Project Management Case Study: Analyzing Suitable Procurement Route for CQU

Question

Task: Consider a project management case study on the construction of new facilities in a new project of Central Queensland University and identify the most suitable procurement and contract strategies for the project.

Answer

Analysis of the project management case studyand Concept of Contract and Procurement Strategies
The project management case studydeals with the construction of new facilities in a new project of Central Queensland University (CQU). The project includes the construction of a main lecture building that can accommodate 500 students, computer and engineering laboratories and a conference hall with good facilities and infrastructure that can accommodate up to 250 people. The project is to be completed before the commencement of the next academic year so the project is bound by the constraint of time; impetus must be put on sticking to the budget of CQU since the budget cannot be overrun. Moreover, the project must live up to the expectations of CQU in terms of quality and prestige. The consultancy firm PPMP20011 Consultant will be guiding CQU by providing advice regarding the procurement and contract strategies for going about the project. Procurement refers to the process of sourcing or obtaining goods or services from an external source for usage in the business of an organization (Raneet al., 2019). There must be a definitive procurement strategy of CQU for the project. Moreover, CQU has to make contracts with various external firm(s) for the procurement processes of various services and goods (Fleming, 2019). The study would suggest suitable procurement and contract strategies that can be used for the project.

Procurement Routes
The procurement route refers to the way the procurement process is to be conducted; in this project management case studythe procurement route refers to the way services and goods will be procured for the project of CQU. Multiple factors like cost, time, risks, financing, etc. are to be considered for choosing the procurement route which is suitable for the sub-project (Lloyd-Walker and Walker, 2015).

1. Main Lecture Building: The three common procurement routes that can be viewed for the construction of the main lecture building are- the Design-Build (DB) route, the Construction Management (CM) and the Design Sequencing route. The DB route is time efficient and cost effective, the owner has less responsibility and the risks lie mostly on part of the contractor but the quality of the project may be compromised. The CM route is especially advantageous in case of projects with time constraints and involving complexity but the owner must be experienced. In this project management case study, CQU is inexperienced so the CM route might not be suitable for this project. The design sequencing route is a less common route that allows for the starting of the construction when 30% of the design of a segment is completed. This route allows for the fast completion of the projects and ensures no risk on the part of the owner (de Araújoet al., 2017). For the construction of the main lecture building the first priority is time, followed by quality and cost. Therefore, the most suitable method for the construction of the main lecture building would be the design sequencing route since it ensures fast completion and quality of the project.

2. Computer and Engineering Laboratories: The procurement routes that can be suggested for the project of construction of computer and engineering laboratories are- the traditional Design-Bid-Build (DBB) route, the Design-Build (DB) route and the Multi Prime Contracting (MPC) route. The DBB route allows the construction to be cost effective and price certainty; moreover, the owner is required to have minimum knowledge and ensures minimum risk on the part of CQU but the route is not suitable in this regard because it is not time efficient. The DB route ensures that the construction work would be completed within the stipulated time and is very cost efficient. Moreover, this route ensures cost certainty at the earliest stages, also risk on the part of CQU is less and there is scope of increased constructability. The MPC route allows for a lesser cost of construction because it eliminates the need of a general contractor. However, this route increases the risk on part of CQU and the final cost of the project is uncertain. Moreover, the MPC route also may lead to delays due to lack of coordination among the subcontractors. Therefore, the most suitable route for the construction of the computer and engineering laboratories would be the design-build route.

3. Conference Hall: The procurement routes that may be suggested for the construction of the traditional Design-Bid-Build (DBB) route, the Design-Build (DB) route and the CM at Risk (CMAR) route. The DBB route is cost effective and ensures the overall project cost does not exceed the budget of CQU but this route does not guarantee the completion of the project on time so this route might not be suitable for the construction of the conference hall. The DB route is time efficient along with being cost effective. This route allows for reduced construction time since the design and construction runs parallely. There is also less risk on the part of CQU since the most of the risk lies on part of the design-construction firm. The CMAR route places the construction manager (CM) at the central place since he/she is responsible for any additional time and cost expenses (Ruparathna and Hewage, 2015). CQU will be at minimal risk and the quality of the work is high. However, the selection of the CM is based on their qualification, the changes are to be brought by CQU, and the huge risks involved may push the CM to not act to the interest of CQU. Therefore, the best route for procurement in this project management case studyis the design-build route since it prioritizes both the time and cost factors as required in the construction of the conference hall.

