The procurement strategies for the Olympic Stadium and the Aquatic Centre for the London 2012 Olympic Games

©2014 Textbook 117 Pages


The International Olympic Committee announced on the 6th July 2005 that the Games of the 30th Olympiad in 2012 will take place in the city of London.
This study aims to determine whether the procurement strategies chosen by the ODA are the right choice for delivering the two main venues in the Olympic Park in time, on budget and to the required quality. In order to answer this question, the approach of this study is to undertake extensive research in the subject area of construction procurement and to identify best practice in making procurement decisions for a project. In particular, the procurement strategies chosen by the ODA will be researched and their shortcomings identified. Based on this theoretical framework, the author will be able to undertake a systematic analysis of the decisions made by the ODA to procure the two most prestigious venues in the Olympic Park. As a main part of this analysis the author will conduct semistructured interviews with key people involved in the Olympics and with experts of MSc Management in Construction - the industry.


Table Of Contents

Olympic Delivery Authority
CH2MHill, Laing O'Rourke and Mace
Office of Government Commerce
National Audit Office
London Organising Committee for the Olympic Games

The introduction of this thesis details the background information to the subject area,
my motivation for the study and the research objectives. It also defines the limitations
and the significance of the study and finally, an overview of each chapter is presented.
1 0
Background information
The International Olympic Committee announced on the 6
July 2005 that the Games
of the 30
Olympiad in 2012 will take place in the city of London.
Three years later, a lot of preparation work has already been done to get London ready
for hosting the world's most prestigious sporting occasion. Over 192 buildings have
been demolished, one million cubic metres of soil excavated, two six kilometre
tunnels and 200km of cabling are completed, and most of the contractors for the new
sporting facilities are appointed.
The Olympic Park will be at the centre of this large development project and spans
two million square metres of the Lower Lea Valley in East London. Most of the new
build venues and sporting facilities will be sited here; amongst them are the two
flagship venues the Olympic Stadium and the Aquatics Centre.
At the heart of the park will be the Olympic Stadium. The brief for the stadium
published by the Olympic Delivery Authority (ODA) outlines the venue as a
spectacular 80,000-seat arena for the Olympic and Paralympic games, which is to be
designed to host the athletics competitions and the opening and closing ceremonies.
The masterplan for the stadium calls for the conversion of this structure into an
athletics-led venue with capacity for 25,000 spectators after the games.

Graphic No 1-1: The Olympic Stadium for the London 2012 Olympics (Building 2008)
The Aquatic Centre, to the southeast of the park, contains two 50m pools and a 25m
diving pool with seating for approximately 20,000 people. After the games, the
capacity will have to be reduced to 3,500 seats and the centre's facilities made
available to the local community. The building will then have to house a new health
and fitness centre as well as facilities for nearby sports clubs.
Graphic No 1-2: The Aquatic Centre for the London 2012 Olympics (Building 2008)
The construction and operation of these sports facilities for the Games will be
undertaken by the London Organising Committee of the Olympic Games (LOCOG).
The delivery of the venues in time, within budget and to the required standard,
however, is the responsibility of the Olympic Delivery Authority (ODA). The ODA is
a non departmental public body and acts in essence as the delivery organisation for all
the construction activity.

1 1
Motivation for the study
The rather difficult task which the ODA is facing is to deliver the above-mentioned
facilities to an immovable deadline, to stay within budget, and at the same time to
deliver the venues with astonishing design and build quality. These are the main
criteria against which the success of this project will be measured.
Additionally, this enormous project is exposed to great political pressures and
regulations. EU & National regulations for procuring the venues apply and
commitments such as `Value for Money' are to be considered by the ODA when
making its procurement decisions.
With this in mind, the ODA have decided to procure the Olympic Stadium and the
Aquatic Centre under the Design & Build route.
For both venues the ODA has
announced to use the New Engineering Contract (NEC) target cost contract.
Based on these procurement decisions and on the comments made by Tessa Jowell,
the Olympics Minister, that the main schemes in the Olympic Park will not be design-
led a debate has started between leading architects and the ODA. The argument is
about the role of the design in the procurement of the Olympic venues and the way the
ODA goes about selecting its preferred contractors.
Jack Pringle, the RIBA president, states that the use of Design & Build contracts
would compromise the quality of design (Building 2006). He openly criticised the
ODA strategy for the use of Design & Build contracts and said that "It is important
that the process is not contractor-led, the crude old Design & Build...let's not
sacrifice games excellence on the altar of the crudest form of reliable delivery"
(Building 2006). Jack Pringle further argues that the ODA is acting too cautiously and
by putting risk factors ahead of design at this early stage does not show a great deal of
confidence (Building 2006).
In addition, Lord Rogers declares that the Design & Build contracts will lead to
venues without design flair. He claims, "Every Olympic Stadium I can think of went
through a design-led procurement process and I don't know why London is not doing
the same. There is no proof that Design & Build contracts are cheaper in terms of
value." (Sherwood 2006)

