• Working drawings: Drawings issued by the designer/
Architect to the contractor. Such drawings are usually
the final stage of design process. That is why working
drawings are also referred to as 'Final Design
Drawings' or 'Construction Drawings'. Working
drawings contain enough detail to fully describe the
character of the structure to be built and enough for
the contractor/ bidder to estimate the amount of time,
labor, material, and equipment needed to complete
the work. That is why, sometime, working drawings
are also stamped as 'Issued For Construction'.
Drawings • Shop drawings: Drawings which are usually prepared
by the contractors at site or at their Technical Office
based on the Working Drawings and according to the
detail required by site personnel for a particular piece
of work. Many a times, the Engineer/ Site Supervisor/
Consultant demands certain shop drawings for
approval prior to actual construction. It is difficult to
predict exact number of shop drawings for a
construction project in advance. Experienced site
staff can work with high-level detail. At times, for
smaller projects, no shop drawings are produced by
the contractor. They rather rely on Construction
1
Drawings only.
• As built documentation is similar to the final
draft of your building and includes every
change that your project has undergone
during planning and execution.
• Buildings don’t always stick to plans and the
Drawings final structure may be slightly or significantly
different to the original idea.
• As-built drawings are developed by
contractors and sub-contractors from red-
lined drafts and are essential to your
construction project.
2
• The engineer(client’s representative) can
Variations issue a variation order before issuing
Taking-over certificate.
(According • The contractor is bound to carry out a
variation instructed by the engineer unless
to FIDIC) the contractor cannot obtain material
required to carry out the works.
3
• The engineer(client’s representative) can
Variations issue a variation order before issuing
Taking-over certificate.
(According • The contractor is bound to carry out a
variation instructed by the engineer unless
to FIDIC) the contractor cannot obtain material
required to carry out the works.
4
• Where there is no specified item for the
work in the Contract and therefore a rate is
used for similar work. The FIDIC Guide
Evaluations suggests that in order to determine whether
there is “similarity of work” the Engineer
(According to should consider the description in sub-
paragraph 12.3(b)(iii), which refers to
FIDIC) similarity in terms of work being of similar
character and executed under similar
conditions.
5
• A new rate shall only be appropriate if all four
criteria are satisfied.
(i) The measured quantity of the item of work must be
less than 90%, or more than 110%, of the quantity
stated in the Bill of Quantities. This criterion is
consistent with the principle that Bill of Quantities
provides only an estimate – see Sub-Clause 14.1(c).
(ii) When the difference in quantity (namely, the
difference between the Measured Quantity and
quantity in the Bill of Quantities) is multiplied by the
New rates rate per unit quantity stated in the Bill of Quantities, the
(According to result must be more than 0.01% of the Accepted
Contract Amount. This criterion is specified in order to
FIDIC) avoid adjusting a rate if the adjustment will have little
effect on the final Contract Price.
(iii) The difference in quantity (namely, the difference
between the Measured Quantity and quantity in the Bill
of Quantities) must have affected the "Cost per unit
quantity", which is the Cost incurred executing the
work covered by the item, divided by the quantity of the
item as measurable in accordance with the applicable
method of measurement.
6
(iv) The Contract must not have used phrase "fixed
rate item" in relation to the item in the Bill.
• The engineer can resolve or determine
any matter under sub-clause 3.5
whenever conditions apply accordingly.
The engineer will discuss with each party
to reach an agreement to the matter.
Whenever agreement is not achievable,
Determinations The Engineer can make a fair
determination under the contract. The
(According to engineer should provide all particulars to
FIDIC) back up the decision made (to all parties).
If any of the party not agreeing to the
determination made by the engineer can
try to revise the decision under clause 20
(FIDIC 99) – claims, disputes &
arbitrations). Until that the engineer’s
decision will be valid.
7
CEM-300 Procurement
Management
Spring 2021
Lecture 2: Supply Chain and the
Role of Procurement
8
What is Supply Chain Management
• Supply chain management (SCM) is the active
management of supply chain activities to maximize
customer value and achieve a sustainable competitive
advantage.
• It represents a conscious effort by the supply chain firms to
develop and run supply chains in the most effective &
efficient ways possible.
• Supply chain activities cover everything from product
development, sourcing, production, and logistics, as well
as the information systems needed to coordinate these
activities.
9
Concept of SCM
The concept of Supply Chain Management (SCM) is based on two
core ideas:
1. The first is that practically every product that reaches an end user
represents the cumulative effort of multiple organizations. These
organizations are referred to collectively as the supply chain.
