A framework for awarding construction projects through term contracts
The term contracts in the construction environment often involve requirements for construction projects that originate from project managers that manage both capital and operational expenditure. The term contracts mainly involve operational services for maintenance of business infrastructure and may not adequately address the risks and specific complexity of work in construction projects, due to the complexity of work in construction projects. A possibility was identified in term contracts of infrastructure in the civil construction environment of a large international petrochemical business in South Africa, whereby construction projects could be executed through these contracts. This concept would minimise the time required to award construction projects to contractors and the costs involved with this process. The motivation behind this concept was that the maintenance contracts were already established, after a legally governed and compliant tender process was followed and where a sound business relationship exists between the client and contractor. Although there may be many similarities, the merging of the two concepts in the title initiated different arguments, such as the risk that differ in these instances as well as other main aspects of term contracts and construction projects that do not align, in terms of work complexity and supplier capabilities. Research was conducted to determine whether it would be possible to execute construction projects through existing term contracts and secondly to develop a framework that could guide procurement management personnel to address all the important aspects for the success of this method of execution. The overall description of the research project is described in the first chapter and an overview provided on this study. This was followed by a literature study on the main concepts in the title, including the important similarities and differences found amongst these concepts. A top-down approach was followed with a review of the construction industry, supply chain management, term contracts and thereafter construction projects and project management. The final section of the literature review compares the term contracts to the construction projects and aims to identify similarities and differences in these main concepts in the title of the study. The research methodology followed was realised through a survey, in the distribution of a questionnaire to respondents from various businesses in the construction, petrochemical and mining industries. The petrochemical company and its contractors (local businesses) formed part of the study. There were 111 completed questionnaires received, from a sample of 300 respondents. The data gathered from the survey indicated that procurement management and relationship management are two key focus areas for successful combination of the construction projects with term contracts. In the final chapter the framework developed from the findings indicated that collaboration and alignment between contracting or procurement specialists and project teams could ultimately reduce risks, time and cost in the execution of the projects through a hybrid construction maintenance (HCM) contract. In closing, the recommendations for effective application of the framework are indicated, which could reduce a business's risk. Contract and project managers may realise time and cost saving due to proper planning of procurement activities. Suggestions for future research are listed thereafter, based on the findings regarding the main concepts in the title. The contribution of the business science is the conceptualisation of a framework upon which construction projects and term contracts can be combined and executed in a concise manner, that develops a new efficient manner of streamlining activities in a business through optimisation of the construction supply chain.