum cost.
The last requirement stemmed from the revived activities of property
developers, following the boom in urban redevelopment, and industrial
organizations. Both of these client groups were unhampered by standing orders
or restrictive procedures and were thus more open to suggestions for the use
of unorthodox arrangements for the provision of their building projects.
Negotiated contracts and package deals were frequently entered into by the
private sector and there was much discussion, but much less real progress, about
the early involvement of contractors in order to benefit from their practical
expertise.
Within this period, a time of sustained and almost uninterrupted economic
growth from the end of the war to the early 1970s, conventional methods of
procurement prevailed with only a relatively small number of projects being
carried out by non-conventional procedures despite a proliferation of reports
recommending their use and the adoption of a more co-operative approach by
all members of the building process.

2.3 1973–1979

The second phase was a period of recession, if not depression and instability,
and commenced in 1973 as a result of the first price increase imposed by the
oil-producing countries coupled with a high rate of inflation arising from the
previous boom and, eventually, from the effect on the oil price rise itself; this
stage is seen to have lasted until 1980.
During this time government-sponsored studies of the industry were less
general and fundamental than they had been in the 1950s and 1960s and related
to specific sectors of construction activity.
10 THE EVOLUTION OF CONTEMPORARY PROCUREMENT SYSTEMS

Of the number of studies emanating from NEDO the report [7] produced
in 1975 by the Joint Working Party chaired by Sir Kenneth Wood was the only
one specifically to examine purchasing policies and procurement practices
although even then the examination was restricted to the public sector. The
report found that the procurement systems used by public authorities were
inappropriate to the circumstances and types of project surveyed, although the
use of non-conventional methods of organizing construction work amounted
to nearly 40% of the projects examined.
Various official and unofficial reports that were produced during this period
drew unflattering comparisons between the performance of the British and
foreign construction industries and the two case studies carried out by Slough
Estates PLC in 1976 [8] and 1979 [9] were particularly damning.
The 1976 study found that the overall time taken to implement an
industrial project in the UK was considerably longer than in other countries
and the eventual cost of developments in this country was considerably
higher than all but one of the seven countries surveyed. The reasons for this
poor performance were considered to stem from the unnecessarily lengthy
and complex design and pricing process and the time taken for the
application and granting of the necessary statutory permits which, when
related to the high level of interest rates, inflation and prolonged
programmes, led to the high levels of cost.
The 1979 report [9] endorsed the findings of the earlier study but conceded
that there had been a general improvement in the intervening 3 years which
was attributable to the effects of the recession and the resulting low level of
building activity.
The recommendations made by the two studies stressed the need for
reform of the planning and building regulation processes and, in the context
of procurement systems, urged the simplification of design and construction
procedures, the improvement of construction management, the
establishment by clients of their real needs and more effective briefing of their
design teams.
These two reports [8, 9] were probably the first formalized examples of a
trend, which emerged during the late 1970s and has continued since, of some
client organizations forcibly voicing their dissatisfaction with the performance
of the construction industry.
In 1978 the Building and Civil Engineering Development Committees
combined to produce Construction for Industrial Recovery [10] a study
which sought, among other objectives, to obtain the views of industrialists
on the adequacy of the products and services offered by the building
industry.
The report, based upon a survey of 500 firms and 32 case studies, concluded
that industrial firms carried out their construction projects using various
procurement methods with many choosing the conventional route. It was also
 1973-1979 11

established that the average industrial user is not aware of the complexities of
the construction process, or more particularly the alternative methods of
acquiring buildings, and that traditional contract procedures frequently do not
meet the needs of the manufacturing industry.
The Royal Institution of Chartered Surveyors, published a report [11] in 1979
which was based upon a study of the contribution made by different design and
contract procedures to cost and time performance, especially in the UK and US
construction industries. The document contains a number of conclusions which
are relevant to the procurement process:
1. A very wide range of procurement systems is used in the private sector in
the US as against a very narrow range in the UK, where central and local
government is the dominant influence and public accountability, rather than
economy, is essential.
2. Major cost and time penalties are likely to be incurred if detailed design is
divorced from construction.
3. The use of construction management in the US has grown as a result of this
system being capable of giving the design team control over the construction
cost and time.
4. The range of variety of procurement systems has proliferated on both
sides of the Atlantic because of escalating costs, increasingly complex
designs, the increased size of projects and the more onerous demands of
owners.
5. Clients in both countries were found to be dissatisfied with conventional
procedures. In the US this dissatisfaction results from an increase in claims,
and subsequent litigation, as well as lack of cost control during the design
stage, while in the UK escalating costs, the slow rate of construction and
technical defects have disappointed clients.
6. Clients in the UK are more conservative than their US counterparts, who
are prepared to experiment with the whole range of procurement methods,
particularly construction management.
The themes of most of the reports published in the 1970s reflected the
diminishing numbers of sponsors prepared to commit themselves to
building projects in an uncertain economic climate and the increasing
concern, of those clients who continued to carry out construction works, at
rapidly increasing material and labour costs, high inflation and railing
demand for their products, all of which were made worse by the delays,
overruns and other difficulties associated with the UK construction
industry.
Within this second phase the use of the conventional procurement system
still accounted for much of the construction work although the use of
management contracting, and to a somewhat lesser extent the design and build
method, continued to increase.
12 THE EVOLUTION OF CONTEMPORARY PROCUREMENT SYSTEMS

