How to Get the Best Deal on Your Next Project

How to Get the Best Deal on Your Next Project

The art of project procurement lies in the ability to balance the needs of the project with the needs of the sellers. It is a complex process involving various stakeholders, including the project team, the project sponsor, the procurement team, and the sellers.

Conduct Procurements

The Conduct Procurements process is crucial for selecting and awarding contracts to external resources, also known as "sellers," that are required to produce project deliverables. It takes inputs from various sources, including the Project Management Plan, procurement documents, source selection criteria, seller proposals, and project documents, among others. The main outputs of this process are Selected Sellers, Agreements, Resource Calendars, Change Requests, and updates to the Project Management Plan and project documents.

The tools and techniques used in Conduct Procurements include a bidder conference, proposal evaluation techniques, independent estimates, expert judgment, advertising, analytical techniques, and procurement negotiations. These techniques are incorporated into the process to ensure that the procurement process is carried out efficiently, effectively, and fairly.

The bidder conference is a meeting held with potential sellers to share information about the project and answer any questions the sellers may have. Proposal evaluation techniques are used to assess proposals to ensure that they meet the specified requirements. Independent estimates and expert judgment are used to verify that the proposals are competitive and reasonable. Advertising is used to attract potential sellers who are not already known to the project team.

Analytical techniques are used to evaluate proposals against the criteria and determine the most appropriate seller. Procurement negotiations are used to finalize agreements with the selected seller and ensure that both parties understand and agree on the terms and conditions of the contract.

The Conduct Procurements process is essential for ensuring that the project receives the necessary external resources and that the seller is selected based on criteria such as cost, expertise, and quality. It is crucial to complete this process as soon as possible to avoid delays in the project timeline.

Overall, the success of the Conduct Procurements process is critical to the success of the project. It ensures that external resources are secured, the best seller is selected, and the contract is awarded efficiently and effectively. By using the appropriate tools and techniques, the project team can select the best seller and ensure that the project is delivered on time, within budget, and to the required quality standards.

Project Delivery Methods

There are several common project delivery methods used in the construction industry, each with its own unique benefits and challenges. Some of the most common delivery methods in the construction industry include:

  • Single contract: This is the simplest form of project delivery, where there is only one contract between the owner and the contractor. The contractor is responsible for all aspects of the project, from design to construction.
  • Multiple contract: This is a more complex form of project delivery, where there are multiple contracts between the owner and different contractors. This is often used for large or complex projects, where it is not feasible for one contractor to take on all of the work.
  • Period contract: This is a type of multiple contract where the contractor is responsible for the project for a fixed period of time. This can be useful for projects where the owner needs to have certainty about the cost and schedule of the project.
  • Panel contract: This is a type of multiple contract where the owner selects a panel of contractors from which to choose the contractor for the project. This can be useful for projects where the owner wants to have a competitive bidding process.
  • Direct labor: This is a method of project delivery where the owner hires its own employees to perform the work. This is often used for small or simple projects, or for projects where the owner wants to have more control over the work.

Some of the common delivery methods in the construction industry are:

  • Design-bid-build (DBB): This is the traditional method of project delivery. The owner contracts with a designer to develop the plans and specifications for the project. The owner then contracts with a contractor to build the project based on the plans and specifications.
  • Design-build (DB): This method is similar to DBB, but the owner contracts with a single entity to design and build the project. This can be a more efficient and cost-effective method of project delivery, but it can also be more risky for the owner.
  • Construction management at risk (CMAR): This method is a hybrid of DBB and design-build. The owner contracts with a construction manager to oversee the project. The construction manager may also be responsible for some of the design work.
  • Integrated project delivery (IPD): This is a collaborative approach to project delivery where the owner, designer, contractor, and other stakeholders work together from the beginning of the project to the end. This can be a more efficient and innovative method of project delivery, but it can also be more challenging to implement.
  • Build-Operate-Transfer (BOT): In this delivery method, private entities finance, construct, operate, and maintain a project, such as a power plant, for a specific period of time before transferring it to the public owner.
  • Public-Private Partnerships (PPPs): In a PPP, the public and private sectors work together to build and operate public infrastructure such as highways, airports, and buildings. This can reduce costs and risk sharing between the public and private partners.

The best project delivery method for a particular project will depend on a number of factors, such as the size and complexity of the project, the owner's risk tolerance, and the availability of qualified contractors.

Each of these delivery methods has its own advantages and disadvantages, and selection of the most appropriate method will depend on the project's specific characteristics and requirements.

Contract Negotiations

Contract negotiations involve more than just haggling over price. It's equally important to focus on securing value for money while ensuring that all parties are comfortable with the terms and conditions of the contract. Some of the variables that can be negotiated during contract negotiations include:

  1. Technical Support: Parties may negotiate warranties, life-cycle support, and other technical details to ensure that the project meets the intended design and function.
  2. Financial Aspects: Deposits, payment terms, penalties, and other financial arrangements can be negotiated to ensure that all parties are comfortable with the financial risk.
  3. Risk Management: Insurances, financial guarantees, warranties, service standards, and liquidated damages clauses can be negotiated to manage the risk associated with the project for all parties.
  4. Management Information: Access to information, reporting, documentation, attendance at progress meetings, and other details can be negotiated to ensure that all parties are informed and aware of the project progress.
  5. Timeframes: Completion dates, delivery dates, milestone achievement, and the length of the contract can be negotiated to ensure that project deadlines are met.
  6. Performance Incentives: Parties may negotiate performance incentives to motivate contractors and parties to perform their roles at exceptional levels.
  7. General Matters: This could include packaging and freight arrangements, the use of specified personnel, sub-contracting arrangements, and other details that the parties may consider relevant.

