Procurement methods in

Construction/ types of contracts

There are several categories of procurement methods in the
construction industry. A proper type of contract (procurement
method) will choose based on the client’s requirement at
the planning stage of the project.

Whenever, A client wants to construct, renovate or develop a

property, he or she (Client) appointing a professional representative
to consult the work. In industry, This team is introducing as the
project management team. Mostly, This team may contain an
architect, quantity surveyor & Engineer.

First of all, this team has to understand the client’s requirements

thoroughly before planing the project.

Mainly they should focus on below requirements

 the full intention of the development

 Project requirement
 Expected quality
 And appropriate time frame (to complete the project)
 Budget (building cost & running cost)

Based on the above requirements and intentions, the project

management team has to choose and finalized the procurement
methods (a type of contract) to execute the project.

What are the factors deciding, what

procurement method or contract type to
follow:
Below are the key factors (to choose suitable procurement method
for a construction project),

 Speed or time
 Budget

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 Expected quality
 Specific project constraints
 Risk
 Asset ownership
 Financing

Below, we have described factors, and requirements (with

examples) should consider before finalising procurement method.

 Speed or time

Example- The ABC Fashion retail company has taken a building for
its new outlet shop. They have signed an agreement with the
building owner, and they want to do particular modification to the
building before commencing the operations. However, time is a
critical thing here because they already started the paying rental for
building. Still, the building does not make any revenue at the period
of modification. in these kinds of situations, the client should follow
a fast track procurement method to complete works
immediately.

 Budget

Budget or cost is a primary concern for all the clients. As an

example- A person wants to build a house. He or she has carefully
made some savings and wants to build the house within the money
have, and do not want to exceed the budget. In this kind of
situations, the procurement method selected should ensure there
will no any budget exceeding.

 Expected quality

In some projects, the client wants to fulfil the maximum expected

quality. As an example- A client seeks to build a hotel. Furthermore,
they want to build it with high-end finishes. The client has checked
and selected all finishes, and they do not want to deviate any of it.
In these kinds of situations, the procurement root chosen should
ensure the client’s aspect of quality.

 Specific project constraints

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Project requirements and restraints can make significant role when
deciding the procurement root. When the government become a
client restriction can come in. So procurement root should be very
transparent for government projects.

 Risk

Risks involved in the projects can affect certain procurement roots.

As an example- Inexperienced person wants to build a house. So he
or she can face significant difficulties to understand the nature of
the construction industry. Contractors may take advantage of the
situation. So he or she can choose a procurement method reducing
these type of risks.

 Asset ownership

As we discussed in the budget factor asset ownership can affect

some procurement roots. When a client does not have the
ownership of the property and still wants to develop the property, a
good procurement root should select according to the situation.

 Financing

As an example- A project is funded by a bank. Bank will assess the

project progress and cashflow from time to time (cause they want to
assure those fundings allocated by the bank utterly spent for the
construction of the project). So they might be forced client to use
transparent procurement root.

Methods of Procurement In Kenya:

Read concisely about the methods for tenders in Kenya - and
compare to what is happening in reality. The use of the wrong
tender methods, leading to tender rigging, is a frequent complaint in
the Auditor General reports on government entities.

These are the relevant laws for the methods of public procurement:
For cases of procurement it is Part XI section 92 of the Public
Procurement and Disposal Act. For cases of tenders begun after Jan
7, 2016, see the Public Procurement and Asset Disposal Act, Sec.

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215). These laws outline the various methods public entities can use
to procure goods and services.

They include:

(a) Open Tender

This method is prioritized by law (Sec. 91 of the Act). All other

methods need to be justified by special circumstances.

