Contract strategy. Traditional Approach Increasing Accelerated Traditional integration Management Contracting of design Construction Management and Project Management construction Design and Build/Turnkey Build Operate Transfer. Procurement : the acquisition of project resources.
Contract strategy • Traditional Approach Increasing • Accelerated Traditional integration • Management Contracting of design • Construction Management and • Project Management construction • Design and Build/Turnkey • Build Operate Transfer
Procurement : the acquisition of project resources • CONSULTANTS THE CLIENT’S • and/or MINISTRY CONSTRUCTION OWN • of WORKS PROJECT RESOURCES • SUBCON- CON- SUPPLIERS • TRACTORS TRACTORS
Vicious circles in construction procurement • 1. Client concern to 2. Competitive tendering • ‘get the best deal’ for all aspects of the • project • 5. Increase surveillance • and control systems • 4. Contractor/professional 3. Reduction in expected • opportunistic behaviour profit for contractor/ • directed at increasing professionals • expected profit
Organisation theory and the project process • Interdependence • Differentiation & specialisation • Integration & coordination • Universal vs contingency approaches
The traditional approach • appointment appointment • consultants main contractor • designing + constructing • GENERIC
The design-and-construct approach • appointment • design and construct company • tendering designing constructing
The divided contract approach • appointment appointment • consultants specialist contractors • designing tendering • earthwork • framework • mechanical work • electrical work • completion
Selection Process Exercise Draw up a list of criteria that a typical client might have in selecting a procurement path. What were/are the criteria of the client on your current project?
The range of management systems and their professional contract • Construction Management Design and Design, • management contracting manage manage and • construct • Professional Contractoral
Criteria for your project timing variation complexity quality price certainty competition division of responsibility professional responsibility risk avoidance
Contract strategies variables • Organisation form • Payment method
Contract strategy variables • Organisation form • Payment method • Overlap of project phases • Contractor selection process • Source of project finance • Contract documents • Leadership / Authority
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 • Flexibility • Price to be paid • The fallacy of cost certainty • Release of control
Comparisons Pros & Cons Traditional Design Build Management
Comparisons - Traditional • Advantages • Competitive tendering; • Bill of quantities makes for ease of valuation of varieties; • High quality and functional standards; • Cost certainty at start of construction; • Independent advice on most aspects of the process; • Clear lines of accountability; • Combination of best design and construction skills possible; • Flexibility for design changes.
Comparisons - Traditional • Disadvantages • Slow and convoluted decision processes; • Total project time longest of all options; • Low levels of buildability; • 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.
O :Builder Q :QS Eo :Services Engineer I :Structural Enginr :Architect * :Sub-contractor PURE DESIGN BUILD INTEGRATED DESIGN BUILD FRAGMENTED DESIGN BUILD Comparisons:DB Organisation
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 Traditional 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. Submit by March, 2003 to steverowlinson@.hku.hk