PhD Final Thesis April 2013.pdf - Anglia Ruskin Research Online

Thesis Keith Gale 2013subjected to open competition. This research uses a benchmarking process toexamine production costs against estimated costs for all projects within the casestudy. The economic effect argument provides a basis for hypothesis H3:H3: There is significant difference in production costs between frameworkagreements and traditional tendering methods due to reduced competition.Within this hypothesis, the definition ‘production cost’ refers to a tender price that isaccepted by the client for an individual project. Due to variations with the financialassessment of construction projects it is suggested that this absolute value – specificat a particular milestone within the life cycle of a project – provides a benchmark thatis comparable with all projects and is recognised by the industry. This benchmark isalso endorsed through the Government Construction Strategy (Cabinet Office, 2011).Due to project characteristics, comparison between production costs of differenttendering methods for the same project is extremely difficult to obtain because thiswould involve tendering the same project on multiple occasions – a positionunacceptable to both client and supplier due to extensive costs involved. Insteadhypothesis H3 will be tested using a method of value assessment familiar to clientsand supported by public sector procurement regulations. The case study clientorganisation is required to gain approval for construction projects by operation ofstanding orders which include preparing a pre-tender estimate of production costs.Prepared by quantity surveyors to reflect current market prices irrespective ofdiscrete or framework procurement method, this estimate provides a benchmark ofvalue. Economic variations in the market are reflected by variance between the pretenderestimate and accepted tender.In order to examine the economic effects suggested by hypothesis H3 two groups ofmajor projects were closely matched for size according to contract value. 60 discreteprojects of a total value of £30,431,702.52 (mean = £507,195.04) with 60 frameworkprojects of a total value of £16,403,695.97 (mean = £273,394.93) were selected foranalysis. This was deemed a comparable match because minor projects under theframework arrangements (generally less than £21,000.00) do not represent medianvalues. Evidence of the pre-tender estimate and the tender total for a project isprovided through a quantity surveyors report (with an example included at Appendix14). In addition, where a tender other than the lowest is proposed for acceptance due182