Procurement pathways 3
The objectives and needs of the project (PAC Procurement Assessment Criteria) 3
Review or relevant options for procurement strategies (PAO procurement Arrangement Options) 7
Most appropriate procurement strategy 11
Purpose of the form 14
Advantages of investing and working in Duqum special economic zone 16
The report is about Anahid group holding that is a development organization based in Muscat. Moreover, Sohrab LLC is a part of this company and specializes in developing food warehouse as well as the distribution centers all over the country. Therefore, the report aims at recognizing the goals and requirements of the project followed with the review of relevant options for the procurement strategies including all the activities that have to be taken by the company. The most suitable alternative will be chosen, and it has to be relevant for the procurement strategy for the undertaking, and an analysis of the same will be done. Furthermore, the report will explain the rights and obligations of the companies involved in this project. There will also be a proposal of the suitable standard form of contract for this venture and the review of possible alternatives for financing. Finally, the project will explain the outcomes of the research conducted concerning the benefits of investing as well as working in Duqum special economic zone.
The objectives and needs of the project (PAC Procurement Assessment Criteria)
A capital works venture is one method for conveying a solution for the specific business needs of a firm. At the point when another capital works venture is chosen, there is normally the requirement for a bespoke arrangement that aims to meet specific goals. Distinguishing these goals and organizing them can be a hard task considering the variety of partners who are commonly included. Therefore, sufficient dialogue and discourse between stakeholders need to be undertaken before task prioritization are organized. New capital works projects are consistently one of kind coincidental plans and based on destinations that are likewise novel in nature. While considering procurement methodology to achieve a project, an Agency ought to be made aware of the unpredictable circumstances of procedures that are included with the procurement procedure so they can be suitably managed. A procurement process determines the key means by which the goals of the capital works venture are to be accomplished for Ana-hid group. From the beginning of a project, an in-house official or task chief should be chosen as quickly as time permits with the goal that a full and adjusted comprehension of customer targets and needs can be created as a pre-imperative for choosing an acquirement technique for a capital works to project. An essential issue that is frequently raised identifies with what customers need to be happy with their structures and the methods by which those structures have been obtained. Thus, it is imperative to assess the customers’ criteria, their significance and after that to choose an acquisition technique to coordinate the requirements. The following is the procurement process map.
Customary procurement determination criteria are based around the ideas of time, cost and quality. While the utilization of such criteria can be utilized as a manual for help the company decision-makers with an underlying comprehension of the fundamental properties of a specific procurement strategy they ought not to be utilized as the sole reason for choosing the procurement strategy. This is a direct result of the essential unpredictability related to customizing customer needs and properties with a specific procurement strategy. The decision as to what procurement method to use should be made as early as possible and supported by the customer’s business case for the venture. A variety of factors can affect the decision of a procurement technique. The accompanying variables ought to be borne as a top priority while deciding the most proper procurement strategy are (Love, Davis, Baccarini, Wilson, and Lopez, 2009, p2-5).
• External factors – thought ought to be given to commercial, political, technology, social and lawful factors while choosing a procurement strategy
• Client characteristics – a customer’s knowledge and involvement with procuring building venture will affect the procurement technique embraced. Procurement choice is impacted by the way of life of the firm and the level of desire customer contribution
• Project characteristics – The size, unpredictability, area and uniqueness of the venture ought to be considered, as this will affect time, cost and hazard.
• Ability to make changes – Changes in ventures are inevitable. The ideal level of adaptability for the customer to make changes amid the ventures will influence the determination of a procurement technique
• Cost– An evaluation at the requirement for cost assurance preceding beginning of development by the customer ought to be embraced. In the event that value conviction is required, structure must be finished before residential and configuration changes limited.
• Time – Most capital works project are required within a specific period. If early completion is a critical factor then a procurement method that supports speedy completion may be favored.
Therefore, the company should consider a process whereby the iterative process constraints and objectives were constantly compared to obtain the possible procurement solution. To help with the accompanying project the constraints and the aims of the project with a specific procurement method has to be applied. Therefore, specific criteria assist the clients in determining their priories according to (NEDO, 1985) the following time factors should be considered when deciding the procurement methods.