The other unpopular decision made by the ODA was to scrap the shortlist of
contractors for procuring the Olympic Stadium and to go with only one bidder. The
original plan for procuring the stadium was to select a preferred contractor via a short
list of 3 to 6 bidders, which would help the ODA to work out the design and scope of
the project.
However, the ODA decided not to go with this shortlist. Many consultants argue that
this procurement decision will not only lead to a compromised design for the stadium
but also to raising costs due to the absence of competition.
When looking at the procurement process for the Aquatic Centre a similar situation
can be found. Despite the fact the ODA entered into a competitive dialogue with a
short list of three contractors, two of them have abandoned the negotiations before any
tenders could be submitted, leaving the ODA again with only one bidder for this
Matthew (2006) supports the above argument concerning costs by saying that it is
unimaginable that London will not deliver the Olympic venues and infrastructure in
time. He suggests that the real risks faced by the ODA are cost, quality and
functionality and says that "Cost escalation is one of the biggest single risks.
Experiences of other games and similar events indicate that as time progresses,
increasing volumes of resources have been applied to overcome obstacles and costs
have risen accordingly." For that reason, not having any competition in terms of price
and quality seems to be a controversial decision in what is regarded one of the largest
and most complex construction projects in the UK.
An auditor of the National Audit office (NAO) also shares the concerns about rising
costs for the infrastructure spending in the pre-games period and says that uncertainty
remains over price inflation and how much contractors will charge for the construction
of the venues (NCE 2007). The Public Accounts Committee report, published in April
2008, agrees with the above and suggests that contracts should have been awarded
based on effective competition between suppliers (NCE 2008).
This debate about rising costs is not unfounded under the light of the development of
the total budget for the Games in the recent past. The overall budget for the Olympic
Games submitted with the bid to the International Olympic Committee (IOC) was
£2.4bn, back in 2004. The figure then rose to £6bn just one year after the games were

awarded to London in 2005. In December 2007, Tessa Jowell has announced the final
figure of £9,325bn.
These spiralling costs are also reflected in the development of the budgets for the
individual projects. At the bidding stage for the Olympic Games in 2005 the Aquatic
Centre was estimated at £73 million. Two years later the budget figure rose to £215
million. Balfour Beatty, as the sole bidder, then submitted costs totalling £230 million
and now the cost is agreed at £242 million. The Olympic Stadium was originally
priced at £280 million in London's bid document in 2005. In 2007 a final figure of
£496 million was announced and only a few months later this estimate has risen to
£525 million.
These debates and cost developments have paved the way for this dissertation. The
scope of this study, the hypothesis and the main research objectives are outlined
1 2
Scope and aim of present work
It is clearly apparent from the above paragraphs that in the Pre-Olympic phase (2005-
2011) the construction of the Olympic venues will be at the centre of public attention,
and scrutiny. Construction industry practices will be placed under the microscope in
the time leading up to the Games, especially the ODA's developed and introduced
strategy for procuring the infrastructure.
The study aims to determine [hypothesis] whether the procurement strategies chosen
by the ODA are the right choice for delivering the two main venues in the Olympic
Park in time, on budget and to the required quality.
In order to answer this question, the approach of this study is to undertake extensive
research in the subject area of construction procurement and to identify best practice
in making procurement decisions for a project. In particular, the procurement
strategies chosen by the ODA will be researched and their shortcomings identified.
Based on this theoretical framework, the author will be able to undertake a systematic
analysis of the decisions made by the ODA to procure the two most prestigious venues
in the Olympic Park. As a main part of this analysis the author will conduct semi-
structured interviews with key people involved in the Olympics and with experts of