2.4 1980 TO THE PRESENT TIME

The third of the chronological phases started in 1980 and has now finished.
This stage has been described as a post-recession period of adjustment and
recovery during which changes have taken place as a result of long-term shifts
in the structure of the industry, such as the emergence of labour-only sub-
contracting and the client’s changing perceptions.
This latter characteristic is best reflected in the publication, at the end of
1983, of the British Property Federation’s (BPF) System for Building Design
and Construction [12]. This body, which represents the majority of UK property
development organizations and a number of the larger retailers and commercial
companies, had concluded that many existing procurement systems caused
delays, were inefficient, could increase costs and cause and sustain
confrontational attitudes between consultants and contractors which are
contrary to the best interest of the client.
A Working Party, assisted by a small group of consultants, was set up to
draft ‘an improved management system for the building process appropriate
for members of the BPF’ and, for the first time on any major scale, eventually
produced its own system of organizing the management, design and
construction of a building project which reflected US practice and the
experience gained in using all of the various existing procurement methods
that have become established over many years. It is interesting to note,
however, that there is no evidence to suggest that this new approach has
captured the imagination of many clients or a significant percentage of the
available workload.
Two important NEDO reports [13, 14], were published in 1983 and 1988,
both dealing with the widely held belief that the process of procuring new
industrial or commercial buildings was unnecessarily long and difficult, a view
which had been established in the reports of the 1970s, which compared UK
performance unfavourably with that of the building industry in overseas
countries.
The 1983 study [13] found, in relation to procurement methods used on
industrial projects, that while conventional methods can give good results,
non-conventional techniques tend to be quicker, although the use of bills of
approximate quantities and negotiated tendering also leads to faster
progress. It also established that over half of the projects surveyed were
carried out by conventional methods, about a third by the design and build
procurement system and the remainder by some form of management or
other approach.
The 1988 report [14], which dealt specifically with commercial projects,
identified a wide variability in time performance, even on comparable projects,
with project outcomes being determined not only by the form of organization
but also by the early development of a comprehensive project strategy and
 THE LEVEL OF USE OF PROCUREMENT SYSTEMS 13

timetable. Two-thirds of the projects surveyed were carried out by the use of
conventional methods with the remainder being more or less evenly divided
between design and build and management techniques.
Both studies found that about one-third of both industrial and commercial
projects finished on time but the rest overran their planned times by a month
or more thereby confirming the concern expressed by many clients during this
period at the industry’s inability to satisfy their needs.
While the British Property Federation produced its own system as a result
of its frustration at the construction industry’s poor performance on its
members’ projects, another group of clients, mainly those sponsoring mega-
projects in London and the south-east of England, began in the mid-1980s
individually to put together their own forms of project organization in a way
that best suited their own interests. The emergence of this type of expert private-
sector client, who has the necessary in-house resources to enable him to manage
large projects and an on-going construction programme, is one of the
phenomena of the period with clients of the industry despairing of it ever putting
its own house in order and identifying the need to develop bespoke project
organizations which, in the case of the major schemes, mainly consisted of some
form of construction management.
In this third and final phase, although the conventional method remained
the most widely used system, there was a substantial increase in the use of design
and build and a continued use of various forms of management approaches,
albeit with an apparent reduction in the use of management contracting, during
the latter years of the period, as a result of clients’ dissatisfaction with this
method of procurement.

2.5 THE LEVEL OF USE OF PROCUREMENT SYSTEMS

None of the many reports on the construction industry that have been produced
since the mid-1960s by government-sponsored committees and others, have
accurately or adequately defined the level of use by clients of the various
available procurement systems.
Some of these studies have, however, given indicative figures. The
Working Party when preparing the 1967 study Action on the Banwell
Report [5] established that, in the housing and educational sections of the
public sector, the methods of procuring building projects was as shown in
Table 2.1.
The information contained within this study regarding the level of use in the
other sections of construction activity was far less definitive—hospital boards
used selective tendering, universities used selective tendering and negotiation
and most contracts for central government and the nationalized industries were
being procured by selective tendering and various forms of negotiation.
14 THE EVOLUTION OF CONTEMPORARY PROCUREMENT SYSTEMS

Table 2.1 Method of appointing the contractor

Source: Action on the Banwell Report [5]

The 1974 NEDO guide Before you Build—What a Client Needs to Know
about the Construction Industry [15], contained information on the use of
procurement methods in the private sector, which confirmed that over 70%
of projects were still procured on a conventional basis, 18% were implemented
using the design and build system and the remainder carried out by
‘management’ and other methods.
The Wood Report [7], which examined the purchasing policies and practices
of the public client, established that 60% of contracts were let on a conventional
basis, nearly 25% used the design and build method and the remainder were
implemented using other non-conventional procurement systems.
Hillebrandt [16] maintained that there was no comprehensive data available
on the level of use of the various construction industry procurement methods
and produced an assessment of the systems usage, in both the public and private
sectors, which is partly reproduced in Table 2.2. Subsequent reports indicate
that the amount of work carried out in the private sector by selective tendering
was underestimated by Hillebrandt [16] and the use of management-orientated
methods substantially overestimated.
A survey of 21 public and private sector organizations carried out in 1985
by Hewitt [17] established that the use of conventional procurement systems,
mainly in the form of selective competition and negotiation, was predominant
with design and build being the next most popular method—the detailed results
of this survey are shown in Table 2.3.
The Faster Building for Industry report [13] established, from a survey of
5000 industrial projects undertaken in 1980–81, that just over half of these were
carried out using conventional procurement methods, a third were implemented
 THE LEVEL OF USE OF PROCUREMENT SYSTEMS 15

Table 2.2 Assessment of level of use of procurement

system in early 1980s [16]

* excluding housing
Source: Hillebrandt [16]

