Procurement Approach for Whitegates Hotel
Category : Arbitration System Examples
Because of some bad investment decisions, Whitegates House and Whitegates Lounge have encountered downfall which made the owner (Watt family) decides to sell the company to a consortium of local businessmen. The new management of the Whitegates Hotel have been able to realize the needs to reconstruct the building to make it more conducive to clients and customers. However, the Heriot developments are having a problem regarding in terms of construction to execute the project successfully. Hence, the main goal of this report is to provide some recommendations regarding the procurement approach to be used by the consortium. Herein, the report will also include some important aspects to be considered in managing or implementing a project.
The main goal of the project is to reconstruct Whitegates hotel to attract more clients and customers. The consortium is has enough skills and knowledge in leisure and catering activity, thus, the main problem is in line with the construction and design of the hotel. Because of this problem, the consortium is in need of a procurement approach that will suit their requirements for rebuilding and reconstructing of the Whitegates hotel. It is noted that the procurement process is regarded as an approach from the completion of a particular design to the successful commissioning of the assembly of the building. It is also commonly represented via contractual and financial arrangements which are dependent on the parties involved (Potter & Sanvido, 1994).
There are two procurement approaches that can be considered, the conventional and the innovative construction procurement (Masterman, 1992). The conventional type of procurement is where the designers do no have the direct connection with the specialist and all communication is through the main contractor who in different cases will not accept design liabilities (Smith, 1987). In this approach, the professionals are being empowered to utilise best practice which is provided their professional education (Masterman, 1992). Herein, the basic forces work consistently whenever there are not interruptions in the process.
On the other hand, the innovative construction approach is a type which gives both the experience and inexperience audiences hands-on involvement to identify the cost and quality of the particular design. In this regard, the customer is required to have a management with strong leadership and teamwork qualities so as to produce quality design and output. In this type, the client has only one organisation to deal with. The innovative procurement process is build to ensure that the creasing diversity, complexity and standardisation of building techniques are achieved.
With this, it is recommended that the consortium which purchased the Whitegates hotel should use the modern type of procurement approach. Herein, the consortium can act as a surrogate designer, which means that they will play a major role in identifying the viability of the intended designs (Cushman & Taub, 1992). In this process, the designer’s role is to be the intermediary for the inception of the design and would support the client to realise the completion of the said design.
For this to be attained, an interface or a medium is needed in order for the client to make precise decisions to select the most appropriate solution from the available options which was generated by the interface (Quatman, 2000). In using this procurement approach, the consortium can also be involved directly in evaluating the business related benefits of the choice of the construction method. The consortium is given the chance to be involved directly in terms of design, costing and logistics. In addition, there is also a close relationship between the consortium and the main contractor in accordance with delivery and site investiture (Rizzo, 1998).
For this procurement process, the fundamental workforce plays a more pro-active role and constantly giving positive feedback in terms of the feasibility or capability of the perceived design (Friedlander, 1998). Such a pro-active role amongst the vital workforce also encourages speed of installation to attain a tight programme and minimise disruption of the project. In addition, the assessment of this procurement approach finds that savings in construction time with improved quality, which in return may lead in reduction of site preliminaries and expensive call-backs. In this approach, the consortium may also reduce financial cost.
Justification of Chosen Procurement Method
It has been mentioned that the chosen procurement method to be use by the management of Whitegates Hotel is the innovative procurement approach. Accordingly, one of the most important things to consider in choosing an effective procurement approach is the decision making process. In the innovative procurement approach, the key decisions are being made early in the procurement process so as to avoid expensive changes to the intended construction design. This type of decision making process can be considered as significant in order for the management of Whitegates to identify environmental implication and related site benefits. Such approach may help the company decrease the impact on the community and site traffic which can be encountered during the project execution. In this process, the consortium may be able to decide the best transportation logistics so as to avoid unintended costs.