the industry. Both the literature review and the interviews will help to achieve the
main research objectives of this study, which are summarised below:
x Obtain a better understanding of construction procurement and the key
areas affecting the project success
x Identify best practice in selecting a procurement method and to make out
the pitfalls and the shortcomings of the procurement strategies that are
used for both venues
x Understand why these procurement decisions were made and identify if
best practice was followed by the ODA during its procurement process and
if the pitfalls of the chosen strategies were counteracted
x Determine if the chosen procurement strategies fit the client & the project
1 3
Limitations of the study
Despite the above objectives it is understood by the author that whilst the procurement
strategy is an important determinant for project success, other factors, such as
construction performance, client-contractor relationships, transaction cost and supply
chain management will also play an important role in delivering these projects within
the set parameters. Such factors could not be taken into consideration due to the
university guidelines that apply to the scale of this study.
1 4
Significance of the study
The significance and importance of this study cannot be underestimated, as this study
will effectively test the procurement decisions made by the ODA. The author feels
that it is important to question the approach to such projects taken by the government,
especially when a large amount of taxpayers' money is spent. Recent national and
international examples that have experienced underperformance and as a result have
wasted large amounts of public money are the Quebec Olympic Stadium, the 2004
Olympics in Athens or the Scottish Parliament building in Holyrood. It is therefore
believed that this study will help to increase the understanding for the procurement
decisions made by the ODA and to establish their effectiveness in helping to deliver
the two main venues successfully. This has not been done before for these two

1 5
Chapter overview
3 4
Literature review
In order to answer the research question the author will conduct a literature review of
current knowledge on construction procurement in the first part of the thesis. Basic
terminologies as well as current ideas in procurement are discussed and the available
strategies are explained. Furthermore, the author clarifies the theory behind the
procurement-strategy selection process and how the best strategy can be selected. This
is then followed by a detailed review of Design & Build, competitive dialogue and
target cost contracts. These are the main elements of the procurement strategies for the
Olympic Stadium and the Aquatic Centre. The author will investigate their
effectiveness, shortcomings and critical success factors. The findings of this review
will assist to build the theoretical framework for the further research in this study.
3 5
The research method used in this study is semi-structured interviews with people
involved in those projects and experts of the industry. The fourth chapter gives
information about why the author has decided to use this method as the instrument for
gathering essential data, what the characteristics of this research method are and how
the sample will help to answer the research question. The chapter also highlight why
other methods have been discounted.
3 6
Data & Results
In the fourth chapter the author will present the results of the empirical investigation.
This presentation comprises of an interview summary, which will be substantiated
through selected interview participants quotes.
3 7
Analysis and discussion
This chapter will analyse the results from the interviews, discuss the likely
consequences of procurement decisions made by the ODA. This analysis will address
the main research objectives and allow for conclusion to be drawn in the final chapter.
3 8
Summary and Conclusions
In the last chapter a brief statement of the original problem is given. It will be
concluded whether or not the procurement strategies chosen for the Olympic Stadium
and the Aquatic Centre will contribute to the successful delivery of these projects.

This is followed by an answer to the essential question: "What has been achieved?"
and a short discussion of the future.

Literature review
1 6
Sooner or later, every client to the construction industry will be confronted with the
decision of how best to procure a project in order to minimise delay in commencement
and completion, minimise risk, reduce disputes and disruption, obtain value for money
and deliver the project within budget constraints and to set quality standards.
Over the past years researchers have attempted to define procurement strategies
depending on the type of client involved and the characteristics of the project.
Masterman (2004) provides a good background on this subject and says that although
the determination of an appropriate procurement strategy is not the only reason for
good project performance it is a significant contributory factor to achieve a high level
of project success. Bower (2003) also argues that because of the fact that risk
allocation, project management requirements, design approach, and the involvement
of consultants and suppliers are very much linked together with the chosen
procurement strategy, the decision on which strategy to choose has a major impact on
the timescale and the overall cost of a project.
Despite the fact that Walker (1995) maintains the view that it is the relationship
between team members and their subsequent performance that is the most significant
factor in determining project success, the majority of research suggests that the
decision of what procurement strategy to use is a crucial one to make considering the
effect it will have on the following stages of the project.
Based on the above, it can be said that the procurement strategy chosen by the
Olympic Delivery Authority (ODA) for the two main venues in the Olympic Park will
have an impact on the successful project delivery. By choosing these strategies the
ODA have set the stage on which the project must play out.
Initially, the author will step back a little from the research question and establish the
basic terminology of construction procurement.