Table 2.3 Most commonly used procurement systems

Source: Hewitt [17]

using the design and build methods and the remainder by some form of
management system.
NEDO’s subsequent report on the commercial sector [14] was based upon
a representative sample of 60 projects, built between 1984 and 1986,
supplemented by additional data gleaned from 260 schemes and the statistical
analysis of non-detailed information on some 8000 commercial projects. The
report concluded that over two-thirds of the contracts were let on a conventional
basis, about one-sixth used the design and build approach and the remainder
were carried out using some type of management procurement method.
Surveys [18] have been carried out in 1984, 1985, 1987 and 1989, by the
Junior Organization of the Quantity Surveyors Division of the RICs, of some
16 THE EVOLUTION OF CONTEMPORARY PROCUREMENT SYSTEMS

Table 2.4 Summary of surveys and estimates of level of use of procurement systems
1960–87 [19]

Source: Rowlinson [19]

(a) Rowlinson’s estimate [19]
(b) Action on Banwell Report [5]
(c) The Wood Report [7]
(d) The Wilson Report [15]
(e) Faster Building for Industry [13]
(f) Hillebrant’s estimate [16]
(g) Hewitt’s survey [17]
(h) Faster Building for Commerce [14]
(i) RICS JO Survey of Contracts in Use in 1984 [18]
(j) RICS JO Survey of Contracts in Use in 1985 [18]
(k) RICS JO Survey of Contracts in Use in 1987 [18]
(l) RICS JO Survey of Contracts in Use in 1989 [18]

700 quantity surveyors in private practice in local and central government and
the housing association sector in order to determine the levels of use of forms
of contract and building procurement systems during the years in question.
The results of these surveys show a decrease over the 4 years in the use of
conventional methods from 83% to 67%, while design and build has increased
over the same period from 5% to 11% or 12% (although the authors of the
survey are of the opinion that the use of the latter arrangement is understated
as a result of the single discipline of the respondents). The use of management
and other methods decreased between 1984 and 1987 and then rose
dramatically to 22% in 1989, although these results may again be suspect.
Table 2.4 based upon Rowlinson’s work [19] summarizes all of the
previously described surveys, reports and literature with a view to bringing
 THE LEVEL OF USE OF PROCUREMENT SYSTEMS 17

Table 2.5 Incidence of use, by percentage of annual value of work commissioned, of

the main procurement systems

together all of the diverse information and providing an indication of the way
in which the use of the various systems has changed over the years.
Unfortunately, the lack of comparable figures for the level of use of the various
procurement methods over a set period of time from a sufficiently wide range
of respondents means that it is not possible accurately to quantify the actual
past use of each individual system, or identify the long-term trends, even on
the basis of the preceding data.
In an effort to establish a more accurate picture, the author undertook a
survey in 1988 [20], of clients, architects and quantity surveyors; respondents
were asked to identify, by percentage of project value, the procurement methods
they had used in the latest year for which such information was available and
for the 12-month period 5 years prior to this. Table 2.5 shows the results of
the survey which related to industrial and commercial projects carried out
during 1986 and/or 1987 and the previous 5 years.
Whilst it can be seen that the results obtained from the three groups of
respondents varied, in some cases quite radically, the trends shown for the use
of each of the procurement systems were, in the main, consistent.
The use of conventional systems by all of the respondents had decreased by
between 7% and 14% over the 5-year period in question, thus confirming the
trend identified by the previous surveys.
The design and build method had gained in popularity over the surveyed
period, once again confirming the historical evidence, with its increase in use
ranging from 35% in the case of quantity surveyors and 60% as reported by
architects, with clients increasing their use of the system by nearly 35%.
18 THE EVOLUTION OF CONTEMPORARY PROCUREMENT SYSTEMS

The use of management contracting varied considerably between the three

groups of respondents with clients reporting a decrease in use from a
comparatively low level of under 4% to just over 2%. The results of the survey
of architects on the other hand showed an increase from nearly 3.5% to 4.5%.
Quantity surveyors also reported an increase in the use of this method, but from
a level of nearly 8% to over 13%. This wide variation in the level of use of
management contracting was unexpected in itself but was more surprising when
the use of this particular procurement system has been, according to the
technical press, levelling off, or even reducing, as a result of clients’
disenchantment with the method.
Design and manage had been used by clients for over 9% of the value of the
work they had carried out during the latest year for which they had records
and the level of use had not altered substantially from that of 5 years earlier;
architects and quantity surveyors reported an increase in use from a comparative
low base.
The relatively high incidence of use among clients of this procurement system
stems mainly from the fact that most of the respondents utilized their in-house
project management expertise to co-ordinate their own internal designers, or
external consultants, and package/works contractors so as to carry out a high
proportion of their construction projects on a direct basis.
The level of use of the remaining methods was so low as to preclude any
meaningful conclusions being drawn from the results although the responses
obtained with regard to the use of the British Property Federation system
appears to confirm the opinions being expressed at the time of the survey that
the uptake of this much vaunted and publicized method had so far been both
slow and partial.

