3.

Prourement method
The following procurement methods are the most well known:
1.
2.
3.
4.

Traditional procurement
Design and build procurement
Private Public Partnership ( )
Concessions

Traditional procurement:
In the traditional approach, the client accepts that consultants are appointed for design, cost
control, and contract administration, and that the contractor is responsible for carrying out the
works according to the contract drawings and specifications. He is also responsible for his own
working methods. The Contractor has the responsibility for all workmanhip and material, including
work by sub-contractors and suppliers. The Contractor is also responsible for any defects, other
than those which are directly related to faulty design or arise from misuse.
The Contractor is chosen after competitive tendring on documents giving complete and detail
information.
With the traditional procurement method, there are the following types of Contract:

Lump sum contract

Measurement contract
Cost reimbursement contract

Lump sum contracts:

The Contract Sum is determined before construction starts and the amount is entered in the
Agreement.
The Contractor undertakes to carry out a defined amount of work in return for an agreed sum. This
can be a fixed amount not subject to recalculation in which case the client does not have the
opportunity to make variations after work has started. The sum can be subjected to limited
fluctuations in the cost of labour, plant, materials etc. In such a case, the amount is determined by
a formula, or by checking vouchers, invoices etc.
Lump sum contracts can be:
with quantities
without quantities
Lump sum cotracts with quantities are priced on the basis of drawings and bills of quantities. Items
which cannot be accurately quantified can be covered by an approximate quantity or a provisional
sum.
Lump sum contracts without quantities are priced based on the basis of drawings and contract
documents. The work to be carried out is described in the Schedule of Work, where the lump sum
is the total of the priced items. An itemized breakdown of the lump sum will be a usefull basis for
valuing additional work. Where only a lump sum is tendered, then a supporting Schedule of Rates
or a Contract Sum Analysis will be needed from the tenderer.

Example:
A Contractor wins the tender to build a house for 100,000 euros. If the house is completed in
accordance with the drawings and specifications describd in the contract, then the Contractor will
receive the amount of 100,000 euros.

If the Client requires additional work, the Contractor should get payed extra for these works.

If the Contractor fails to complete the house, the Contract may have a provision for this and
specify the amount that shall not be payed to the Contractor.

Generally, the Contracts do NOT include clauses for all possible things that may go wrong
in a project.

If the Contractor is to be payed before completing the works (during constructon), this shall
be specified in the Contract. Otherwise, the Contractor is payed when all works are
completed (entire contract).

BUT, the Employer cannot refuse to pay the Contractor due to some minor defaults or
minor incompletion of works (substantial performance). For these incompletion or default
works, the Employer can proceed with claims against the Contractor.

Measurement contracts:
Measurement contracts are sometimes referred as remeasurement contracts, schedule of
rates contracts, contracts with approximate quantities. According to this type of Contract, the
Contractor is responsible to complete the works and get payed according to the unit prices in
the contract.
This contract includes in the contrct documents a bill of quantities which details all the items
needed for the completion of the works. The Contractor enters against each item his unit rate.
This is multiplied by the quantity to give the value of the item.

The advantage of measurement contracts is that if during construction works it is

necessary to alter the quantities, the value of each item can easily be determined by
applying the Contractors rate to the revised quantity.

Mostly used when the Engineer cannot be certain of the final quantities, for example in
case of services (construction works of sewerage network) where unexpected
conditions such as obstacles from existing services or soil conditions may arise and
therefore the quantities change very often.

Cost reimbursement contracts:

These are sometimes referred to as cost plus contracts. The contractor undertakes to carry
out an indeterminate amount of work and he is payed based on the actual cost of labour, plant
and materials (honestly and properly) plus an agreed fee to cover overhads and profit.
Checking the prime costs which are directly related to the works is relatively straightforward.
The variable is the fee, which should be agreed beforehand and establishing precisely what it
covers.

There are three types:

Cost plus percentage fee:

The fee charged is directly related to the prime cost. It is a percentage of the prime cost. The
contractor has no incentive to work at maxmum efficiency.

Cost plus fixed fee:

The fee is a fixed lump sum usually based upon an agreed estimated cost. This is mostly used for
works that are largely foreseeable. The contractor has an incentive to work efficiently so as to
remain profitable within agreed fee.

Cost reimbursement based on a target cost

The Employer and the contractor agree the most likely cost of the contract, the target, together
with an associated fee. If the Contractors costs exceed the target, his fee is reduced and vise
versa.

Target Cost
Fee

Cost