1 7
Terminology of construction procurement
Procurement in construction generally embraces all those activities undertaken by a
client seeking to construct or refurbish a building. The literature, however, is
somewhat inconsistent in terms of the terminology it uses to describe procurement in
construction. It is variously referred to as method, path, strategy or system. For that
reason, it needs to be clarified what exactly is meant by these terms in the context of
construction procurement and how they will be used by the author for the purpose of
this work.
A typical construction project passes through a number of phases, from inception
through to completion, with the inception phase commencing immediately after the
client decides to construct a building. According to Masterman (2004) this inception
phase is concerned with establishing a framework for successful project completion,
the so called "project strategy".
The formation of a project strategy entails weighing up the benefits, risks and
financial constraints that are attached to a project (JCT 2008). These will affect the
choice of contractual arrangements. Masterman (2004) adds to this definition and says
that developing such a project strategy is also concerned with carrying out a detailed
assessment of the client's characteristics, the client's overall needs and objectives and
also identifying the risks inherent in the project and the best environment to manage
the design and construction.
This environment is created through the selection of an appropriate procurement
strategy or procurement system, which in turn is made up of three elements. The main
element is the procurement method or route, which is then complemented by the form
of tender and the type and form of contract (Hanif 2007). All of these are depicted in
the below Graphic No. 2-1.

Graphic No. 2-1: Elements in a Procurement Strategy or System (Hanif 2007)
Procurement Strategy / System
Procurement method
/ route / option
Form of tender or
contractor selection
Type of contract &
Form of contract
Management Contracting
/Constr. Management
Design & Build
Prime Contracting
Single stage tendering
Lump sum contracts
Measurement contracts
Cost reimbursement
Target cost contracts
Two-stage tendering
Competitive Dialogue
Framework Agreements
Graphic No. 2-1: Elements of a procurement strategy or system (Hanif 2007)
In order to finalise the discussion about the terminology the author would like to add
that McDermott (1999) argues that the term procurement system should include not
only the method used to design and construct a building but also the cultural,
managerial, economic, environmental and political issues that might be generated by
the decision to procure a project.
Whilst Masterman (2004) agrees that those aspects surrounding the procurement
system are to be considered when making the choice of what system to use he
contends that those surrounding aspects should not be part of the procurement system
itself, but rather a component or sub element of the project strategy. He substantiates
this argument by saying that "the sub elements do not have the ability to change the
procurement systems themselves but effect the way in which the systems should be
selected and used" (Masterman 2004).
The author agrees with Masterman on this point and for the purpose of this work will
adopt his view and treat the procurement system itself as the method of implementing
the project and the sub elements as the factors that will influence the choice of what
system to use.
In the following the author will therefore examine the impact and importance of those
sub elements, which are the characteristics of the client organisation, its involvement
in the procurement process and the understanding of dealing with the risks inherent in
a construction project. These are fundamental to the selection of the most appropriate
procurement system and its elements later on in the process.

1 8
Client identity and characteristics
The client, as the sponsor of the construction process, can be defined as "the
organisation, or individual, who commissions the activities necessary to implement
and complete a project in order to satisfy its needs and then enters into a contract with
the commissioned parties" (Masterman 2004).
Clients to the construction industry, however, exist in a very broad spectrum ranging
from experienced clients who procure construction work on a frequent basis and
understand the industry, to very small and inexperienced clients who are likely to only
ever build once in their lifetime. Naturally, the client's level of experience and
understanding will have an impact on the procurement process and different clients
with different characteristics will require different approaches as to how their projects
are procured.
The literature on this subject can be summarised as consentaneous and the
identification of the client characteristics is widely accepted as an essential step at the
beginning of the project in order to make an informed choice from all available
procurement options. Already in 1984, Cherns and Bryant recognised the importance
of identifying the real client and pointed out that failure to exercise caution in this
respect can cause major difficulties for the project's performance.
The Scottish Parliament building in Holyrood acts a contemporary example for this
and shows what can happen if a proper identification of the client is not carried out. It
also acts as a reminder of the fact that clients do not always fit the chosen procurement
method. The Holyrood Project was delivered 3 years later than scheduled, and with a
final price tag of £414 million, ten times the originally estimated cost.
Whilst the client on this project was more than willing to become involved in the
project it was characterised as a very inexperienced political client with little
familiarity to either construction or the sponsorship of major construction projects
(Fraser 2004). In addition, the project was not only large in size but also highly
complex and of non-standard design. Despite those characteristics, the procurement
method used was construction management, where most of the risk lies with the
client. One of the important conclusions from the public inquiry into the failure of this
project was that there was no procurement strategy document prepared and no
reasoned analysis supporting the adoption of the chosen procurement method and in
how far it would fit the nature of the client. As a consequence, "there was no

