What is

procurement?

The overall
process of
acquiring
construction
work or
services
What should be
considered
when selecting
a procurement
route?
The specifics of
the project
The client
objectives
regarding cost,
time, control,
quality and risk
Traditional / general contracting
What are the
main
procurement
methods?

Design and build

Management contracting
Construction management

What is
traditional
procurement?

The design is completed by the clients

design team before competitive tenders are
invited and a main contractor is employed to
build what the designers have specified

How does
traditional
procurement
work?

The contractor takes responsibility and

financial risk for the construction of the works
to the design produced by the clients design
team for the contract sum within the contract
period

The client takes the responsibility and risk

for the design and design team performance

When might
traditional
procurement be
appropriate?

If the employer has had the design

prepared
If the design is substantially completed at
time of contractor selection
The client wishes to retain control over the
design and specification
Cost certainty at start on site is important
The shortest overall programme is not the
clients main priority

What contracts
might be used?

JCT minor, intermediate, standard with

quantities

What are the

advantages of
traditional
procurement?

Competitive fairness and transparent

process increase value for money
Design led can ensure quality
Price certainty before commencement
Well known procedures
Changes are reasonably easy to arrange and
value

What are the

disadvantages?

Overall project may have a longer

durationthan others sequential process
No contractor design and planning input
Strategy based on price competition could
lead to adversarial relations
Dual point of responsibility design team for
design and contractor for construction
If design not complete at time of tender, cost
and time certainty are reduced

What is design
and build?

Where the contractor is responsible for the

design, planning, organisation, control and
construction of the works to the employers
requirements

How does D&B

work?

The employer gives the tenderers the

Employers Requirements and the
contractors respond with the Contractors
Proposals, which include the price for the
works

When might D&B be appropriate?

Where there is a need to make an

early start on site can overlap
design and construction
Where the client wishes to minimise
their risk not got responsibility for
design
For technically complex projects
benefit of contractors expertise
Where the employer does not want
to retain control over the design
development

What contracts might be used?

JCT DB 11

What are the advantages of design

and build?

Single point of responsibility for

design and construction
Earlier commencement on site
Early price certainty
Benefit of contractors experience
harnessed during design

What are the disadvantages of

D&B?

Client may find it hard to prepare a

sufficiently comprehensive brief
Client has to commit to a concept
design early
Variations from the original brief are
difficult to arrange and often
expensive
Harder to compare tenders harder
to determine if getting value for
money
Ease of fabrication may be
prioritised above aesthetic quality
May be less real competition due to

fewer design and build firms

How much design input will the

contractor have under D&B?

This depends on the amount of

design work the employer has
already had completed at time of
tender
Can range from full design to
production information and
coordination only

Under D&B - who carries out the

design for the contractor?

It may be outsourced to a separate

design company (contractor retains
responsibility)
They may have in-house design
capabilities
OR the clients team may be
novated

What is novation?

A new contract that transfers the

rights and obligations of one
contractual party to a new third
party i.e. design rights and
obligations of architect transferred
to contractor

If the design team is novated, what

should the client put in place?

A collateral warranty to the design

team to give them remedies for
breach of contract

What is management contracting?

A management contractor is
employed to contribute their
expertise to the design and to
manage construction and is paid a
fee for doing so

How does management contracting

work?

The Management Contractor has

direct contractual links with all of the
works contractors
They have the responsibility for the

construction works without actually

carrying them out
Not all of the design need be
completed before the first works
contractors start work
The MC selects the works
contractors through competitive
open book tenders
The client reimburses the cost of
these packages to the MC plus their
fee
The MCs role is low risk get
prime cost plus a fee

When might management

contracting be appropriate?

Where the client does not want cost

certainty before commencement
Where an early start on site in a
priority

What contract might be used?

JCT Management Contract 05

What are the advantages of

Management Contracting?

Overall project duration is

shorter due to overlapping design
and construction
There is contractor contribution to
the designand planning process
Changes can be accommodated in
packages not yet let if they have no
further impact
The works are let competitively at
current market prices on a firm price
basis

What are the disadvantages of

Management Contracting?

The price for the works is not

received until the last package has
been let
Changes to the design of later
packages may affect packages
already let - expensive

There is little incentive for the MC to

reduce costs
May become a post box system
In practice, the MC has little legal
responsibility for the defaults of the
works contractors

What is construction management?

The employer places a direct

contract with each of the trade
contractors and utilises the
expertise of a construction
managers who acts as a consultant
to coordinate the contracts

How does it construction

management work?

The trade contactors carry out the

work
The construction managers
supervises the construction process
and coordinates the design team
The CM has no contractual links
with the trade contractors or
members of the design team
Their role includes preparation of
the programme, determining
requirements for site facilities,
breaking down the project into
suitable works packages, obtaining
and evaluating tenders, coordinating and supervising the
works

When might construction

management be appropriate?

On large, complex projects were the

advantages of CM can be put to use
e.g. upfront buildability knowledge,
programme advise, specialist input
from trade contractors
Where early start on site is key
Flexibility in design, procurement,
construction strategy
Where price certainty before

commencement is not key

Where the client is experienced in
construction

What contracts might be used for

construction management ?

JCT - Construction Management

Agreement CM/A AND Construction
Management Trade Contract
(CM/TC)

What are the advantages of

construction management?

Overall project duration reduced by

overlapping design and construction
Construction manager can
contribute to the design and project
planning processes
Roles, risks and relationships for all
parties are clear
Changes in design can be
accommodated without paying a
premium
Prices may be lower due to direct
contracts with trade contractors
Client has means of redress to trade
contractors through direct
contractual links

What are the disadvantages of

construction management?

Price certainty not achieved until

last trade package is let
Changes to later packages may
adversely affect packages already
let - expensive
Need an informed, pro active client
Client has a lot of consultants and
contractors to deal with not just
one more fees

What is the difference between

management contracting and
construction management?

Under construction
management the client is in direct
contractual relationships with each of
the trade contractors and the
construction manager isnt

Under management contracting,

the MC is in direct contractual
relationships with the trade
contractors and the client is in
contract with the MC only
How do you identify the client
requirements before
recommending a procurement
route?

Through detailed discussions with the

client and design team to identify
their priorities in terms of cost,
time, quality, risk, control
requirements and experience
Depends on their other requirements
such as cost and quality

If the client wishes to start on site

asap what procurement route
would you recommend?

What if they wanted an early start

but also cost certainty, what
procurement route would you
recommend?

If time was their

overriding priority then CM or MC as
they offer the fastest start on site, this
is because start on site is not
dependent upon a long tender period
BUT has consequential
disadvantages in terms of cost
certainty
Then design and build might be the
most appropriate
Allows design and construction to
beoverlapped rather than being
sequential
Tenders are based on the provision
of all services so the client gets a
lump sum price
Guaranteed maximum price

What is GMP? What does it mean

to you?

A lump sum contract under which

there is no adjustment of tender price
unless the SCOPE required by the
client changes

The contractor includes the additional

risks involved in the design
development process in his tender
price
Greater price certainty contractor
takes risk of design development and
unforeseen occurrences
What are the advantages of
GMP?

Greater control of overspending

contractors interests to alert the team
to expensive items of design
development
Quicker settlement of final account
The client may pay too much
contractors risk allowance may be
higher than in reality

What are the disadvantages of

GMP?

Scope changes are likely to be very

expensive
Can be adversarial trying to decide
whether changes are design
development or scope changes