1. Time: Does the project have to be completed early?
2. Certainty of time: how important is the certainty of the project completion?
3. Certainty of cost: Before commitment of the firm to the project does it have certainty to the price of the project.
4. Price competition: In the implementation of the project, is the consultant or the consultant price competitive to the competition?
5. Flexibility: Also, the management should ask itself whether there will be variations during building the construction.
6. Complexity: The management needs to ask itself whether construction need to be technologically advanced or need to be highly serviced.
7. Quality: Do the materials, workmanship, and the products need to be of high quality.
8. Responsibility: is it the responsibility of the consultant or the client to make sure that the construction is up to standards.
9. Risk: Is it important to transfer the risk from the current?
Table below shows the procurement pathway
Review or relevant options for procurement strategies (PAO procurement Arrangement Options)
Procurement arrangement option gives a platform for uniting different specialist organizations in various ventures, and for recognizing and satisfying the priority needs of the customer for securing the needed products and services. Besides this is the view that the effective execution of construction work relies upon the procurement approach embraced. Such is because the way to procurement is to recognize the needs in the goals of the customer and to design an idea, a procurement course, which will be the most fitting to understand the goals.
Construction customers in the country and somewhere else incline toward traditional acquirement course of action alternative to other forms, even in situations where the utilization of the conventional procurement course of action are improper. For example, it is contended that the traditional path of acquirement activity is much of the time utilized across the world. It includes Duqum special economic zone in the Duqum region because of its allure as a methods for accomplishing fixed or minimal cost for the construction of the task like the one that is undertaken by the Anahid group holding for the development of the food warehouses and distribution centers. In any case, many pieces of research opine that the usual strategy for task usage in Duqum and other parts of the world as being as well long and needs an upgrade and reproducing to make the procedure progressively productive. Then again, distinguishes the inherent drawbacks of this framework could prompt a longer development time and inducing antagonistic relations among the undertaking group. Each one of those precedents demonstrates that the requirements of construction customers are not well addressed to by the overall procurement arrangement alternatives.
The perfect procurement arrangement alternative that could be embraced by customers which could give answers for the procurement arrangement associated issues in the construction business is one that adjusts the need needs of the customer with the relevant issues are pondering, in their selection procedures as well as the decision-making process. Hence, there is a requirement to research the main factors and variables underlying a perfect or appropriate procumbent arrangement option, which would meet the clients’ needs as well as broader issues influencing selection of a procurement arrangement option in the Duqum special economic zone in the Duqum region as well as in other parts of the world.
The selection of suitable procurement arrangement is exceptionally significant in making sure that success of any construction is achieved since the utilization of unsuitable procurement system is believed to lead to project failure according to Chang and Ive (2002, p277). Procurement is significant as it determines the general structure for construction, adapting the framework of responsibilities, threats or risks as well as specialists for construction practitioners as stated in Naoum and Egbu (2016, p311).
From a strategic point of view, procurement can be looked at as a strategy intended to satisfy the customer’s development requirements. Therefore, a wrong choice of PAO at the beginning could significantly affect the determinations of the project crew to accomplish the objectives lied down and customer satisfaction will be harmed in the process. One conceivable reason for this could result from a universally appropriate set of standards to determine the suitability of a PAO. For instance, the challenge of having a commonly accepted standard for the establishment of the procurement arrangement option, which balances the perfect with the applied realities in the choice process, is one of the issues. Regrettably, in modern times, there has been profound inquiry concerning the construction sector’s capability of delivering projects that satisfy the customers’ expectations.
Procurement in the construction sector is different from the procurement of services and goods in the consumer services and production sector where a direct selection can generally be made concerning quality and cost. However, the procurement of building is complicated and includes the interaction of the customer, contractors, design team, as well as numerous statutory bodies in the process from the beginning of construction to the end.