SUMMARY

1. Despite the fact that this examination of the historical background to

procurement plainly shows that in the post-war period all relevant official
reports and studies have emphasized the need for clients and the industry
to embrace the use of non-conventional procurement methods in order to
maximize the likelihood of ensuring the clients’ needs are met, it was not
until some 25 years after the end of the war that the reactionary forces lost
momentum and, what were then, unorthodox methods of procurement
began to be used more frequently.
The 1950s and 60s were a time of general reorganization of the industry
in order to deal with the large increase in workload and shortage of
resources prevalent during this period and although selective tendering,
negotiated and serial contracts were used to overcome the difficulties
resulting from these phenomena, the use of conventional procurement
 SUMMARY 19

Table 2.6 Summary of surveys of the levels of use of procurement systems

(a) Faster Building for Industry [13]

(b) Masterman’s survey of clients [20]
(c) Faster Building for Commerce [14]
(d) RICS JO Survey 1984 [18]
(e) RICS JO Survey 1985 [18]
(f) RICS JO Survey 1987 [18]
(g) Masterman’s survey of clients [20]
(h) RICS JO Survey 1989 [18]

systems still predominated mainly as a result of central and local

government controlling the major part of the industry’s annual workload
and maintaining a policy of public accountability.
The 1970s and 80s were, on the other hand, characterized by a lack of
public finance, a changed pattern of demand as the private sector became
dominant and new client attitudes to the organization of the design and
construction of projects and the financing of development schemes. In terms
of the use of procurement systems these changes resulted in the launching
of the BPF system, the designing of bespoke procurement systems, often by
client organizations themselves, and the increased use of design and build
and management-orientated systems.
2. It is not possible, on the basis of literature and past research, to accurately
quantify the past or present level of use of all, or any, of the available
procurement systems; this inability stems from the lack of truly comparative
figures for the individual methods over a set period of time from a sufficiently
wide range of reliable sources.
However, Table 2.6 attempts to provide an indication of the pattern of
use of such systems based upon information contained within those surveys
which most nearly meet the criteria for such comparisons.
3. Figure 2.1 shows the difference in the level of use of the three categories of
procurement systems over a period of nearly 30 years between 1960 and
1988, as estimated by Rowlinson [19] and Masterman [20] and illustrates
in graphic form, the changes that have been described in this chapter and
20 THE EVOLUTION OF CONTEMPORARY PROCUREMENT SYSTEMS

Figure 2.1 Changes in the level of use of procurement systems, 1960–1988

in particular the determination of a large number of clients to implement

their projects by the use of procurement methods which satisfy their own
needs and not those of the construction industry.
The next four chapters define and describe the various individual procurement
systems and their variants, and provide information on the history and
characteristics of the methods as well as the process of implementation and the
advantages and disadvantages of the different systems.

REFERENCES

1. Simon Report (Central Council for Building and Works) (1944) The Placing and
Management of Building Contracts, Chairman Sir E. Simon, HMSO, London.
2. Phillips Report (Ministry of Works) (1950) Report on the Working Party on the
Building Industry, Chairman Mr J. Phillips, HMSO, London.
3. Emmerson Report (Ministry of Works) (1962) Survey of Problems before the
Construction Industries, Report prepared by Sir H. Emmerson, HMSO, London.
4. Banwell Report (Ministry of Public Buildings and Works) (1964) The Placing and
Management of Contracts for Building and Civil Engineering Work, Chairman
Sir H. Banwell, HMSO, London.
 REFERENCES 21

5. Economic Development Committee for Building (1967) Action on Banwell Report,

National Economic Development Office, London.
6. Higgins, G. and Jessop, N. (1965) Communications in the Building Industry,
Tavistock Publications, London.
7. Wood Report (Building Economic Development Committee) (1975) The Public
Client and the Construction Industries, Chairman Sir K.Wood, NEDO, London.
8. Slough Estates Limited (1976) Industrial Investment. A case study in factory
building, Slough Estates Ltd, London.
9. Slough Estates Limited (1979) Industrial Investment. A case study in factory
building, Slough Estates Ltd, London.
10. Building and Civil Engineering Economic Development Committee (1978)
Construction for Industrial Recovery, Chairman Mr F.C.Graves, NEDO, London.
11. University of Reading, Department of Construction Management (1979) UK and
US Construction Industries: a Comparison of Design and Contract Procedures,
RICS, London, September.
12. British Property Federation (1983) Manual of the BPF System for Building Design
and Construction, BPF, London
13. Building Economic Development Committee (1983) Faster Building for Industry,
NEDO, London, May.
14. Building Economic Development Committee (1988) Faster Building for Commerce,
NEDO, London, November.
15. Building Economic Development Committee (1974) Before you Build—What a
Client Needs to Know about the Construction Industry, NEDO London.
16. Hillebrandt, P.M. (1985) Economic Theory and the Construction Industry, 2nd
edn, Macmillan, Basingstoke.
17. Hewitt, R.A. (1985) The procurement of buildings. Proposals to improve the
performance of the industry, project reports submitted to the College of Estate
Management for RICS diploma in Project Management.
18. Junior Organization, Quantity Surveyors Divisonal Committee (1985, 1986, 1988,
1990) Survey of Contracts in Use, 1984, 1985, 1987, 1989, RICS, London.
19. Rowlinson, S. (1986) An analysis of the performance of design—build contracting
in comparison with the traditional approach, unpublished PhD Thesis, Brunel
University.
20. Masterman, J.W.E. (1989) The procurement systems used for the implementation
of Industrial and Commercial building projects, unpublished MSc thesis, University
of Manchester.
3
SEPARATED AND
CO-OPERATIVE
PROCUREMENT
SYSTEMS

3.1 INTRODUCTION

The unique characteristic of this category of procurement systems is the

separation of the responsibility for the design of the project from that of its
construction. Even where variants of the basic system allow co-operation
between the contractor and the client or his consultants, these two fundamental
elements remain as two separate entities.
The category contains one main procurement system—the conventional
method—and a number of variants of that method. In this guide these
variants have been restricted to those which are generally accepted as being
most widely used in the industry, i.e. negotiation, two-stage selective
tendering, continuity contracts, serial contracts and cost-reimbursable
contracts.
In most cases these variants have been devised, or have evolved over the years,
as a means of mitigating the shortcomings of the basic system. These deficiencies
and the other characteristics of both the parent system and its offspring are now
examined and discussed.