systematic assessment of the risks implicit in the chosen procurement route and how
best to manage those risks" (Auditor General of Scotland 2000, Para 3.20).
This negative example shows that the client's experience and its ability to participate
in the procurement process are factors that determine the success of the chosen
procurement method in terms of achieving a high quality building, keeping in control
of the budget, and finishing on time.
In order to ensure that these factors can easily be established at the outset of a project
researchers like (Duffy 1992), (Galbeith 1995), (Masterman 2002), or (Naphiet and
Naphiet 1985) have attempted to define certain categories of clients. However,
Masterman (2004) recognises that such categorisations will not be exhaustive enough
to capture all various forms and subspecies of clients. He concludes that "the
characteristics of clients that are most likely to be relevant to the implementation of
construction projects, and more particularly to affect the choice of the most
appropriate method of procurement" are the type of client and its experience.
The two main types of clients that were identified are the public and the private client.
The characteristics of these two types differ mainly as a result of the source of funding
and the legal framework they operate in, which in turn affects their likely approach
and attitude towards project procurement.
The second important characteristic is the level of the client's experience of
implementing projects in the construction industry. In support of the argument made
by Masterman (2004), Moorledge (1987) also recognises this as a critical
characteristic because of the effect it can have on the client's behaviour during project
execution. Especially in case of megaprojects like the Olympic Games it is necessary
to understand the anatomy of such projects in order to be an effective player in the
project development (Flyvberg et al 2007). The main characteristics that are to be
established in order to determine the level of experience of the client team are:
x Knowledge and understanding of the construction industry and its
established procedures
x Regularity of involvement with the construction industry and in particular
with large infrastructure projects
x The expertise of client team in the overall management of construction

x The ability to generate an all-inclusive brief with prioritised objectives in
terms of cost, time and quality
x The ability to be constructively and consistently involved in the project
from start through to completion
In addition to the above characteristics it needs to be mentioned that organisations are
complex bodies, and it is therefore necessary to determine the organisational
arrangements in order to refine the profile of the client. It was suggested by Handy
(1985) that the organisational arrangements and culture of any client establishment is
determined by its history and ownership, size, the technology it uses, its goals,
objectives, environment and people.

1 9
Client needs, requirements and project objectives
Notwithstanding the importance of knowing the client's identity as a basis for
choosing a suitable procurement method, it is the client himself who is able to
influence the project outcome by the actions it undertakes whilst procuring a
construction project.
The role of the client is an important one to be considered in the context of
construction procurement because it is the client who provides the most important
perspective on the project performance and whose needs must be met by the project
team (Latham 1994).
Moorledge et al. (2006) found that especially for large and complex projects, like the
Olympic Games, the overall outcome is often determined not only by the skill and
quality of the project team, but also by the active involvement of the client body
during the whole project, particularly during the initial stages of the procurement
process. One of the key tasks is the client's statement of what is required or, in other
words, the formulation of the project brief. An accurate and definitive statement of
requirements will not only enable the choice of the most appropriate procurement
system but also aid the control of all construction activities (Masterman 2004).
Masterman argues that "too often, an early decision is made on building projects to
appoint a team of design consultants rather than a single unbiased adviser, with the
result that a procurement system is often chosen by default rather than design."
Many detailed studies and reports were produced over the last three decades, such as
Bennett and Flanagan (1983), Hewitt (1985) or The University of Reading (1988) that
have endeavoured to determine typical client requirements. It was found that time,
cost and quality still remain the main focus of construction clients. Also Masterman in
his study in 1994 attempted to prioritise the needs of clients and concluded that "there
is little reason to doubt that quality, cost and time remain client's primary objectives".
Importantly, he pointed out that the specific definition of these criteria will vary from
client to client and project to project and it is their accurate definition that sets the
stage for all subsequent activities of the project.
It is therefore considered important to briefly highlight the considerations that need to
be given to these three criteria by the client and how they affect each other.