Seeney (2015) observes that the various PAOs had increased over the years. Nonetheless, no standard definition, as well as classification of procurement methods, has been generally accepted. It is because there are no official agreements or structures on the terms as well as the underpinning standards. Furthermore, in all efforts by previous studies to differentiate between PAOs, it is forgotten that they are more or less the same than they are different. The procurement systems can be classified into:
• Design and build
• Total package
Essentially, procurement of a construction project within a designated time, quality, and cost is the primary goal of the customers. It should be noted that the client’s requirements, as well as expectations related to construction projects, will include:
i. Value for money
ii. Satisfactory durability
iii. Pleasing to look at
iv. Reasonable running cost
v. Fit for purpose
vi. Free from defects on completion
vii. Supported by worthwhile guarantees
Chigangacha and Haupt (2016) note that the quality as a part of customer’s requirement in the procurement process. Nonetheless, because of construction projects being different in size, nature, and complexity, customers may have varying degrees of significance to each of the three primary client requirements. The authors continue to state that the cost, for instance, may require to be exchanged on a venture, which needs very high standards of excellence. Moreover, time on these particular projects might also be traded off to make sure that the anticipated degree of quality for the construction of the food warehouses as well as distribution centers by the Sohrab LLC is achieved (Chigangacha and Haupt, 2016).
The most widespread procurement arrangement option (PAO)
There is an agreement of the viewpoints by all researchers as well as building experts across the globe the conventional procurement arrangements are the most common and extensively embraced by this sector for procuring a construction project as stated in Wells and Hawkins (2014). The fame of the conventional PAO results from a wide range of advantages; however, the most significant reasons include that most customers, as well as contractors, have broad experience of it. The other reason is that the system provides some expense predictability if the design has been wholly scoped out before the beginning of the construction. Finally, it offers the customer greater management of the plan since the client controls the design team.
Choosing a perfect procurement arrangement option
Numerous attempts have been undertaken to develop models to help in decision-making during the selection of PAO process. Regrettably, none of the models has been extensively embraced in practice. The most noteworthy reason is the inadequacy of a universally appropriate set of standards to determine the suitability of a PAO. During PAO selection, some researches have provided the customer with guides to help in procurement arrangement option selection, which was produced by NEDO in 1985 (Walker, Harley and Mills, 2015). The guide is essential and can be used by Sohrab LLC in its project to construct food warehouses and distribution centers in Duqum special economic zone. The standards are as follows concerning the project by the Sohrab LLC:
• Time: refers to the period in which the project should be completed and is significant for this venture to be successful. Therefore, the businesses should make sure that the time required is observed for the maximization of the profits for the organization.
• Certainty of time: the management and the project initiators have to make sure that the project will be completed on time because this is important regarding performance as well as the success of the company.
• Certainty of cost: the price if the firm will be required to be outlined before the commitments are made with the other interested firm with other businesses that are interested.
Most appropriate procurement strategy
Anahid group holdings should apply the design and construct (D&C) procurement method since the project is urgent. In this design, the contractor should accept the responsibility of the design portion of the warehouses. Therefore, Anahid group holding has to ensure that it holds its end of the design system. Unless it is otherwise, stated, Anahid has the responsibility of building the warehouses according to the client’s descriptions. Furthermore, the design is appropriate since it limits the contractor from the designer liability and takes care of the cognitive skills of the contractor (Turner, and Turner, 2014, pp 110). Therefore, under this situation, the independent contractors will have no obligation that is not more than their normal responsibilities.
Furthermore, under this procurement procedure, the appointed contractor has indemnity of insurance making the riskless for the company. Additionally, since most contractors do not have in-house designers, the company has an external consultant to design the warehouses making the technique the most appropriate. Since the client’s specification may come to a few pages or even a hundred pages, the project should use the design and construct method. Moreover, the contractor is restricted to apply the restriction placed by the client regarding time and cost, which makes the design and construct technique most appropriate in doing the project.
The design and construct methodology do not require the specification of the technical details making it essential in the reduction of the project cost. Subsequently, D&C technique is critical in offering certainty of the contract sum and provides the cost benefits to the company. Additionally, the integration of the design and construction technique accompanied by the relative freedom of the contractor to utilize their purchasing power and market expertise in the most effective way provides the customer with the most cost-effective service.