3.2 THE CONVENTIONAL METHOD

3.2.1 Definition of the system

This method of procuring building projects is usually referred to within the industry
and literature as the ‘traditional method’. The author maintains that, in fact, the
traditional method of designing and constructing buildings was that which was most
commonly used before the end of the 1700s or beginning of the 1800s when clients had

23
24 SEPARATED AND CO-OPERATIVE PROCUREMENT SYSTEMS

for many centuries traditionally employed craftsmen, on an individual basis, under the
supervision of a master mason, or surveyor or, very rarely, an architect.
Since that time and up to relatively recently the ‘accepted social behaviour’,
the Concise Oxford Dictionary’s definition of ‘convention’, has been for most
clients to implement their building projects by using a main contractor with
the design and supervision being carried out by an architect assisted by other
specialist consultants. The term ‘conventional method’ has therefore been used
to describe this system throughout this guide.
Apart from the separation of design and construction the conventional
procurement system exhibits a number of other basic characteristics.
1. Project delivery is a sequential process.
2. The design of the project is largely completed before work commences on site.
3. The responsibility for managing the project is divided between the client’s
consultants and the contractor and there is therefore little scope for
involvement of either of the parties in the other’s activities.
4. Reimbursement of the client’s consultants is normally on a fee and expenses
basis whilst the contractor is paid for the work completed on an admeasure
or lump-sum basis.
The ideal definition of this method will include all of these features and the
following attempt at encapsulation has been adopted for the purpose of use
within this guide.
The client appoints independent consultants, on a fee basis, who fully design
the project and prepare tender documents upon which competitive bids, often
on a lump-sum basis, are obtained from main contractors.
The successful tenderer enters into a direct contract with the client and
carries out the work under the supervision of the original design consultants.
Figure 3.1 illustrates the conventional procurement system in simplified
diagrammatic form.

3.2.2 Genesis

The conventional procurement system has been used by the majority of clients
of the industry for at least the past 150 years in order to implement their building
projects.
It is maintained by Powell [1] that a watershed in the use of the system
occurred during the Napoleonic wars (1792–1815), when, as a result of the
frequent disputes that arose between the client and the separate tradesmen,
involved in the ‘measure and value’ system current at that time, the
Government’s Office of Works introduced competitive tendering for entire
projects as a superior alternative.
 THE CONVENTIONAL METHOD 25

Figure 3.1 Contractual and function relationships—the conventional system of

procurement

By the 1850s ‘contracting in gross’, as the system was then known, widely
prevailed enabling clients to secure the economic benefits of competition,
knowledge of the final cost before work began, better control of subsequent
expenditure and the ability to enter into a single, contractual relationship with
a builder instead of less co-ordinated tradesmen.
At the same time as the organizations for constructing projects and the
associated contractual relationships were changing, surveyors were being
used by groups of builders, and eventually by clients, to take off from the
architect’s drawings the quantities of materials required for estimating
purposes and relieving the tenderers of responsibility for their accuracy and
sufficiency.
From the second half of the 19th century until the commencement of the
Second World War the use of the conventional system by both public and private
26 SEPARATED AND CO-OPERATIVE PROCUREMENT SYSTEMS

clients gradually increased, together with the use of standard forms of contract,
to the point where, in England and Wales at least, this method was being used
for the vast majority of projects, albeit on the basis of very open competitive
tendering.
Following the end of hostilities in 1945 the conventional procurement system
remained predominant, supported by the findings of the Simon committee [2]
who had reported that an examination of the system of placing contracts had
not disclosed any serious weakness in the methods that had been built up by
‘architects, quantity surveyors and builders’, although it was recommended that,
where appropriate, selected and limited lists of tenderers should be used together
with negotiation.
The story of that most demanding of clients the commercial property
developer, from 1945 to 1967 as told by Marriott [3] makes no mention of the
use of any procurement system other than the conventional method apparently
confirming that, up until at least the middle 1960s, this approach satisfied the
majority of the metropolitan property companies.
The seeds of change, however, had already been sown in the Emmerson and
Banwell Reports of 1962 and 1964 [4, 5]. Emmerson concluded that ways
needed to be found of improving co-ordination and co-operation between the
building owner, consultants, contractors and subcontractors, and suggested that
the system for placing contracts and managing projects should be
comprehensively reviewed.
Banwell [5] reiterated this view and berated the majority of the various
members of the industry for their reactionary approach to new ideas and
processes pointing out the urgent need for the separate factions to come together
and think and act as a whole, particularly in the ‘letting, form and management
of contracts’.
Perhaps as a result of the pressure exerted by such reports, as well as normal
commercial influences, the mid- to late 1960s were a watershed in terms of the
increased use of non-conventional procurement systems and thus the decline
in the employment of conventional methods.
This period saw the beginning of the growth of design and build, the birth
of the first major management contract, the use of serial tendering for system
build/industrialized buildings and a general acceptance amongst the larger and
more far-sighted clients and consultants that the involvement of the contractor
at an early stage could be of benefit to the project as a whole.
In 1973 the oil crisis, and the consequent rise in fuel prices and interest
rates, meant that the dominant project objective of most clients became
the need for rapid commencement and completion of his development in
order to reduce borrowing to a minimum. These requirements resulted
again in a continuing decline in the use of conventional procurement
systems.
This trend has continued up to the present time with clients satisfying their
 THE CONVENTIONAL METHOD 27

needs by increasingly using non-conventional procurement systems to the

detriment of the conventional method.

