Architecture / June 17, 2018 /
The payment arrangements adopted on a contract directly affects the level of risk borne by the contractor. Where the contract is let on the basis of a drawings and specification lump sum the contractor assumes the risk for both the quantity and pricing. In lump sum contacts based on bills of quantities and remeasurement contracts the contractor assumes the risk for the pricing only. With reimbursement contracts the client assumes the risk for the quantity and pricing. The payment arrangement, therefore, directly motivates the contractors efforts to carry out the work in an efficient and economic manner. This in turn has a major impact on the final price paid by the client.
Procurement refers to the process of obtaining goods and services from another for some consideration. They describe the process as being simple in theory – balancing quality, time and cost priorities, but complicated in practice by legislation, the need to achieve value for money, demonstrate accountability and coordinate consultant and contractual roles and obligations to achieve a satisfactory outcome. The procurement strategy identifies how the project is structured and establishes where responsibility for design is to be placed, how the work is to be co-ordinated, and on what price basis the contract is to be awarded. The procurement strategy also directly affects the level of risk borne by the contractor and leads to choices regarding the conditions under which the work will be executed. These risks must be appraised and managed by the contractor and has a direct impact on the price tendered by the Contractor