Where tenders are open to anybody who may wish to to apply. The
accounting officer of a procuring entity is obligated by law take such
steps as are reasonable to bring the invitation to tender to the
attention of those who may wish to submit tenders. For the
procurement of goods and servicese from 20 Mio. KES, open tenders
are required. In open tenders, goods and works must be tendered
nationally from 6 Mio KES, services from 3 Mio KES. Details about
Open Tenders: (Sec. 96 of the Act) (for the thresholds see
Public_procurement_regulations_2006)

(b) Two-stage tendering

Two-stage tendering is a procedure typically used to achieve an

early appointment of a contractor to a lump-sum contract. A
procuring entity may engage in procurement by means of two-stage
tendering when, due to complexity and inadequate knowledge on its
part or advancements in technology, it is not feasible for the
procuring entity to formulate detailed specifications for the goods or
works or non-consultancy services in order to obtain the most
satisfactory solution to its procurement needs. In the first stage
competitors formulate proposals without a tender price. In the
second stage selected competitors are invited to submit tenders
with price tags. Details: (Sec. 99 b of the Act)

(c) Design competition

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In this type of procurement, part of the services are already a part
of the tender, because the overall shape and the details of the
contract are offered by the contractual partner and not by the
procuring entity. The Act says in Sec. 2 (Interpretations): “… such
services may include architecture, landscaping, engineering, urban
design projects, urban and regional planning, fine arts, interior
design, marketing, advertising and graphic design.” For details see
Sec. 100 and 101 of the Public Procurement and Asset Disposal Act.

(d) Restricted tendering

An accounting officer of a procuring entity may use restricted

tendering only if any of the following conditions are satisfied a
complex or specialized nature of the goods the time and cost
required to examine and evaluate a large number of tenders would
be disproportionate to the value of the goods if there is evidence to
the effect that there are only a few known suppliers. An
advertisement is placed, where applicable, on the procuring entity
website regarding the intention to procure through limited tender.

Some details are to be found in Sec. 102 of the Public Procurement

and Asset Disposal Act

(e) Direct procurement

A procuring entity may use direct procurement as allowed as long as

the purpose is not to avoid competition. Because the procedure is
especially corruption-prone, there procurement is also strictly
limited to goods, works or services that are available only from a
particular supplier or contractor, or a particular supplier or
contractor has exclusive rights in respect of the goods, works or
services, and no reasonable alternative or substitute exists cases of
disaster, war, catastrophic events and unforeseeable needs in these
cases. Needs of standardization and compatibility if these needs are
reasonable and economic for the acquiring of goods, works or
services provided by a public entity provided that the acquisition
price is fair and reasonable and compares well with known prices of
goods, works or services in the circumstances.

The rules for direct procurement can be found in Sec 103 and 104
the Public Procurement and Assets Disposal Act, 2015 and – for

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cases before Jan 7, 2016 – in the
PublicProcurementandDisposalAct_Cap412C_.

(f) Request for quotations

A procuring entity may use a request for quotations from the

register of suppliers for procurement only if the estimated value of
the goods, works or non-consultancy services being procured is not
more than 1 Mio. KES (see public_procurement_regulations_2006,
(Page 1163, pdf-File). The goods or services must also be readily
available and known from an established market. The persons and
companies who are asked for a quotation must be registered. At
least three must be asked – but enough to “ensure effective
competition). See Public Procurement and Asset Disposal Act,
Section 105 and 106.

(g) Electronic reverse auction

This is a type of auction in which the roles of buyer and seller are
reversed. In an ordinary auction (also known as a forward auction),
buyers compete to obtain a good or service by offering increasingly
higher prices. In a reverse auction, the sellers compete to obtain
business from the buyer and prices will typically decrease as the
sellers undercut each other. The Authority may in exceptional
circumstances approve a system of electronic reverse auction
method of procurement for goods, works or non-consultancy
services by a procuring entity. (for more details see: Sec. 110 of the
Public Procurement and Disposal Act)

(h) Low Value Procurement

A procuring entity may use a low-value procurement procedure if

the entity is procuring low value items which are not procured on a
regular or frequent basis and are not covered in framework
agreement.