2. The second idea is that while supply chains have existed for a
long time, most organizations have only paid attention to what
was happening within their “four walls.” Few businesses
understood, much less managed, the entire chain of activities that
ultimately delivered products to the final customer. The result was
disjointed and often ineffective supply chains.
10
• Supply chain management is
viewed as lying between fully-
vertically-integrated systems and
those where each channel
member operates completely
independently.
• In a fully-vertically-integrated
SCM system, the functions
performed within one company.
are
Concept One traditional example is the tire
industry where some companies
grew their own rubber,
manufactured the tires, and sold
through their own retail stores or
directly to original equipment
manufacturers.
11
• In fully-vertically-integrated systems, the
structural relationships among the functions,
such as marketing and logistics are defined
by top management.
• The functions will work with each other
indefinitely, so their interactions are more
predictable. When functions are performed by
independent entities with few or no ties to
one another, the relationships are more
tenuous.
SCM • The players can change from one transaction
to the next. In contrast, supply chain
Concept management may be likened to a well-
balanced and well-practiced relay team. A
relay team is more competitive when it
practices with the same core lineup so that
each runner knows how to be positioned for
the handoff. While relationships are strongest
among those who directly pass the baton, the
entire team must be coordinated to win the
race.
• This is the major benefit of supply
12 chain
management. Missed handoffs may well
translate to lost market share in today’s
competitive marketplace.
13
14
Physical Flows
Physical flows involve the
transformation, movement, and
storage of goods and materials. They
are the most visible piece of the supply
chain. But just as important are
What information flows.
connects Information Flows
Information flows allow the various
SCM supply chain partners to coordinate
their long-term plans, and to control
Links? the day-to-day flow of goods and
materials up and down the supply
chain.
15
• In a push-based supply
chain, production happens
based on demand forecast.
Push • In a pull-based supply chain,
procurement, production, and
vs. Pull distribution are demand-
driven rather than based on
Supply predictions. Goods are
produced in the amount and
Chain time needed.
16
• A company using the push system will
forecast demand and employ the
Material Requirements Planning
(MRP) process to produce goods and
services ahead of time. This is related
to the Just-in-Case concept.
Push • This forecast may not always be
vs. Pull accurate and will require inventory
stockpiling, but it remains a useful
Supply strategy for products that tend to have
a lot of work in progress (WIP) or long
Chain lead times.
• The push system is particularly useful
for products with low demand
uncertainty or with high importance of
economies of scale in reducing
17
costs.
• The Pull System is a lean
manufacturing method (avoiding
wastes) that uses the Just-in-Time
strategy of not producing goods
Push until an order is received. Instead
of forecasting demand, the pull
vs. Pull system produces ‘as needed’.
Supply • This is particularly useful for
companies that deal with high
Chain demand uncertainty, low product
mix, and low importance of
economies of scale.
18
• As with Just-in-Time vs Just-in-Case,
Push vs Pull is not black and white.
Most companies have some sort of a
hybrid of the two, on a spectrum
between the two ends.
• The
Push push-pull strategy is usually
suggested for products with high
vs. Pull demand uncertainty and
importance of economies of scale.
high
Supply • Example
• XYZ pre-orders and stocks up on raw
Chain materials and components. However,
from this point on, they do no produce
their computers until an order is actually
placed. They initially “push”, but then
switch to “pull’’ in the production and
assembly process. 19
• The continuous flow model: Offers stability in
high demand situations that vary very little.
Manufacturers that produce the same goods
repeatedly with very little fluctuation can benefit
from the continuous flow model. It is ideal for
commodity manufacturing and is one of the most
traditional supply chain models. This supply chain
model typically works well for businesses with
short-shelf-life products, such as dairy products
and bread.
Supply
Chain • The efficient chain model: Best for businesses
that are in very competitive markets and where
Models end to end efficiency is the premium goal. This
model is best suited to industries that exist in
highly competitive markets with several producers,
and customers who may not readily appreciate
their different value propositions. These are
usually commoditized businesses where
production is scheduled based on expected sales
for the length of the production cycle and
20
competition is almost solely based on price. The
steel and cement industries fall under this
category.
• The fast chain model: Ideal for manufacturers
that manufacture products that are trendy with
short life cycles. It works well with a business that
must change their products frequently and that
needs to get them out fast before the trend ends.
It is a flexible model. The fast chain model is
ideal for manufacturers that manufacture
products that are trendy with short life cycles. It
works well with a business that must change their
products frequently and that needs to get them
Supply out fast before the trend ends. It is a flexible
model.