Separate the expenses of the task. Clarify how you anticipate that the installments will occur (all in advance, half down, payable in augmentations after each stage). Rundown the key staff associated with the culmination of the undertaking. In the event that you are the main person will’s identity dealing with this undertaking, at that point this area can be evacuated. Clarify what an effective result will be for this venture. Try not to get excessively energized here and guarantee something that you probably won’t have the capacity to convey on. Something like “Positioning #1 on Google for the majority of your watchwords” unquestionably would be effective, yet you can’t ensure that, so something more along the lines of “A composed technique including focused on catchphrases and a site enhanced to rank for these catchphrases” is something that you realize you can convey, and will result in a palatable assessment.
What would be an ideal next step? Who is to contact who? In the event that the customer needs to push ahead, what might that resemble? Give explicit time allotments if conceivable. Clarify how and why your business was established, what your strengths are, and some other intriguing actualities or figures about your business that puts your best foot forward. Past customer tributes would be a solid match here as well.
Information Analysis – The factual methods to be connected in the examination to meet the necessities of every one of the explicit destinations and speculations to be tried. This segment ought to succinctly depict how the information got will be prepared, determined or processed. On the off chance that an automated technique is to be utilized, it ought to determine which software(s) will be utilized and how it will be utilized. Such proclamations like “The outcomes will be entered in a PC” with no further clarification won’t be acknowledged. Where results will be handled as tables, a short type of such tables ought to be given with the headings.
(a) Human Subject
In all examinations including human subjects, the accompanying rules ought to be watched: I “First, do no damage.”
ii. Guide advantage to examine subjects or network should exist.
iii. Educated assent by subjects and additionally network pioneers including conceivable advantages, dangers and burdens (the convention ought to be joined by assent looking for data sheet and educated assent frame.
iv. Show the technique for keeping up classification of data got amid the investigation.
v. If there should arise an occurrence of new medications or potentially methodology to be utilized on human subjects, any conceivable symptoms, untoward responses and consequences of past utilize even in creatures ought to be expressed.
In all examinations including creatures, the accompanying rules ought to be watched: I. Techniques to limit agony and trouble must be indicated: ii. On the off chance that relevant, a solid legitimization must be made for not utilizing legitimate medications to lighten torment and trouble; i if appropriate, the technique for willful extermination ought to be determined
4. The rights and obligations of groups/organizations involved in the project
Overseeing hazard is one of a proprietor’s most important capacities in making any real venture useful. The proprietor is at first in charge of the majority of the undertaking dangers, as it is usually the proprietor’s choice to execute the task or not. (Obviously, the Sohrab LLC might not have an entirely chance free technique, because not completing the work may involve risks to the practical usage of the proprietor’s central goal or marketable strategy.) The proprietor has a definitive duty regarding distinguishing, breaking down, alleviating, and controlling undertaking dangers, including acknowledgment of the venture dangers, or alteration, or end of the undertaking—which are all undertaking danger the board exercises. It is genuine whether the undertaking execution is overseen straightforwardly by the proprietor or by workers under the proprietor’s supervision.
Compelling risks the executives start with hazard appraisal. There are two primary roles for a pre-project chance evaluation:
(1) To choose whether to execute the undertaking and acknowledge the dangers or end it as unsatisfactorily hazardous and
(2) To distinguish the most astounding need chance factors that ought to get the most consideration by the executives.
One type of hazard relief for the Sohrab LLC is to exchange a portion of the venture chances by contract to other people, apparently at a commonly adequate cost. For instance, under an expense in addition to charge get, the proprietor holds the cost hazard; be that as it may, under a settled value get, the proprietor looks to exchange the cost hazard to the temporary worker. Regardless of whether the decision cost or cost-in addition to charge approach is progressively advantageous to the company relies upon conditions, for example, whether the owner or the contractual worker is better ready to deal with the dangers.
Purpose of the form
The terms of the contract depend on the
The flowchart below shows each of the stages in the contract management process.
The company only has 30% of the funds required to complete the project. Therefore, it is recommended that the firm seeks alternative sources of capital such as seeking its equity. Alternative only, the firm could also sell debt securities. The company could also apply technology to seek alternative means of funding such as crypto currency and crowd funding could enable the firm to raise more capital.
The firm could sell some of its equity to raise the 70% required to complete the project The company only has 30% of the funds required to complete the project. Therefore, it is recommended that the firm seeks alternative sources of capital such as seeking its equity. Alternative only, the firm could also sell debt securities. The company could also apply technology to seek alternative means of funding such as crypto currency and crowd funding could enable the firm to raise more capital.