3.2.3 Share of the market

While a great deal of time and effort has been expended in achieving technical
innovation in construction, and refining existing and producing new forms of
contract, very little attention had been paid, until comparatively recently, to
the rationalization and reorganization of the procurement process thus
allowing the conventional system to maintain a major share of the available
building work.
However, the increasing participation of large and sophisticated clients in
this process, particularly during the past decade, and the historical events that
have previously been described has meant that the amount of work being carried
out using the conventional procurement method has declined and appears likely
to continue to do so.
The lack of accurate comparative historical data on the level of use of
procurement systems and the wide range of types of projects and categories
makes any examination of this aspect of construction activity extremely difficult
and any subsequent results somewhat unreliable but some surveys and research
can provide at least indicative information.
The comparison of design and contract procedures in the UK and the US
carried out by the University of Reading in 1979 [6] concluded that the
most common form of contractual arrangement used in both countries was
the lumpsum approach, using the design/tender/build process, but
unfortunately no attempt was made to quantify this statement.
The 1984, 1985 and 1987 Surveys of Contracts in Use [7], carried out by the
RICS Quantity Surveyors Divisional Committee, covered all types of UK
building works, except maintenance, and demonstrated a significant decrease
in the use of separated and co-operative procurement systems during the 4-
year period covered by the surveys, although even then 87% of the projects
examined in 1987 were carried out using the conventional method or one of its
variants.
On the other hand the Building Economic Development Committee’s
(BEDC) reports Faster Building for Industry [8] of 1983 and Faster Building
for Commerce [9] of 1988 found that only 52% and 65% of the projects in
these sectors of the industry were carried out using conventional procurement
methods, the difference between the results of these surveys and those carried
out by the RICS being accounted for by the narrow client/project base used in
the BEDC investigations.
At the present time the market’s perception of the conventional system and
its variants is that for small- and medium-sized uncomplicated projects. Where
28 SEPARATED AND CO-OPERATIVE PROCUREMENT SYSTEMS

time is not at a premium, these systems offer the most economic route to success.
In the case of major new works, where time is at a premium, the shortcomings
of the separated and co-operative methods are likely to result in the use of non-
conventional systems.
The wide variation in the estimates of the level of use of this system means
that any attempt to evaluate the share of the market currently enjoyed by the
conventional method, and its offshoots, is fraught with difficulty but it is
suggested that the level of use had shrunk from the 85% estimated by Rowlinson
for 1960 [10] to something between 55%–60% at the end of the 1980s.
In the immediate future, and as long as the present high level of activity
continues, it is likely that this method will continue to lose ground albeit at a
slower rate than during the past two decades. However, in the longer term it
could be argued that if demand reduces in line with current indications and the
past cyclical pattern of building industry activity, the decline in the use of
conventional systems may reduce and even stabilize.

3.2.4 The process

The Royal Institute of British Architect’s (RIBA), outline plan of work [11],
sets out the procedures to be followed for projects being procured by
conventional means. Although the plan identifies 12 stages there are only four
which need concern us in the context of procurement systems, these are:
preparation, design, tender and construction.
As one of the unique characteristics of the conventional system is that it
follows a strictly sequential path, each of these four stages can be viewed as
separate entities and carried out, to a certain extent, in isolation of the others
with the result that the process can become extremely lengthy, lead to poor
communication, undermine relationships between project team members and
produce problems of buildability. The four stages are now described and
discussed.

Preparation

This is the inception stage of the project when the client establishes his
needs in principle, but not in detail, appoints a project manager and selects
and appoints his design team which normally consists of, as a minimum,
an architect, structural/civil engineer, mechanical and electrical engineer
and quantity surveyor, together with any other specialist consultants
necessary for the successful implementation of the project. Dependent
upon the nature of the client, and the undertaking itself, the project
manager may be:
 THE CONVENTIONAL METHOD 29

1. an employee of the client organization with no construction knowledge who

simply acts as a co-ordinator of information and a single source of contact
and communication for the design team leader who will have responsibility
for the day-to-day project management;
2. an experienced construction professional, permanently and directly
employed by the client, who, in addition to being the single point of contact,
will be responsible for the financial, technical and administrative
management of the project from inception to completion;
3. an external consultant project manager appointed, probably on a percentage
fee/target-cost basis, for a specific project to carry out the same duties as
an ‘in-house’ project manager.
It can be seen that the conventional procurement system involves the client in
a number of differing relationships with several organizations and many
inexperienced customers are dismayed at the complexity of the process and the
size, and the cost of the design team itself.
During the preparation stage and before the appointment of the design team,
but not the project manager, the client should establish his basic needs in terms
of the functionality and the quality of his project and the cost and time
parameters that he wishes to set.
Having settled these fundamental requirements, he must determine the
strategies he will use to successfully implement the project and, on the basis of
these, appoint an appropriate design team.
Any time taken during this stage to ensure that the client’s requirements are
correctly established will be time well spent and should be reflected in the ability
to proceed with the other three phases of the project with the minimum of
change and disruption. The decisions taken at this time set the whole tone and
pattern for the remainder of the building process.
At this stage, and to a slightly lesser extent during the design phase of the
project, the client has a great deal of influence—he has much less opportunity
to control any aspects of the undertaking during the last two stages and
particularly during the construction period.

