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Pavitra Sharma
CON 567- Advanced Procurement Systems - spring 2014
Dr. Dean T. Kashiwagi
Contents
Introduction- ................................................................................................................................................. 1
Problems Identified- ..................................................................................................................................... 2
The Best Value Approach (Kashiwagi, 2014)- ............................................................................................... 2
Differences identified between the traditional system of procurement in India and the Best Value
Approach-...................................................................................................................................................... 4
Proposed Solution-........................................................................................................................................ 5
Conclusion-.................................................................................................................................................... 5
Bibliography .................................................................................................................................................. 6
CON 567
Pavitra Sharma
Public Ltd. companies: 5-7% of the value of goods/ (with private holding) services
procured.
Stated below are the principles concerning the owner as envisioned by Construction Industry
Development Council (Construction Industry Development Council; Jain)
Stated below are the principles concerning the contractor as envisioned by Construction Industry
Development Council (Construction Industry Development Council; Jain)
Principle 6- Contractor possesses requisite experience in the type of work taken up.
Principle 7- The Contractor has adequate resources for executing the work.
Principle 8- The Contractor quotes a workable price.
Principle 9- The Contractor has the corporate strength and resilience to overcome adverse
situations if and when they may arise.
CON 567
Pavitra Sharma
Problems IdentifiedThe reality of situation in the system of procurement is completely contradictory to principles
stated by the Construction Industry Development Council (CIDC). There is no transparency in
the system. The work is awarded to the lowest bidder. The vendors lack expertise. These are to
name a few but there lies a bigger picture.
Principle 1 and Principle 2- During the pre-bid phase, the contract is awarded to the vendor
with the lowest bid. Factors like specific past experience on similar project, performance data,
customer satisfaction and the works in hand is often ignored during the process. CIDC
emphasizes to follow pre-qualification of contractors but due the prevailing system of envelopes
and no interview during this phase, the system fails. Therefore, the owners revert back to the pre
bid selection of the contractor with lowest bid.
Principle 3- The vendors quote unrealistic and lower bid to acquire the project which in turn
results in time and cost overruns. Therefore, the quality of the project suffers.
Principle 4- Since the lowest bidder is awarded the project during the pre-bid selection, the
credibility and expertize of the vendor is often hidden from the owner. Hence, the system
becomes opaque.
Principle 5- The owners team of engineers and managers lack expertise and management
skills which results in weaker quality and schedule control measures. Hence, the project suffers
in quality, time and cost overruns.
Principle 6- The contractor with the lowest bid during the pre- bid selection is awarded the
project. The expertise of the contractor, performance data like cost and time deviations, customer
satisfaction is altogether neglected.
Principle 7- In house resources are minimal in most cases. Contractors rely mostly on
temporary hiring of resources which is seldom preplanned in advance. As a result there is delay
in schedule and cost overruns. Also, the contractors lack expertise which makes it difficult to
identify and mitigate risk.
Principle 8- The field of contracting is highly unregulated in India. A contractor can bid a
certain lowest amount without the financial backing, without identifying the scope of work and
also without adequate resources.
Principle 9- When faced with adverse situations, these contractors adopt short cuts to cope up
with the work as they lack expertize, financial backing and adequate resources.
The Best Value Approach (Kashiwagi, 2014)The Best Value based Performance Information Procurement System (PIPS) creates an
environment that includes
CON 567
Pavitra Sharma
Pre-qualification
Selection
Clarification
Execution
The clarification phase provides an opportunity to the vendor to identify itself as a BV vendor for
the owner. If the offer is unacceptable to the owner then the next prioritized BV vendor is
brought into the clarification phase.
The Execution Phase (Phase 3) - A contract is signed after the BV vendor is identified
during the clarification phase. The BV vendor delivers its services and mitigates risk in
accordance to the WRR. The role of the client or owner here is to assure that a quality service is
provided by the BV vendor without time and cost deviations with the help of WRR.
3
CON 567
Pavitra Sharma
Traditional System
No transparency.
Complete transparency.
A stressful environment.
No stress environment.
A win-lose environment.
No accountability of the vendor.
Many transactions and decision making during
the execution.
Overall project cost increases.
CON 567
Pavitra Sharma
ConclusionIndia Construction Industry is the second largest industry in the country after agriculture and
contributes to 11% of the countrys GDP. There exists immense potential for growth in the
coming years as India is one the fastest developing economies competing with the developed
counterparts. The prevailing system can be changed if the industry focuses on providing quality
work rather than maximizing profit. Experts and well educated staff should be employed by the
companies and not save money on staff salaries. Use of latest technology and performance
measurement matrices should be encouraged. Honesty and transparency should be thoroughly
exercised. Favoritism, political influence, emotion and self-interests should be discouraged. In
conclusion, the whole system should revolve around the expertise of the individual or the
company.
CON 567
Pavitra Sharma
Bibliography
Construction Industry Development Council. (n.d.).
Jain, R. (n.d.). System of procurement in construction works: Some flaws and their remedies.
Kashiwagi, D. T. (2014). Best Value Standard.