The firm could sell some of its equity to raise the 70% required to complete the project. The strategy has two min advantages. First, the firm will not incur debts, which could reduce its liquidity when the firm repays the loan and the interest. Secondly, equity financing is cheaper than debt financing which could lower the overall cost of the firm. However, the approach could be disadvantageous to the shareholders since it could dilute their claim in the company’s earnings and assets.
Alternatively, the firm could obtain loans from financial institutions or sell debt securities. Long-term loans are preferable since they do not adversely affect the short-term liquidity of the company and are repaid at lower interest rate as compared to short-term loans. Debt securities require the firm to pay a specific interest depending on the category of the interest. Therefore, the company may repay the debt at a lower value if the market price for the debt securities falls.
The company could also use technology to increase the proceedings which it could receive from selling shares and debentures. For instance, it could use crowd funding where it could broadcast its investment securities to more prospective buyers instead of a few financial institutions. Moreover, the firm could procure some of the construction material using token money from some of its suppliers that it could repay at a later date. Therefore, technology could help the company to increase the amount of capital, which it raises from selling investment securities.
The company could also obtain the excess fund from suppliers by acquiring construction materials on credit. Therefore, the company needs to enhance its relationship with suppliers in two main ways. First, it could improve its communication with suppliers by corresponding with them regularly. Consequently, the firm could be required to revise its communication plan and use cheap channels such as social media and email. Secondly, the company could hold several face-to-face meetings where it could convince the marketing department of the suppliers to offer it raw materials on credit. However, the tactic could be disadvantageous to the firm since it could incur short-term liabilities, which it could be compelled to pay within one year and the project could take a longer time to generate adequate income to repay the debts.
Advantages of investing and working in Duqum special economic zone
This area ought to condense quickly the significance of the normal outcomes and their potential use Sohrab LLC and the parent group could benefit immensely from operating in a special economic zone (SEZ). SEZ refers to areas that are designated by the government that have more liberal economic laws as compared to the rest of the state. For instance, companies that operate in such regions are likely to be taxed at as lower rates and accepted from import duties.
Therefore, they offer several advantages to investors. The concept of SEZ is based on planned economies where the government creates special zones to attract investors by offering favorable environments that may improve their return on capital invested. However, such organizations are likely to encounter several problems including regional disparity, land grabbing and loss to the government. The benefits of the company operating in the SEZ overweigh the demerits hence the firm should be encouraged to open more slaughterhouses and cold room facilities in the region.
The primary benefit that the company could have is that it may have lower operation costs. The firm could operate in the SEZ without seeking an export permit. Moreover, the corporates that operate in such regions are likely to be taxed at a lower rate since their inputs are either tax-free or taxed at a lower rate. Therefore, SEZ offers the firm the possibility to expand to nearby companies. Moreover, since its inputs could be obtained from companies that have competitive advantages and are not subjected to import duty. Therefore, they could sell their products art lower prices which could entice more customers. Since Sohrab LLC is in charge of renovating the facilities and installing the necessary equipment it could incur less capital expenditure.
Sohrab LLC and the parent group could benefit immensely from operating in a special economic zone (SEZ). SEZ refers to areas that are designated by the government that have more liberal economic laws as compared to the rest of the state. For instance, companies that operate in such regions are likely to be taxed at as lower rates and accepted from import duties. Therefore, they offer several advantages to investors. The concept of SEZ is based on planned economies where the government creates special zones to attract investors by offering favorable environments that may improve their return on capital invested. However, such organizations are likely to encounter several problems including regional disparity, land grabbing and loss to the government. The benefits of the company operating in the SEZ overweigh the demerits hence the firm should be encouraged to open more slaughterhouses and cold room facilities in the region.