Design

This phase sees the appointment of the design team who develop the project
through a series of stages: briefing, feasability, outline design, scheme design
and detailed design with the scheme’s configuration and features becoming firmer
at each stage. Again the client and his consultants have considerable freedom
during this phase to conceive and develop the project without excessive time or
economic pressures although research [8] has shown that projects which move
quickly in the pre-construction period tend to be constructed quickly as well.
30 SEPARATED AND CO-OPERATIVE PROCUREMENT SYSTEMS

Figure 3.2 The influence of various parties on the cost of new facilities
Source: Perry [12]

When using the conventional procurement system it has been established

that very often work has been put in hand without the client having
comprehensively established his needs, and the design team having clarified
them, with the result that expensive and disrupting changes have been necessary
during the construction period.
This less-than-rare phenomenon stresses the need to ensure that the proposed
design satisfies the functional and qualitative needs of the client before obtaining
tenders and commencing work on site—the lack of attention to this requirement
will result in an unsuccessful project.
During the design process the designers are usually working in isolation, far
removed from the contractor who will eventually be responsible for carrying
out the construction of the project, and sometimes each other; this isolation
from the contractor is deliberate and great care is taken to ensure that no
contact occurs thus reinforcing the division identified by Banwell [5] some
quarter of a century ago.
Thus opportunities for incorporating and ensuring buildability, as
recommended by all authorities, are virtually non-existent although it has
been suggested, perhaps somewhat naively, that even if a contractor is chosen
 THE CONVENTIONAL METHOD 31

after the design has been formulated, he should be invited, when appointed,
to suggest any modifications which might improve buildability, speed of
construction or cost.
The main reasons for the lack of involvement of contractors when using the
conventional method are well known but deserve reiteration.
1. Clients wish to ensure that the responsibility for the design of any project
is vested in one group, i.e. the design consultants.
2. The list of tenderers will generally not be available until the design has been
mainly completed.
3. The practical and ethical difficulties of dealing with suggestions from a
number of contractors during the design stage are difficult to overcome.
4. Once design decisions have been made they usually cannot be changed
without cost penalties and delays to the construction programme.
In this context Perry [12] has identified the impact by reference to an unidentified
Swedish study of work carried out by the client and his consultants up to and
including the design stage as influencing 90% of the construction cost with only
15% of the actual project expenditure having been incurred—see Figure 3.2.
It can thus be seen that, although the client may be anxious to see work
commence on site, progress during this stage should be carefully controlled and
not unreasonably forced. Hastily prepared design details can lead to major
misunderstandings and disputes during the construction stage, which may result
in delays and cost penalties.

Preparing and obtaining tenders

Tender documentation on conventionally procured projects normally consists of

drawings, specification(s) and a bill of quantities, with the latter document being
prepared by the quantity surveyor on the basis of measurements ‘taken off’ from
the designers’ drawings in order to provide each tenderer with a common base
from which to price his bid. For the conventional system to operate successfully,
and to minimize the financial risk to the client, it is imperative that the design is
fully developed before the bills of quantities are prepared and tenders invited. If
this is not done excessive variations and disruptions of works are likely to occur.
Whilst selection of the contractor by limited competitive tendering should
offer the assurance of achieving the lowest price for the project, in reality the
designer’s drawings are rarely in sufficient detail to enable a bill of quantities
to be prepared with any accuracy and the art of evaluating from the drawings
the exact amount of work required ranges from the difficult to the
impossible.
It has been repeatedly demonstrated that, where tender documentation is
suspect in this way, bids obtained by the conventional method can only be
32 SEPARATED AND CO-OPERATIVE PROCUREMENT SYSTEMS

considered as indicative of the final cost to the client and may result in an
unscrupulous contractor abusing the system by submitting an unrealistically
low bid and then formulating claims for additional reimbursement in order to
uplift his original tender to a commercially viable level.
The selection of contractors who will receive tender documents and submit
bids can be made in a number of ways but it is usual in the case of conventionally
managed projects, particularly if the expenditure of public money is involved,
for tenderers to be selected by advertisement, or more often from a list of
approved contractors, with the latter method rapidly becoming the norm for
all categories of clients.
In 1975 the Wood Report [13] found that the current practice at that time
for building projects was that 16% of the sample of public clients surveyed
appointed contractors by open competition and 65% by selective
competition; a further 14% chose one contractor with whom they
negotiated.
It has now been generally accepted by all categories of client that, when using
the conventional procurement system, the selection of the most acceptable bid
should not be made by the use of open competitive tendering but by selective
tendering based upon a list of tried and tested contractors whose performance
and financial stability are regularly monitored.
A critical element of the tender documentation is the form of contract, a
subject about which much has already been written; suffice it to say that in the
context of procurement systems and the achievement of project success it is
normal and advisable to use the most appropriate of the many standard forms
of contract of which the industry has much experience.
If for any particular reason it is intended to introduce any special conditions
of contract, to use non-standard agreements proposed by one of the parties or,
more rarely, to formulate a bespoke form of contract, technical and legal advice
should be taken and the advantages and disadvantages of the proposed
documentation carefully considered before any commitment is made.
Once tenders are received the selection of the bid of most advantage to the
client presents very little difficulty when using this system as tenders will be
capable of being judged on price alone having been based on documentation
which is common to all tenderers and, theoretically at least, accurately and
comprehensively reflects the client’s actual requirements.

Construction

When using the conventional system of procurement, an adequate period should

be allowed for the contractor to plan the project thoroughly and organize the
required resources. Undue haste in making a physical start on site may result
in managerial and technical errors being made by both the design team and the
 THE CONVENTIONAL METHOD 33