For this project to be more successful the consideration of prefabrication process is also given importance and this is included in the innovative procurement approach. Hence, the initial space planning, succeeding detailed design, service integration and coordination is being required. The nature of this type of procurement process is flexible to meet the demands and requirements of the consortium in terms of having a successful and effective method.
In line with the innovative procurement approach, there are many acquisition method or procurement approaches include outsourcing, competitive acquisition, multi-phase acquisition, single-source acquisition, in-house development and consultant and contractors method (Akintoye, 1994). It is very important that an organization will choose the appropriate method in order to maximize the result of the project. Consequently, the organization must be able to utilize the procurement approach that they choose for them not to waste time and effort. In this manner, the company may use the consultant and contractors procurement method. Here, the organization may choose such method, so that the organization itself should have a total control over the project and can also seek help from other construction consultants that would meet the organization’s demand. The consultant and contractor method is also an approach that may utilize outsourcing and in-house development. The major role of a consultant is to provide advice dealing with technical skills and contractors are the ones who limit the technical people.
The major role of a consultant is to provide advice dealing with construction skills and contractors are the ones who limit the workforce. This consultant and contractor methods is use so that they can call some outside or external help in designing and constructing of the hotel. Consequently, this procurement method is being divided into two categories; consultants and contractors. The consortium may use the consultants to provide them the construction skills that they have while contractor will be utilized in order to provide the number of staffs needed required for the project.
Here, the organisation per se, can maintain their core team to direct and maintain continuity of the project. In this method, the organisation can have the right to have the service of other external consultants that may be used in order to make the project a success. The consortium must be able to choose a consulting and contracting agency which meets their requirements and upon thorough investigation, the project team will start the project which compromises three stage plans: business case, conceptual design and build, test and implement.
Moreover, the company may also choose outsourcing as their procurement method. Outsourcing simply means going outside your organization to get a job done. There are many reasons for outsourcing in a company or an organization. The most common reasons for outsourcing are the needs for expertise, that is due to lack of learning curve and re-creating; manpower, for having not enough staff; time requirements, because of the limited time available to accomplish the job; needed for economics, owing an overall cost savings; shifting of responsibility as for deniability; and removing of stumbling blocks in keeping the work for flowing.
When the management of Whitegates choose outsourcing, the company may get many benefits including freeing up management resources, sharing costs, , building new organization structures, training staff, and interfacing with other information needed for their project. Outsourcing offers a company functional specialization and flexibility (Economist, 1994, p. 79). Herein, the development team for the hotel will be able to maximise their full potential to do other works and leave all the necessary activities to the outsourced agents who will initiate the construction of the hotel.
White & James (1996, p. xiv) provides a definition of outsourcing as a “contractual relationship between an external vendor and an enterprise in which the vendor assumes responsibility for one or more business functions of an enterprise”. Outsourcing and out-tasking involve transferring a significant amount of management control to the provider of the job. With the needs to renovate the hotel to make it more convenient to the clients, the outsource construction agency will be responsible for all the tasks needed for the said project. In this type of procurement method, continued direct or indirect management and decision-making by the client of the out-tasking business is assured.
Outsourcing always involves a considerable degree of two-way information exchange, co-ordination, and trust. Hence, this means that the consortium will be ensured that will have the chance to Organizations that deliver such services feel that outsourcing requires the turning over of management responsibility for running a segment of business. In theory, this business segment should not be mission-critical, but practice often dictates otherwise. Outsourcing business is characterized by expertise not inherent to the core of the client organization (TOMCP, 2004).
According to Irwin (1995) outsourcing strategies may come in many advantages. The advantages that can be gained in outsourcing are that activity can be performed better or more cheaply by outside specialist. Moreover, achieving the competitive advantage is not crucial in the activity. The risk of the firms in the exposure to the construction trends can be reduced. Furthermore, the cycle can be cut, the decision-making have sped –up and the coordination costs can be reduced. Finally, because of these outsourcing strategies, the firms or the consortium can concentrate on its focal point in business.