An important task the client has to fulfil in order to enable a successful project
delivery is the provision of funding. Financial parameters need to be clearly set down
from the start and as accurately as possible by the client. Only then can the objective,
to complete the project without exceeding the available budget, be met. This involves
having a clear understanding of the funds required and any budget constraints, which
in turn will give guidance of how best to approach the project in terms of its
procurement and what time and quality levels are realistic.
However, before the client can make its decision on what time objectives are realistic
it has to carefully look at the project at hand. If the client is faced with an immovable
deadline then the complexity of the design and an early contractor involvement to
advise on design and construction logic must be considered. Failure to do so will
evoke a direct relationship between time, cost and quality, where the cost will spiral
because works have to be speeded up at a later date or the quality has to suffer
because design compromises have to be made to meet the deadline.
Despite the fact that cost is often the main driver during the development of a project,
quality is the main expectation (Abraham and Farrell 2003). Again, it is the client who
has the greatest control over the design quality of the project, as he chooses the
procurement method, appoints the consultants and sets the design standards. His
leadership is required to ensure that the briefing process is carried out effectively to
avoid a situation where the building produced is not fit for its purpose, despite being
on time, within budget and well constructed (Wardrop 1996).
3 9
Prioritisation of the client needs
The aim of the procurement system is therefore to balance these primary objectives.
Very often clients commence projects stating that all three variables are of the same
importance. Masterman (2004) states that these three primary objectives are
interrelated and conflicting in such a way that the achievement of all three at the same
time, at the same level and at the same project is next to impossible. The focus of a
client on only one key criterion will therefore have an effect upon the other two
(Construction Excellence 2004). Such a prioritisation will normally have an impact on
the choice of the most suitable procurement system. The below Graphic No. 2-2
visualises this aspect.

Tension Triangles
The tension between time, quality and cost is illustrated in the top diagram.
As more of any one element is demanded, lines to the other two become stretched.
Thus, in the diagrams [1.2.3.] a decision has been taken to reduce the timescale, to
lower the cost or to increase the quality. This results in increased pressure on the
remaining two criteria in each scenario, as their threads are lengthened.
ctionality, performance or appearance)
(speed or certainty of completion)
(Price level or cost certainty)
Graphic No 2-2: Tension Triangles (University of Nottingham 2008)
Walker's (1996) findings agree with the above and he adds that at least one of those
main three objectives, if not two, will need to be sacrificed to some extent, and
individual clients will need to weigh each of the criteria to suit their own
organisation's particular circumstances and the project's technical, commercial and
other characteristics.
The weighting of each of those objectives will therefore vary from project to project
and from client to client, but the exact weighting needs to be accurately identified and
clearly determined in order to select a suitable procurement system.
It can be summarised that researchers are unanimous on the subject of the client role
and the fact that the effectiveness of a client in developing the project brief and
defining and prioritising the above described main objectives will heavily influence
the project outcome.
2. 3.