Contracts for the Projects
The selection of the type of contract is also very important for the project since the contract type must align with the procurement route chosen for the project (Hackett and Statham, 2016).

1. Main Lecture Building: The procurement route suggested for this design-sequencing route. Consequently, the contract type that can be chosen for this is lump sum since this contract type ensures that the budget of the project is not exceeded. The guaranteed maximum price (GMP) approach can also be taken for the contract, since it allows for the limiting of the project cost and all risks would be transferred on the part of the contractor. The establishment of the GMP accelerates the project so the project is also completed fast and this is advantageous in this case since time is the foremost priority in this project management case study.

2. Computer and Engineering Laboratories: The procurement route chosen for this project is the design-build route that ensures that project is completed on time and that the budget of the CQU is not overrun (Loosemore, 2016). The most appropriate contract type for this project is the lump sum. This would ensure that cost certainty of the project is upheld. The GMP contact method won’t be much effective since in the DB route the GMP contract has limited incentives.

3. Conference Hall: The DB route is chosen for the construction of the conference hall; the suggested contract type is lump sum. The lump sum contract ensures that the cost certainty of the project is prioritized. The priority in the construction of the conference hall is the time and cost constraints and the lump sum contract is in accordance with the priority set by the owner, that is, CQU.

Budget for the Construction of the Conference Hall
A budget has to be allocated for the project of the construction of the conference hall. The costs are rough estimates since it is difficult to estimate the exact cost for the different particulars of the project (Sequeira and Lopes, 2015). The building material and labour cost would be included in the contract of the design and building contractor. The infrastructure development may or may not be included in the contract of the building firm depending upon the clauses laid down in the contract. The lump sum contract for this project may also increase or decrease the costs marginally depending upon the contract and understanding between CQU and the building contractor firm.

Table 1: Budget Allocation for the Conference Hall
(Source: Created by the Learner)

Which are the suitable negotiation strategies used in this project management case study?
It is imperative to devise efficient negotiation strategies for the projects with the contractor firms. For most negotiations, a reactive approach is needed; both the parties must be aware of the other’s interests and motivation. It is important to have a clear idea about the priorities and the interests of the firm that would help the negotiator to get a competitive advantage over the other. An alternative is also kept prepared in case things do not go according to the plan. This strategy is known as BATNA or Best Alternative to a Negotiated Agreement (PON - Program on Negotiation at Harvard Law School, 2020). This strategy can be particularly helpful in this project management case study of CQU, since CQU stressed on maintaining the quality of the project without compromising on the cost and time factors of the project. CQU must keep other alternative firms on the list so that there is enough competition regarding gaining the contract of the project; increased competition ensures that the quality of the work is high and this would be advantageous for CQU.

References
deAraújo, M.C.B., Alencar, L.H. and de Miranda Mota, C.M., 2017. Project procurement management: A structured literature review. Project management case studyInternational Journal of Project Management, 35(3), pp.353-377.

Fleming, Q.W., 2019, January. Project procurement management: contracting, subcontracting, teaming. Project Management Institute.

Hackett, M. and Statham, G. eds., 2016.The aqua group guide to procurement, tendering and contract administration. John Wiley & Sons.

Lloyd-Walker, B. and Walker, D., 2015, April.Collaborative project procurement arrangements. Project Management Institute.

Loosemore, M., 2016.Social procurement in UK construction projects.International journal of project management, 34(2), pp.133-144.

PON - Program on Negotiation at Harvard Law School, 2020. What Is BATNA? How To Find Your Best Alternative To A Negotiated Agreement. [online] PON - Program on Negotiation at Harvard Law School. Available at: [Accessed 10 September 2020].

Rane, S.B., Narvel, Y.A.M. and Bhandarkar, B.M., 2019. Developing strategies to improve agility in the project procurement management (PPM) process.Business Process Management Journal.

Ruparathna, R. and Hewage, K., 2015. Review of contemporary construction procurement practices. Journal of management in engineering, 31(3), p.04014038.

Sequeira, S. and Lopes, E., 2015.Simple method proposal for cost estimation from work breakdown structure.Project management case studyProcedia Computer Science, 64, pp.537-544.