Effective contract negotiation can result in a fair and balanced agreement that benefits all parties and ensures that the project is completed successfully.

Forming a Contract

Forming a contract requires some basic elements, which include:

Offer: The offer is made by the seller and refers to a proposal with a price or similar detail that will form the basis of the contract. The offer should clearly indicate the intention of the parties to deal with each other.

Acceptance: The acceptance of the offer is made by the buyer. It is essential that the acceptance is communicated to the seller. The communication of acceptance can be in the form of a letter of acceptance or any other suitable communication means.

Consideration: Consideration is an exchange of something of value. This can be in the form of goods, money, services, or any other valuable consideration that is exchanged between the parties to form the contract.

It is crucial that all parties to the contract understand the terms and conditions of the contract in detail. A contract should be recorded in writing and signed by all parties involved to avoid any confusion or disputes that may occur later.

Common Types of Contracts

There are various types of contracts that are used in different industries. Some of the common types of contracts include:

Lump Sum Contracts: This type of contract is a firm price agreement, where the parties agree on a fixed price for the scope of work or services to be provided by the seller. No variations are allowed in the contract, and the seller takes the risk of any cost overruns.

Fixed Price Variable Contracts: This type of contract is a fixed price agreement with the scope for changes to time, cost, quality, labor, materials, or other factors. The seller allows for variations, but the parties agree on a maximum percentage value for these variations.

Schedule of Rates Contracts: This type of contract is a period agreement where the contractor provides goods or services for a set rate for a period. The fees or rates are predetermined, and the contractor is reimbursed accordingly.

Cost Plus Fixed Fee Contracts: This type of contract is a reimbursement agreement where the seller is reimbursed for the actual costs incurred plus an agreed margin of profit. The seller bears the risk of any cost overruns, and the buyer benefits from transparency.

Time and Material Contracts: This type of contract is a combination of the cost-plus-fixed-fee and fixed price-variable contracts. The seller charges for the actual time and materials used, with a profit markup added to cover overheads and make a margin.

Each type of contract has its advantages and disadvantages, and the choice of the most suitable contract type depends on the specific needs of the project or service. It is essential to ensure that all parties involved in a contract understand the terms and conditions before signing the agreement.

Ensuring Contractual Obligations

Once the sellers have been selected and agreements are in place, it is important to ensure that the contractual obligations are met by all parties involved. This means making sure that the seller meets the performance criteria and timeframes agreed upon, and that payments are made in accordance with the payment terms.

Inputs

There are a number of inputs that are essential for ensuring contractual obligations are met. These include:

  • The project management plan: This document outlines the goals and objectives of the project, as well as the resources and activities that will be needed to achieve them.
  • Procurement documents: These documents include the request for proposal (RFP), the contract, and any amendments to the contract.
  • Agreements: These documents include any agreements between the project team and the seller, such as change orders or dispute resolution agreements.
  • Approved change requests: These requests are for changes to the scope of work, time, cost, quality, labor, or materials.
  • Work performance reports: These reports track the seller's progress against the agreed-upon schedule and budget.
  • Work performance data: This data includes information such as the number of hours worked, the materials used, and the costs incurred.

Tools and Techniques

There are a number of tools and techniques that can be used to ensure contractual obligations are met. These include:

  • Contract change control system: This system is used to track and manage changes to the contract.
  • Procurement performance reviews: These reviews assess the seller's performance against the agreed-upon criteria.
  • Inspections and audits: These activities are used to verify that the seller is meeting the agreed-upon quality standards.
  • Performance reporting: This process provides regular updates on the seller's progress.
  • Payment systems: These systems are used to make payments to the seller in accordance with the payment terms.
  • Claims administration: This process is used to resolve disputes between the project team and the seller.
  • Records management system: This system is used to store and maintain all of the documentation related to the contract.

Outputs

The outputs of ensuring contractual obligations are met include:

  • Work performance information: This information is used to track the seller's progress against the agreed-upon schedule and budget.
  • Change requests: These requests are for changes to the scope of work, time, cost, quality, labor, or materials.
  • Project Management Plan updates: These updates reflect any changes to the project plan that are necessary as a result of changes to the contract.
  • Project documents updates: These updates reflect any changes to the project documents that are necessary as a result of changes to the contract.
  • Organizational process assets updates: These updates reflect any changes to the organizational process assets that are necessary as a result of changes to the contract.

Ensuring Contractual Obligations are Met

Ensuring contractual obligations are met is essential for the successful execution of any agreement. To achieve this, several mechanisms can be used to monitor any breaches and take appropriate action.

One of the key mechanisms is contract performance reviews and reporting, which involve regularly reviewing the contract's performance to ensure that all parties are meeting their obligations. This can help detect any potential issues before they escalate into more significant problems.

Inspections and audits are also vital tools for monitoring compliance with contractual obligations. These measures involve verifying that the work is being carried out according to the terms of the agreement and industry standards. Inspections and audits can be conducted internally or externally by a professional organization depending on the scope of the contract.

The payment system is another critical mechanism for ensuring that contractual obligations are met. A structured approach to issuing and approving claims can prevent payment delays and ensure accurate and timely compensation. This system should be designed to be transparent, efficient, and flexible.

Change control systems are also essential mechanisms for monitoring contractual compliance. The system should be in place to manage any changes that impact the contract and maintain the legal intent.

Finally, a records management system is crucial for ensuring that all relevant documentation related to the contract is maintained, organized, and accessible throughout the contract lifecycle. This mechanism enables contract managers to track all activities, ensure compliance, and address any potential disputes that arise.

Adopting these mechanisms will ensure that legal intent is met, and breaches of contract are detected and remedied promptly. Ultimately, this will help foster trust and promote fruitful partnerships between contracting parties.

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