contractor, which could lead to a lengthening rather than a reduction of the

construction period.
It has already been established that, when using this method a very high
proportion of the estimated cost of the project has been committed before
work commences on site although actual expenditure is comparatively small.
However, it is during the construction phase that the majority of difficulties
will surface with the quality of the performance during this period having
already been largely determined by the quality of the preparatory work; it is
at this stage that the price for an incomplete design, inaccurate bill of
quantities, poorly prepared tender documentation and lack of ‘buildability’,
etc. is paid.
The ability to introduce changes to the design of the project during the
construction period that is a characteristic of this system is both a strength and
a weakness as such variations have been identified as one of the most important
causes of, and excuses for, delay.
If it is essential to instigate changes, the project team (including the
contractor), should be consulted and the practical and financial consequences
of the proposed variation established in detail before instructions to proceed
are given.
Developers building on a speculative basis have been identified as allowing
their projects to be disrupted substantially by their efforts to respond to demands
from prospective tenants during the construction period and the in-built ability
of the system to accommodate variations can lead to a permissive attitude to
design changes and any alterations to the original design should be kept to a
minimum or, if possible, entirely eliminated.
The management and supervision of the work on site, to ensure that it
confirms to the client’s brief as reflected in the design, specification and contract
conditions is the responsibility of the design team, although it should be
remembered that under normal terms of engagement they are not required to
carry out full-time supervision of the works which is usually an additional
service provided by a resident architect, engineer and/or clerk of works whose
services are provided at an extra cost to the client.
The ability of design consultants in general, and architects in particular, to
manage projects has been continually questioned over the past two decades and
particularly by Barnes [14] who has maintained that in the case of the
conventional approach designers are not motivated to give sufficient attention
to the control of the critical criteria of cost and time.
The combination of part-time supervision and lack of management expertise
and motivation during the construction phase of conventionally procured
projects can result in delays and additional costs being incurred by the client
as a consequence of poor performance by his consultants; the detailed and
continuing involvement of the client can offset these deficiencies as it has been
amply demonstrated that customers who take a constructive and objective
34 SEPARATED AND CO-OPERATIVE PROCUREMENT SYSTEMS

interest in all aspects of their projects achieved the best results particularly in
terms of speed of completion.
Because of the separated nature of the conventional method of procurement,
it is necessary for the client to ensure that good communications exist between
all members of the project team, that immediate decisions are made when
queries arise during the construction phase and that a strong site-management
team is in place before work commences on the project.
Payment to the contractor for work that has been satisfactorily completed
is made by means of interim certificates, generally monthly, of value of work
done, issued by the architect on the recommendation of the quantity surveyor.
The priced bill of quantities submitted by the contractor at tender stage forms
the basis of interim valuations and also ensures that any variations can be valued
by reference to pre-agreed rates for appropriate operations. An agreed
percentage is retained until final completion and a further reduced amount until
the defects liability period is satisfactorily completed.
This rigid monthly payment system, together with the practice of holding
retention monies, has been criticized as being a very expensive method of
payment for the large number of undercapitalized small subcontractors
who now carry out the majority of the actual site work and it has been
suggested that the adoption of more flexible methods of payment and the
streamlining of the retention system would benefit the client as well as the
industry.
The likelihood of such a major change in payment methods being achieved
within the foreseeable future is remote but in the meantime it is incumbent on
clients to ensure that certified payments are promptly honoured and that the
subsequent reimbursement of all subcontractors by the main contractor is made
with the same alacrity. Such action will ensure that the contractor’s efforts are
more effectively engaged in actually managing the project rather than pursuing
outstanding payments and may well serve to ensure good relations and thus
improve project efficiency.
The nature of the conventional method of procurement and its associated
conditions of contract is such that any delays that occur during the construction
phase, which are caused as a result of happenings outside of the main
contractor’s control, can only be overcome or mitigated by issuing instructions
to accelerate the appropriate current or future critical operations at the client’s
expense.
The sequential characteristic of the system reduces the ability to deal with
any unexpected delays other than during the construction period. Overcoming
such delays during this phase of the project is not easily achieved even if the
cost of the necessary acceleration can be accommodated within the financial
budget for the scheme and it is essential that, apart from the pre-planning of
the project that has been previously identified, the project team closely monitor
the contractor’s progress so that any areas of possible delay can be detected
 THE CONVENTIONAL METHOD 35

sufficiently early to enable remedial action to be taken and practical completion

achieved in accordance with the client’s requirements.

3.2.5 The product

Cost

It is maintained that when using conventional procedures, where bills of

quantities form part of the tender documentation, the cost of tendering is
reduced, the quantitative risks encountered in tendering are removed,
competition is ensured, post-contract changes can be implemented at a fair and
reasonable cost and clients can be confident that they know their financial
commitment. All this is true, provided that the design has been fully developed
and accurately billed before obtaining tenders. If, however, these criteria have
not met with excessive variations, disruption of the works and a consequent
increase in the tendered cost will occur.
There appears to be a dirth of up-to-date accurate information on the actual
final costs of projects carried out using the conventional method although there
have been a number of reports and guides published since the mid-1970s which
touch upon this fundamental aspect of procurement management.
The Building Economic Development Committee of NEDO produced a
guide [15] in 1974 in which the performance of projects designed by different
types of designers was measured. Only 26% of all of the factory projects
examined that had been designed solely by architects, or architects assisted by
other designers—in other words, procured by conventional means—were
completed within 5% of the estimated cost. The remainder exceeded the budget
figure by a greater margin. Office projects fared little better with 33% of the
projects that used the conventional system being completed within the 5% figure
and the remainder again exceeding the estimated cost by more than that
percentage.
In 1982 the Department of Trade and Industry and the Department of the
Environment jointly produced A Guide to Methods of Obtaining a New
Industrial Building in the United Kingdom [16], which demonstrated that the
sequential traditional path, i.e. the conventional method of procurement,
provides a high degree of price certainty and competition.
Flanagan [17], in 1981, illustrated the apportionment of financial risk
between the client and the contractor when using various procurement systems
(see Figure 3.3), which showed that the basic form of reimbursement associated
with the conventional procurement system, i.e. the lump-sum fixed price,
allocated the major part of the risk to the contractor thus, theoretically at least,
reducing the cost of the project to the client to the minimum. Finally, in 1988,
Brandon et al. [18] assumed values for an addition to the unit cost of the project
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