What is a Traditional procurement route (Lumpsum)?
In a Traditional procurement route, the Client appoints the design team prior to the appointment of the contractor. In the Lumpsum option, the design is finished before the tendering process begins. Basically it follows a sequential nature of strategy i.e. design is completed first followed by tendering and then the construction. Based on the completed design, the contractor agrees to complete the project at an agreed sum.
There is a level of certainty in the design, cost and duration of the project. So it is a low risk strategy for the client. The contractor bears the risk of completing the project for the agreed contract sum and within the contractual period. The client bears the risk only for design part.
A typical project organisational structure for a Traditional procurement route is given below.
What are the advantages & disadvantages of a Traditional procurement route (Lumpsum)?
The advantages are as follows:
- There is a reasonable certainty in the price during the appointment of the contractor.
- There is a fairness in competition during the tendering process as all contractors are bidding on the same basis.
- The client has higher control over the design process and the quality.
- Changes, if any, can be easily arranged and valued.
- The Traditional route is a well known route and thus ensures confidence in those involved in the project.
The disadvantages are as follows:
- If tender documents are prepared from an incomplete design, it will lead to less certainty in cost and time and can also result in disputes.
- As the strategy is sequential, overall project duration is usually longer than other strategies.
- The contractor cannot provide any inputs to the design or planning of the project.
- Designers and contractor have little incentive to advise on factors which can help in reducing the operational costs of the building.
Reference: RICS Professional Guidance, UK: Developing a construction procurement
strategy and selecting an appropriate route, 1st edition, guidance note