According to Antonucci (1998), in general, the following are considered the positive impact of outsourcing to business sectors, especially for the consortium.
Access to state-of-the-art facilities: Herein, the consortium who has considered outsourcing can be assured of having state of the art facilities and equipments to be used by the outsourced construction agents.
Cost savings and quality. Because of the intense competition in the business world, most management are left with no other choice but to lay off employees so as to reduce costs. Even the most established companies find ways on how to compete along with new entrants while reducing company expenditures. In outsourcing, companies are enabled to save costs primarily through the outside vendors or construction agents. This is become third party members have a much tighter regulation of fringe benefits as well as able to run leaner overhead structures. They are also more aggressive in using low-cost labour pools and can move data centres to areas of low cost through the help of modern telecommunications. Furthermore, outside vendors are able to apply world class standards to the firm’s available staff, in which all of whom have to re-qualify for appointment at outsourcing time. Third parties can also reduce costs as they can utilize more effective bulk leasing and purchasing arrangements for all software and hardware and have more control over licenses of software as they often are better informed negotiators. Also, outside vendors encounter certain contractual pressures; hence, they are obligated to meet deadlines.
Flexibility. Through the use of constructing functions, businesses must be able to adapt well in the constantly changing business environment so as to quickly respond to changing trends and demands. Thus, flexibility is essential to the business. The outside vendors are able to tap a wide array of skills, resources and capacities, while the internal staffs have limited abilities.
Job security for regular employees. Through outsourcing, companies are able to hire staff knowing that they will be hired for a limited period. Hence, they can easily drop or add employees into the workforce without putting the reputation of the company as a stable employer in danger. Further, outsourced employees buffers regular workers from changes in demand as well as enable the firm to create a more established relationship with its regular employees than would otherwise be plausible.
Since the consortium is using a contracting procurement approach, it is important that the management should consider a Partnering agreement between the stakeholders involved. In this agreement, the stakeholders work together in a relationship of coordination and trust, so as to achieve the main goal. This can be achieved by maximising the benefits of each stakeholder’s resources and potentialities. The stakeholders or involved parties for the agreement of restructuring the hotel includes teamwork among the stakeholders: (consortium and the construction agency); total continuous enhancement, openness among stakeholders, readiness to accept changes and trust and mutual benefits.
For this partnering to be successful, there is a need to apply this commitment throughout the supply chain, which includes the consortium, consultants, and lead contractors. The commitment from both the management and the staff is important to ensure effective partnering.
The consortium may choose between the two main contract options. The first is to use partnering as a project management method with traditional construction contract. This can be applied with any procurement strategies currently in use such as conventional, design and construct as well as management contracting. In this regard, the form of contract to be used by the contractor and the consortium consists the main features described in constructing the team. It is recommended that care should be undertaken when using or signing a partnering Charter in lieu with the conditions of the agreement as the Charter may influence the interpretation of the contract if there is a disagreement.
The consortium who are in charge of the changes in the structure of Whitegates Hotel is having a problem in initiating the project since the development organisation has no enough knowledge in structuring and constructing. With this, a need to identify the most appropriate procurement method has become the challenge for the organisation. Herein, it shows that the most effective procurement approach to be used by the company is the innovative procurement approach, specifically the consultant and contractors procurement method. This paper has been able to provide reasons why the company should choose consultant and contractors and outsourcing as procurement method. In this paper, the benefits and advantages of using these types of procurement method has been provided as well as the ways on how these approach can be used efficiently to avoid problems and atrocities.
It is said the with the use of the innovative procurement approach which is partnering that involves consultant and contractors procurement method and outsourcing, the consortium are given the chance to still decide on the project while ensuring quality work from the advising team and as well as from the outsourced team who are chosen to do the project. It can be said that through the consultant and contractors approach, the company will be able to control the deliverance of the project to ensure quality output and to ensure that the organization goal of having a convenient and state of the art hotel will be achieved.