Chain
• The agile supply chain model: Ideal for
Models companies that manufacture products under
unique specifications by their customers. This
model is mostly used in industries characterized
by unpredictable demand. The model uses a
make-to-order decoupling point that involves
manufacturing an item after receiving customers'
purchase orders. To ensure agility in the supply
chain, managers focus on having the ability for
21
excess capacity and designing manufacturing
processes that are capable of the smallest
possible batches.
• The custom configured models: Focuses
on providing custom configurations
especially during assembly and production. It
is a combination of the agile model and the
continuous flow model, a hybrid of sorts.
Usually, the processes before product
configuration are lengthier than the
configuration itself and the downstream
Supply processes, so they are managed under an
Chain efficient, or a continuous-flow supply chain
Models model. The configuration and downstream
processes then operate as in an agile supply
chain, e.g., development of personalized PC.
• The flexible model: Gives businesses the
freedom to meet high demand peaks and
manage long periods of low volume
movement. It can be switched on and off
easily, such as spare parts manufacturers.
22
TRADITIONAL MANAGEMENT VERSUS SCM
IN PROCUREMENT
• Construction procurement is the overall process of identifying, selecting
and obtaining all materials for the construction process. The 'traditional'
procurement route, sometimes referred to as 'design bid build' (or 'bid
build’ by contractors) remains the most commonly used method of
procuring building works.
• The client first appoints consultants to design the project in detail, and
then prepare tender documentation, including drawings, work
schedules, and bills of quantities. Contractors are then invited to submit
tenders for the construction of the project.
• This may be referred to as a 'traditional contract. The contractor is not
responsible for the design, other than temporary works, although some
traditional contracts do provide for the contractor to design specific
23
parts
of the works.
TRADITIONAL MANAGEMENT VERSUS SCM
IN PROCUREMENT
• Typically, the client retains the design consultants during the
construction phase to prepare any additional design information that
may be required, to review any designs that might be prepared by the
contractor, and to inspect the works. Normally, one consultant (often,
but not necessarily, the architect) will be appointed to administer the
contract.
• Traditional construction contracts are most commonly lump-sum
contracts, however, measurement contracts and cost reimbursement
contracts can also be used for ‘traditional’ projects where design and
construction are separate, sequential activities.
24
TRADITIONAL MANAGEMENT VERSUS SCM
IN PROCUREMENT
• This form of procurement is suitable for both experienced and inexperienced
clients. Fully developing the design before tender gives the client certainty
about design quality and cost, but it can be slower than other forms of
contracting, and as the contractor is appointed only once the design is
complete, they are not able to help improve the buildability and packaging of
proposals as they develop.
• It is considered as being a low-risk method of contracting for the client, as
the contractor takes the financial risk for construction. However, if design
information is incomplete at the tender, or if significant variations are
required after the contractor has been appointed, the cost to the client can
be significant. Because of this, and because of the separation of design and
construction, traditional procurement can be seen as adversarial. 25
TRADITIONAL MANAGEMENT VERSUS SCM
IN PROCUREMENT
• The traditional way of managing is essentially based on a conversion (or
transformation) view on production, whereas SCM is based on a flow view
of production.
• The conversion view suggests that each stage of production is controlled
independently, whereas the flow view focuses on the control of the total flow
of production
26
27
Adapted from Cooper and Ellram 1993)
• The construction industry is one of the
productive industry which plays an
important role in the national social
economies.
• This industry helps in generating wealth
and development of the country.
However, the construction industry is
SCM in often associated with poor performance
Constructi such as time and schedule overruns,
poor health and safety performance,
on product defects and high wastage.
• SCM provides a great opportunity for the
construction industry primarily to reduce
cost and time and thus improve the
profitability of the construction projects.
28
• Typically, construction supply chains only
Issues in exist for the duration of a project
implementat • Where maintenance services are part of the
contract, the supply chain can theoretically
ion of SCM remain in existence for the life of the building.
in • The growth in projects procured under the
Construction private finance initiative (PFI) and under
build, own, operate and transfer (BOOT)
Industry; arrangements should increase the longevity
Adapted of some supply chains.
from Briscoe • Whilst this may bode well for the future
development of integrated project delivery
and Dainty within the industry, there remains an acute
(2005) need for clients to achieve integrated supply
chains for standard buildings and facilities.
29
• Construction supply chains on larger projects
Issues in typically involve hundreds of different
implementat companies supplying materials, components
and a wide range of construction services
ion of SCM
• A continued reliance on a fragmented and
in largely subcontracted workforce has
Construction arguably increased the complexity of this
supply network and delimited opportunities
Industry for process integration.
