Contract strategy Traditional ApproachIncreasing Traditional ApproachIncreasing Accelerated Traditionalintegration Accelerated Traditionalintegration Management Contractingof design Management Contractingof design Construction Managementand Construction Managementand Project Managementconstruction Project Managementconstruction Design and Build/Turnkey Design and Build/Turnkey Build Operate Transfer Build Operate Transfer

CONSULTANTS THE CLIENT’S CONSULTANTS THE CLIENT’S and/or MINISTRY CONSTRUCTION OWN and/or MINISTRY CONSTRUCTION OWN of WORKS PROJECT RESOURCES of WORKS PROJECT RESOURCES SUBCON- CON-SUPPLIERS SUBCON- CON-SUPPLIERS TRACTORSTRACTORS TRACTORSTRACTORS Procurement : the acquisition of project resources

1. Client concern to 2. Competitive tendering 1. Client concern to 2. Competitive tendering ‘get the best deal’ for all aspects of the ‘get the best deal’ for all aspects of the project project 5. Increase surveillance 5. Increase surveillance and control systems and control systems 4. Contractor/professional 3. Reduction in expected 4. Contractor/professional 3. Reduction in expected opportunistic behaviour profit for contractor/ opportunistic behaviour profit for contractor/ directed at increasing professionals directed at increasing professionals expected profit expected profit Vicious circles in construction procurement

Organisation theory and the project process n Interdependence n Differentiation n Differentiation & specialisation n Integration n Integration & coordination n Universal n Universal vs contingency approaches

appointmentappointment appointmentappointment consultantsmain contractor consultantsmain contractor designing +constructing designing +constructing GENERIC GENERIC The traditional approach

appointment appointment design and construct company design and construct company tendering designing constructing tendering designing constructing The design-and-construct approach

appointmentappointment appointmentappointment consultantsspecialist contractors consultantsspecialist contractors designing tendering designing tendering earthwork earthwork framework framework mechanical work mechanical work electrical work electrical work completion completion The divided contract approach

Selection Process Exercise Draw up a list of criteria that a typical typical client might have in selecting a procurement path. What were/are the criteria of the client on your current project?

A comparison of USA and UK practice

Construction Management Design andDesign, Construction Management Design andDesign, management contractingmanage manage and management contractingmanage manage and construct construct Professional Contractoral Professional Contractoral The range of management systems and their professional contract

Management contracting systems

Management contracting systems (cont)

Criteria for your project n timing n variation n complexity n quality n price certainty n competition n division of responsibility n professional responsibility n risk avoidance

Contract strategies variables Organisation Organisation form Payment Payment method

Contract strategy variables Overlap Overlap of project phases Contractor Contractor selection process Source Source of project finance Contract Contract documents Leadership Leadership / Authority Organisation form Organisation form Payment method Payment method

Selection Exercise Using the chart in “Thinking about Building” select a contract strategy for your current project. Is the path with the highest score the one that you actually chose? If not, why not?

Construction contracts n Flexibility n Price to be paid n The fallacy of cost certainty n Release of control

Comparisons Pros & Cons Pros & ConsTraditional Design Build Management

Comparisons - Traditional u u Advantages u u Competitive tendering; u u Bill of quantities makes for ease of valuation of varieties; u u High quality and functional standards; u u Cost certainty at start of construction; u u Independent advice on most aspects of the process; u u Clear lines of accountability; u u Combination of best design and construction skills possible; u u Flexibility for design changes.

Comparisons - Traditional u u Disadvantages u u Slow and convoluted decision processes; u u Total project time longest of all options; u u Low levels of buildability; u u Many organisational interfaces to be managed.

Comparisons - Design build Advantages   Single point responsibility;   Integration of design and construction;   Fixed price bids;   High levels of buildability;   Short total project times;   Client involvement in the process can be minimised;   Package deal systems offer off-the-shelf solutions;   Competition on price and product.

Comparisons - Design build Disadvantages   Lack of independent advice;   Valuation of variations   Detailed brief at outset;   High levels of buildability;   Changes can be expensive   Client control of quality is minimised;   Tender process can be expensive ;   Lower levels of competition at tender.

Comparisons:DB Organisation O :Builder Q :QS Eo :Services Engineer I :Structural Enginr  :Architect * :Sub-contractor PURE DESIGN BUILD INTEGRATED DESIGN BUILD FRAGMENTED DESIGN BUILD

Comparisons - Management Advantages   Early start to construction work;   Quick total project times;   Value management and buildability ;   Flexibility for change;   Competition for each work package;   Increased specialisation of trades contractor inputs;   Extra layer of management leads to strong organisation ;   In-depth planning of the whole process.

Comparisons - Management Disadvantages   No firm price at start of construction;   Complicated contractual relations and unclear liability;   Extra layer of management leads to extra costs;   Client must be deeply involved ;   Conducive to “buck-passing”;   Risk taken by client;   Conflict between professional participants ;   Changed roles.

Comparisons Time vs Cost Time vs CostTraditional Design Build Management

Selection Processes Mini-assignment Write a 2500 word report outlining a methodology for selecting a contract strategy. This should be written from the perspective of an advisor to a prospective client. Write a 2500 word report outlining a methodology for selecting a contract strategy. This should be written from the perspective of an advisor to a prospective client. Submit by March, 2003 to