The public_procurement_regulations_2006 state that the “Maximum

level of expenditure under this method is Kshs 30,000 per
procurement per item” (p.1153) and in Sec. 63, that “a procuring
entity may use a low value procurement procedure only if-
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(a) the estimated cost of the goods, works or services being
procured per item is less than or equal to the prescribed maximum
value as set out in the First Schedule;

(b) no benefit would accrue to the procuring entity in terms of time

or cost implications if the procuring entity uses requests for
quotations or any other procurement method;

Kenya Subsidiary 1153 Legislation, 2006

(c) the procedure is not being used for the purpose of avoiding
competition;

(d) the use of the procedure has been recommended by the

procurement committee after a market survey

(2) The following procedure shall apply in respect to low value

procurement-

(a) the procurement unit shall procure the goods, works or services
from a reputable outlet or provider through direct shopping;

(b) an original invoice or receipt for the low value procurement of

goods, works or services and the price paid shall be obtained and
signed by the person undertaking the procurement.;”

(i) Force Account

The work is done and billed by a public entity with labour and
equipment owned by the public. The Law in Art. 109 is very clear
about the conditions:

“(2) … A procuring entity may use force account by making recourse

to the state or public officers and using public assets, equipment
and labour which are competitive and where

(a) quantities of work involved are small and scattered or in remote

locations for which qualified construction firms are unlikely to tender
at reasonable price and the quantities of works cannot be defined in
advance;

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(b) unforeseen and urgent work is required to be carried out without
disrupting on-going operations;

(c) the procuring entity is to complete works delayed by the

contractor after the written warnings did not yield any tangible
results.

(3) This method shall only be applied

(a) with the prior approval of the accounting officer;

(b) within the limit prescribed in Regulations;

(c) where the total cost of procuring the goods, works and non-
consultancy services are, at most, set at the prevailing market rate.

(4) The procedure to use force account shall be as prescribed in the

Regulations”

(k) Request for proposals

Used for Consultancy Services. There are elaborate provisions for

requests for proposals in Sections 115 to 130 of the Public
Procurement and Asset Disposal Act. They are “used if the services
to be procured are advisory or otherwise of a predominately
intellectual nature.” Those who win a contract from a request for
proposal are barred from delivering goods and services once the
proposal is put into practice (Sec. 130 )

(l) Framework Agreement

The law states – among other provisions – in Sec. 114 (1):

“A procuring entity may enter into a framework agreement open

tender if—

(a) the procurement value is within the thresholds prescribed under

Regulations to this Act;

(b) the required quantity of goods, works or non-consultancy

services cannot be determined at the time of entering into the
agreement; and

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(c) a minimum of seven alternative vendors are included for each
category.”

Classified Procurement

For reasons of national security some procurements are of a

classified nature. Which means that the list of items is confidential
and must not be disclosed. Procurement can be managed with dual
lists of goods and servicese, of which one is confidential. The
procurement itself falls nevertheless under the Public Procurement
and Asset Disposal Act. If a procuring entity is not a national security
organ, it shall request the Cabinet Secretary for approval of the
classified list of items annually. The Cabinet shall approve of the list
of classified items. Details are in Sec. 90 of the Act.

Hints for Reporting

Whereas there are these many types of tenders, most County

Governments either use open Tenders or Request for
Proposals/quotations. In both cases, journalists may examine the
documents seeking for tenders to determine whether they contain
all necessary details in a clear manner.

For example, a request for proposals should state in specific terms

the purpose, objectives scope and nature of services required,
clearly outline the expected outputs and desired qualifications.
Further, it should outline the application procedure and give proper
addresses. The specifications of goods and services being sought
should be very clear.

Journalists can also conduct a market survey to determine whether

the specifications stated in the request for proposals or tender
advertisements are up to standard.

It is possible to determine whether the procurement entities

understand what they are looking for from the details of the tender
advertisement.

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