The primary benefit that the company could have is that it may have lower operation costs. The firm could operate in the SEZ without seeking an export permit. Moreover, the corporates that operate in such regions are likely to be taxed at a lower rate since their inputs are either tax-free or taxed at a lower rate. Therefore, SEZ offers the firm the possibility to expand to nearby countries. Moreover, since its inputs could be obtained from companies that have competitive advantages and are not subjected to import duty. Therefore, they could sell their products art lower prices which could entice more customers. Since Sohrab LLC is in charge of renovating the facilities and installing the necessary equipment it could incur less capital expenditure. The high profit margin of businesses that operate in SEZ could attract investors who could provide additional capital to fund the expansion of the company. SEZ could also benefit from the substantial labor pool that contains skilled, semi-skilled and unskilled labor that they could employ in the sites that they are building for Anahid group. Labor constitute a significant portion of the industrial sector expenditure, thus a high supply of labor could enable the company to complete its contracts on time and at lower costs. Therefore, operating in the SEZ could offer opportunities for the company to increase the demand for the products and services offered by their customers and reduce their operating costs.
However, the reputation of the company could be ruined due to several factors. First, most of the SEZ encounter pollution due to the concentration of industries which could release the wastes to the neighboring areas. Moreover, since its inputs could be obtained from companies that have competitive advantages and are not subjected to import duty. Therefore, they could sell their products art lower prices which could entice more customers. Since Sohrab LLC is in charge of renovating the facilities and installing the necessary equipment it could incur less capital expenditure. The high profit margin of businesses that operate in SEZ could attract investors who could provide additional capital to fund the expansion of the company. SEZ could also benefit from the substantial labor pool that contains skilled, semi-skilled and unskilled labor that they could employ in the sites that they are building for Anahid group. Labor constitute a significant portion of the industrial sector expenditure, thus a high supply of labor could enable the company to complete its contracts on time and at lower costs. Therefore, operating in the SEZ could offer opportunities for the company to increase the demand for the products and services offered by their customers and reduce their operating costs.
However, the reputation of the company could be ruined due to several factors. First, most of the SEZ encounter pollution due to the concentration of industries which could release the wastes to the neighboring areas. Moreover, the company could be perceived as contributing to economic inequality in the country which could hinder some of the customers from purchasing its products. However, the disadvantages of operating in SEZ exceed the disadvantages.
The procurement arrangement operation is significant for the involved transactions between one company and the others and; therefore, a company has to be ready to learn about the trending issues in the industry to make sure that it gets the best operations and services. Moreover, in the construction industry that the Sohrab LLC is engaging in requires to acquire the knowledge of the industry as well as what the industry wants, mainly in the construction of the facilities in Duqum special economic zone that are five food warehouses as well as the 20 distribution centers. Therefore, the procurement arrangement option will be necessary for the company in ensuring that all the customer s needs are met, and satisfaction should be the key. With all the requirements of the clients, the company ought to consider them and offer quality products and services concerning the construction of the facilities to maintain the standard opted by various people in different parts of the world. Nonetheless, according to the case study, the company is ready to offer quality as stipulated and will be in a position to provide the required quality because it has been in the industry for a long time and knows what the client’s needs dictates and they are ready to do so according to the report.
Chang, C.Y. and Ive, G., 2002. Rethinking the multi-attribute utility approach based procurement route selection technique. Construction Management & Economics, 20(3), pp.275-284.
Chigangacha, P.S. and Haupt, T.C., 2016. Effectiveness of Client Involvement in Construction Projects: A Contractor Perspective (Doctoral dissertation, University of KwaZulu-Natal, Howard College).
Love, P., Davis, P., Baccarini, D., Wilson, G. and Lopez, R., 2009. Capital works procurement: the selection of a building procurement method. Cooperative Research Centre for Construction Innovation, CRC Construction Innovation, Brisbane, Australia.
Naoum, S.G. and Egbu, C., 2016. Modern selection criteria for procurement methods in construction: A state-of-the-art literature review and a survey. International Journal of Managing Projects in Business, 9(2), pp.309-336.
Seeney, L., 2015. Project performance measures for civil construction projects associated with different procurement strategies.
Turner, D.F. and Turner, A., 2014. Building contract claims and disputes. Routledge.
Walker, D.H.T., Harley, J. and Mills, A., 2015. Performance of project alliancing in Australasia: a digest of infrastructure development from 2008 to 2013. Construction Economics and Building, 15(1), p.1.
Wells, J. and Hawkins, J., 2014. Promoting Construction Health and Safety through Procurement: A briefing note for developing countries. Engineers Against Poverty, London.
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