Contract strategy

1. 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

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

3. 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

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

5. The traditional approach • appointment appointment • consultants main contractor • designing + constructing • GENERIC

6. The design-and-construct approach • appointment • design and construct company • tendering designing constructing

7. The divided contract approach • appointment appointment • consultants specialist contractors • designing tendering • earthwork • framework • mechanical work • electrical work • completion

8. 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?

9. A comparison of USA and UK practice

10. The range of management systems and their professional contract • Construction Management Design and Design, • management contracting manage manage and • construct • Professional Contractoral

11. Management contracting systems

12. Management contracting systems (cont)

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

14. Contract strategies variables • Organisation form • Payment method

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

23. 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?

24. Construction contracts • Flexibility • Price to be paid • The fallacy of cost certainty • Release of control

25. Comparisons Pros & Cons Traditional Design Build Management

26. 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.

27. 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.

28. 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.

29. 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.

30. 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

31. 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.

32. 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.

33. Comparisons Time vs Cost Traditional Design Build Management

34. 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