30
• Most major contractors operate as “flexible
firms”, exemplifying the “hollowed out”
structure characterized by extensive
outsourcing and an almost exclusive focus
on management and coordination functions
• This presents a problematic context for
Issues in achieving the integrated delivery of the
implementat industry’s projects and processes.
ion of SCM • Despite the difficulties that the industry faces,
it is essential that it develops its supply chain
in practices to deliver value to the client, rather
Construction than simply seek to generate short term cost
savings.
Industry
• Partnering and similar procurement
approaches have often been identified as the
preferred mechanism for delivering this value
and this approach appears to have been
embraced by a significant number31of larger
construction organizations.
• Most major contractors operate as “flexible
firms”, exemplifying the “hollowed out”
structure characterized by extensive
outsourcing and an almost exclusive focus
on management and coordination functions
• This presents a problematic context for
Issues in achieving the integrated delivery of the
implementat industry’s projects and processes.
ion of SCM • Despite the difficulties that the industry faces,
it is essential that it develops its supply chain
in practices to deliver value to the client, rather
Construction than simply seek to generate short term cost
savings.
Industry
• Partnering and similar procurement
approaches have often been identified as the
preferred mechanism for delivering this value
and this approach appears to have been
embraced by a significant number32of larger
construction organizations.
• Partnering brings many advantages, such as
cost and time savings and improved
customer satisfaction.
• Partnering is based on collaborative methods
of working that help drive integrated supply
chain involvement resulting in optimum
project solutions which meet the client’s
business objectives.
• Collaboration in the design process means
that risks and issues can be identified and
Partnering resolved earlier, culminating in less redesign
and fewer claims when problems occur,
which means that construction costs can be
estimated more accurately.
• This is achieved by getting designers, main
contractors and specialist sub-contractors
committed to the project at an early stage.
The project will gain much from the
experience and skills of the specialists,
33
solving design issues before they arise and
advising on life cycle costs.
• Partnering approaches are mainly being
used as partnerships between the private
sector and public sector to improve value
and efficiency of public-sector projects(e.g.,
Public public infrastructure).
Private • Private public partnership (PPP)
procurement methods emerged in the early
Partnership 1990s.
(PPP) • In this method, the public sector enters into a
Adapted partnership with the private sector.
from • The public sector needs such partnerships
Ruparathna mainly because of challenges such as lack of
capital, lack of internal expertise, and
and Hewage inadequate consideration of life-cycle asset
(2013) management. During the early period of PPP,
the public sector assumed the primary
responsibilities; however, currently a major
portion of responsibilities are assumed
34 by the
private sector.
• Build operate transfer (BOT): In this
approach, a private entity designs, builds,
and finances an infrastructure, which
ultimately is owned by the public sector. The
Public private entity operates and maintains the
built asset during the concession period
Private while collecting the revenue. At the end of
Partnership the contract period, the BOT entity returns
(PPP) the built asset to the project agency for little
or no additional concession.
methods
• Build own operate (BOO): This approach is
similar to BOT except there is no return of
the asset and the BOO entity owns and
operates the facility over its’ life cycle.
35
• Design build operate maintain (DBOM): In
this approach, a private entity designs,
builds, and assumes operation and
maintenance of the built asset for the
contracted period of time. This approach
ensures that the project is in high quality,
because the design-build entity must
maintain the asset for the entire contract
Public period.
Private • Lease develop operate (LDO): In this
Partnership approach, a private entity leases a built asset
from a public organization. The private sector
(PPP) entity provides capital to renovate expand or
methods upgrade the built asset and operates it for a
contracted amount of years.
• Buy build operate (BBO): In this approach,
the public sector entity sells an asset to a
private entity that is capable of expansion or
rehabilitation and eventually creating
36
a
profitable venture for the private entity to
operate.
• Design build operate maintain (DBOM): In
this approach, a private entity designs,
builds, and assumes operation and
maintenance of the built asset for the
contracted period of time. This approach
ensures that the project is in high quality,
because the design-build entity must
maintain the asset forthe entire contract
Public period.
Private • Lease develop operate (LDO): In this
Partnership approach, a private entity leases a built asset
from a public organization. The private sector
(PPP) entity provides capital to renovate expand or
methods upgrade the built asset and operates it for a
contracted amount of years.
• Buy build operate (BBO): In this approach,
the public sector entity sells an asset to a
private entity that is capable of expansion or
rehabilitation and eventually creating
37
a
profitable venture for the private entity to
operate.
QUESTIONS
38