2 0
Project Risk
Projects involve commercial risk. This is one of the most significant defining
characteristics of projects and project strategies. Researchers, unanimously, recognise
the critical relationship between risk and cost as an important one to be understood by
the client before making any procurement decisions.
Construction projects unavoidably involve certain risks and these risks can be
categorised into physical works, delay and disputes, direction and supervision,
damage and injury to person and property, external factors, payment, law and
arbitration (Abrahamson 1984, Bruni 1985). The client will have to decide where the
liability for those risks lies and to what party they are allocated. Is the risk to be with
the contractor, the designer, the consultants or the client itself? It is in the nature of
every contract to allocate risks and to make one party financially liable should a risk
occur. This is why risk becomes a commercial concern and the chosen type of
contract, within a certain procurement system, will ultimately dictate the financial
implications and the degree of the commercial risk for the client.
It can therefore be said that in the same way the definition and prioritisation of the
main project objectives impacts on the selection of the most appropriate procurement
approach, the required allocation of risk influences the choice of what procurement
method and contract structure is the best fit (Murdoch 2005).
When trying to determine the most suitable allocation of a risk it is in fact the
formulation of the most suitable response to that risk that is sought. Here, the client
has a range of possible options, which are the transfer, retention, avoidance or
reduction of risk. The most important responses in the context of construction
procurement are the transfer to the contractor or the retention of the risk by the client.
Publicly financed organisations' are generally very risk adverse and clients have been
extremely shy of retaining risks. As such, risks have been transferred to the contractor
by default rather than assessment.
The author feels that this is an important point to mention and a question that is to be
answered when assessing the procurement decision made by the ODA for the two
flagship venues. Passing every risk to the contractor is, as a general principle, not
sensible, especially those risks that are difficult to assess (Murdoch 2005). This is
because contractors usually include contingency amounts in their tenders as a means

of pricing the uncertainty of whether or not a particular construction risk might occur
and to what extent it can be controlled (Bower 2003).
For that reason, transfer of risk is not always in the best interest of the client. In
particular on large infrastructure projects such as the Olympics risks should not simply
be transferred by default. The construction of the venues for reasons of size and
innovation alone, combined with the time constraints, attracts many risks. These can
cause the costs of the whole project to overrun significantly. These risks can only be
acknowledged and their impact reduced through careful identification (Flyvberg et al
2007). This will ensure that risk is allocated to the party that is best suited to manage
it. Such an approach to risk will support the selection of the most suitable procurement
system and will guarantee that risk is dealt with at the minimum cost to the project.

2 1
Procurement Method Selection
Now that the important role of the client during the initial stages of the project has
been discussed and the basic principle of risk management put into the context of
construction procurement, the author will turn to the selection of the most appropriate
procurement method, which is an important element of the procurement system.
Its selection is effectively a decision-making process. This chapter is concerned with
the question of how this decision should be made to suit the client's needs and
objectives and the author will explore the practice and theory behind this decision-
making process.
4 0
The selection of a procurement method in practice
It is argued by Masterman (2004) that the decision making process in practice
"usually begins with very little understanding of the decision situation, a vague notion
of possible solutions and very little idea of how to evaluate them and choose the most
viable solution".
Moreover, he suggests that the selection in practice features a complex process that
often takes considerable time to complete and is influenced by a number of parties. He
adds that the way in which many clients and their advisors select their procurement
method can be haphazard, ill-timed, and lacking of logic and discipline. This poses the
question, how can a strategy be chosen and what are the principles of best practice in
procurement method selection?
Across the literature on this subject, the necessity is stressed to carry out the selection
process before a contractor is appointed. In other words, the timing is seen as
important. This is to ensure that an unbiased selection of the most appropriate
procurement method can be made. Whilst this seems to be a very logical approach,
Masterman, in a study where he surveyed sixty-two clients, found that twenty-three
percent of the clients did not follow this recommended and logical practice. Due to the
fact that most of them were experienced clients he concludes that many clients do not
seem to have recognised the importance of this process in the past.
The actual procurement method selection then starts with the identification and
evaluation of all available options and the evaluation of their suitability for the project
at hand. It is this step in the selection process that requires an independent approach to

