CONSTRUCTION CONTRACT

ADMINISTRATION
7043BEPG
Week 7 Lecture 1

CONTRACT
STRATEGIES
Lecture Contents
• Procurement process
• Key criteria affecting
decision
• Types of Contract
Strategy
• Advantages &
Disadvantages
• Typical Uses
 Learning Outcomes
• To understand the
various strategy
options open to a
client
• To understand the
criteria that guide the
decision
• To understand the
relationship between
cost / time and quality
 The Procurement Process
Key steps a Client must
consider;

• Step 1 Verifying need for the

Construction Project
• Step 2 Assessing the
Options
• Step 3 Developing
Procurement Strategy
• Step 4 Implementing
Strategy
• Step 5 Project Delivery
• Step 6 Post Project Review
 Step 3 - Developing
Procurement Strategy
• Construction involves
significant risks;
o Project fails to meet
client needs
o Late completion
o Cost overrun

The 'Procurement strategy’

should balance;

RISKS vs PROJECT
OBJECTIVES
Procurement Strategy
What are the key criteria??

TIME
speed or certainty of
completion date

E
COST
price level or cost certainty

QUALITY
functionality and
performance
 Time, Cost & Quality
• Interdependent and often
in tension
• Emphasis on one will
usually have a negative
effect upon the others!
• Determined by business
E
case
• Usually 2 of the 3 are
dominant
o ‘B’, ‘C’ or ‘D’ type
projects
o ‘E’ types are unusual
Procurement Options
1. Traditional
2. Design and Build
3. Management
Contracting
4. Construction
Management
5. Prime Contracting
6. PFI

• Partnering
• Framework Agreements
 1. Traditional
• The client develops the
project
o The client develops the
business case for the
project
o The client provides a
brief and budget
• The client appoints…
o Team of consultants to
prepare a design, plus
tender documents
o Building contractor to
1. Traditional
• The consultant administers the
contract
o On behalf of the client
o Advises on aspects
associated with design,
progress and stage
payments
• Much of the work is
subcontracted
o Specialist firms but the
contractor remains liable
• Missed contractor design input
 1. Traditional
Advantages

• Cost certainty
• Competitive fairness
• Satisfactory public
accountability
• Procedures well
known
• Reasonably easily
managed and valued
1. Traditional
Disadvantages

• Open to abuse
(resulting in less
certainty)
• Slow to start on site
(no parallel working)
• Contractor not
involved in design or
planning (no
‘buildability’)
• Adversarial potential
When is Traditional
Procurement Used?
• Probably the most
common’
o all clients, including
inexperienced clients
o complex projects and
projects where
functionality/quality is a
prime objective
o time predictability
o cost certainty
• Not suitable for fast track
projects
 2. Design and Build
• The contractor responsible for
design and construction
o In-house designers
o Consultants
• The contractor tenders
against client brief
o Performance specification
• The contractor follows initial
concept design and develops
the design
• Contractor, subcontractors or
specialists complete works
 2. Design and Build
•Shorter tender lists
•Single point of contact
oClient - Contractor
•Early cost commitment by
the client
•Early commitment to
design & performance
•Changes during design
are expensive
oIf not impossible!
 2. Design and Build
Advantages

• Single point contact

and responsibility
• Inherent ‘buildability’
• Cost certainty
• Reduced total project
time
2. Design and Build
Disadvantages

• Relatively fewer firms

(less real competition)
• Client needs to commit
himself before design is
complete
• No design overview
unless consultants
appointed
• Bids difficult to compare
• Client driven changes
can be expensive
 When is Design & Build Used?
• It can be suitable for:
o all clients, including
inexperienced clients and
those requiring distance
from the project.
o cost certainty
o faster track
• However, it is not suitable
for:
o an uncertain or
developing client brief
o complex buildings
 3. Management Contracting
• Management contractor manages
the work
o Specialists paid by fee
o Client appoints designers
separately
• Early appointment
o Work alongside the design
team
o Programme issues
o Design input
o Cost input
• Works let competitively by the
management contractor
o Work ‘packages’
3. Management Contracting
•Overlap of design and
construction
oIntegration of Design-
Tender and Construction
Programme
oJust-in-time approach
•Management contractor
does not carry out
construction works
oJust manages sub-
contractors
3. Management Contracting
• Specification & Design
changes can be made
o Construction begins
before design is finished
o Construction begins
before all packages are
tendered
• Often changes are
inevitable, not just
optional
o Changes to stay within
 3. Management Contracting
Advantages

• Time saving potential for

overall project time
• ‘Buildability’ potential
• Breaks down adversarial
barriers
• Parallel working
• Late changes easily
accommodated
• Work packages let
competitively
3. Management Contracting
Disadvantages

• Need for good quality

brief
• Poor certainty of price,
but shared risk
• Critical contractual
stage between client
and management
contractor
When is Management
Contracting Used?
• This approach is suitable
for:
o fast track projects
o complex buildings
o a developing brief
• It is less suitable for:
o inexperienced clients
o cost certainty before
starting construction
o clients wanting to pass
risk to the contractor
END