ensure that the later selection is not biased and that the project criteria are matched to
the characteristics of the most suitable procurement method.
Nutt (1984), Mintzberg et al. (1976) and Hickson et al. (1986) examined more than
200 projects and clients and Masterman (2004) builds on this research by identifying
five distinct categories of system identification and evaluation. These are the
analytical search, consultative search, historical evaluation, intuitive evaluation and
policy compliance.
Examining all the clients involved in this study he found that only one-quarter have
carefully analysed and established the project criteria in order to match them with the
characteristics of the most appropriate procurement method. Primarily public clients
had used historical evaluation and policy compliance for this part of the selection
process. Masterman (2004) suggests that this indicates an insufficient understanding
of the selection principles resulting in a reliance on past experience. He follows that
when such experience or policy compliance is dictating the selection process then
often little consideration is given to changes in the project typology, the client's own
needs or the current state of the construction market. The decision is then biased.
Considering the above findings and the importance for public clients to obtain value
for money Masterman (2004) poses the question as to how this requirement can be
satisfied when using a non-analytical examination or no examination at all.
The author therefore recognises this as an important point that would need to be
investigated in relation to the Olympic Stadium and the Aquatic Centre. The literature
on this subject confirms that, especially for temporary public clients like the ODA, the
selection of a suitable procurement method should be carried out in an objective and
disciplined manner.
4 1
The selection of a procurement method in theory
In order to make a disciplined and objective selection and to stay within the
framework of the project strategy and project brief, researchers agree that several
theoretical project assessment criteria should be considered by the client at the
identification and evaluation stage. Some of the typical project assessment criteria that
the author identified across the literature and their relation to the main 3 project
objectives are listed in the below Table No 2-1.

Main project objectives
expressed within the project brief
Related Assessment Criteria
acting as the key determinants for the selection of the
most appropriate procurement method
related Assessment Criteria:
x Certainty of final cost
x Value for money
x Lowest possible tender
Cost & Time
related Assessment Criteria:
x Ability to change design
x Risk Management: Transfer,
Elimination, Avoidance, Minimisation
of risk
x Complexity of project
related Assessment Criteria:
x Minimum design and construction
x Certainty of completion date
x Early Start on site
related Assessment Criteria:
x Innovation
x Appearance
x Functionality
Related Assessment Criteria:
x Responsibility and involvement
x Accountability
x Management (i.e. single point of
Table No 2-1: List of "key determinants" for procurement suitability and their relation to the
main project criteria time, cost, and quality
Many theoretical models have been established based on the above criteria to aid the
selection process. Masterman (2004), however, suggests that the early models from
HM Treasury's Central Unit on Purchasing (1992), Mohsini and Davidson (1989) or
Birrell (1992) are only very basic means and can only act as a `primer for discussion'.
Nowadays, the selection process has become more and more complex as a result of
the increasing technical complexity of projects, the need for speedy start and
completion, and the continuing proliferation of different methods. This has led to the
development of more sophisticated and systematic approaches of system selection and

researchers over the years have attempted to develop more systematic approaches for
the procurement method selection (Masterman 2004).
Examples are Skitmore and Marsden (1988), Franks (1990), Bennett and Grice
(1990), the Construction Round Table (1995), (Chan et al. 2001), (Cheung et al.
2001), (Luu et al. 2003) or the model included in the OGC Procurement guide (2007).
Masterman (2004) carried out a trial based on the model of Skitmore & Marsden to
establish which procurement system should have theoretically been used on the
projects that were part of his study. He found that two-thirds of the choices he
examined were to some degree inappropriate and did not match with the outcome of
the theoretically assessment.
Although this finding was heavily conditioned by Masterman he concluded that a
large amount of clients adopted an incorrect approach. The method they chose was not
the best fit to their main project objectives.
Despite the objections raised by Moorledge et al (2006), who argue that there is no
such thing as universal "best practice" in construction procurement it is suggested by
Masterman (2004) that the above models are definitely helpful for identifying the
procurement systems that would not be suitable for a particular project or client. Their
application can assist in narrowing down the choice of systems that clients should
consider. This view is shared with other researchers who confirm that despite the fact
that these theoretical models cannot make the decision for the client they can act as a
very good tool of assistance when evaluating the available procurement methods. This
is because they give a good indication of the weaknesses and strengths of all available
Avoidance of using such tools means that clients have to rely on their own expertise
or the knowledge of external consultants and have to trust that such sources have a full
understanding of the characteristics of all available options. Masterman (2004) and
Skitmore and Marsden (1988) highlighted that this is not the case and found that the
knowledge of many consultants on the available procurement methods is incomplete.
In addition, Galbraith (1995) suggests that especially experienced clients tend to drive
the process with their knowledge about what has worked in the past and are therefore
influenced more by experience rather than by project specific factors.


Type of Edition
ISBN (Softcover)
File size
748 KB
Publication date
2018 (June)
Olympic Stadium Aquatic Centre London 2012 Olympic Games

Title: The procurement strategies for the Olympic Stadium and the Aquatic Centre for the London 2012 Olympic Games
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117 pages