SC 430

Lecture No 2:
Construction Project Delivery
Options
 THE STARTING POINT
• A need for a project has been identified:
Questions:
– Where will the money be obtained to pay for the
project?
– How will the project be procured (purchased,
implemented)?
– If finance is available - the Owner can proceed to
decide on the procurement method.
 The starting point in project

– If the finance needs to be raised or borrowed -

necessary arrangement must be put in place,
which may mean negotiating with a bank or
international funding agency.
– When finance is borrowed - the lending agency
will probably impose restrictions on the project
and the method of procurement; e. g. World
Bank , Local banks
 Part I: ALTERNATIVE STRATEGIES FOR PROJECT
DELIVERY
Extreme alternative ways for organizing delivery of
projects:
Doing everything Total responsibility
in-house using expertise to a contractor -
within the owners finance, design,
organization execute, operate the
project
• Two essentials:
– A sound contractual relationship between the owner
and each of his/her consultants and contractors.
– Cooperation and trust between the people from
different organizations and professions involved.
 Key Services
Before an engineering facility is realized two essential
functions have to be performed:
• Design;
• Erection, installation or construction.
– How much work in-house? and
– How much to consultants and contractors?
DESIGN
 Idea ERECTION
 Feasibility and
 Preliminary design COMMISSIONING
 Detailed design
Note
The words
• Construction,
• Installation and
• Erection
Shall be used interchangeable
 DELIVERY OPTIONS

The range of options includes:

1) All work in-house;
2) Design in-house and erection by a
contractor
3) Initial design brief in-house, design by a
consultant and erection by main
contractors who will use subcontractors as
necessary.
 DELIVERY OPTIONS
4) All design and management by a project
manager, using several trade contractors
whom work directly for the owner
(includes design and build approach);
5) Raising the finance, design, erection and
operation by a single contractor, who
employs consultants and subcontractors as
necessary.
 THE CHOICE OF DELIVERY OPTION

• The choice will depend partly on:

– The Owners policy;
– Facilities which the Owner has available
in-house; and;
– The size and type of the project.
There are advantages and disadvantages of
each.
 THE OWNERS REQUIREMENTS
• For any project, the Owner must decide what s/he
wants - A project Brief
• The extent to which the Owner wishes to influence the
detailed design and the way in which s/he sees the
design developing will influence the choice of method
of procurement.
• Adhere to legal and regulatory requirements.

NOTE:
The owner should Avoid frequent changes of mind since
it costs more and cause delays!
 Option 1: All work in-house
• The Owner does the feasibility study;
• This is followed by preliminary designs and estimates
• Owner then uses own expertise to prepare detailed
design;
• S/he uses in-house staff to construct/erect the facility
• Use the erected facility for own purposes.
• Main Disadvantages:
– Lack of accountability.
– Poor quality and budgetary control;
 Option 2: Design in-house and
erection by a contractor
• The Owner does the feasibility study;
• This is followed by preliminary designs and
estimates done by the owner;
• Owner then uses own expertise to prepare
detailed design;
• S/he uses an established contractor to carry out
the construction/erection;
 Option 2: Design in-house and
erection by a contractor
• Owner supervises work performed by the
contractor
• Contractor hands over constructed facility when
construction is completed to the satisfaction of
the owner.
• Main disadvantage:
– Lack of accountability for design;
– Lack of quality control mechanism for
design.
 Option 3: Initial design brief in-house, design by
a consultant and erection by main contractor
• The Owner prepares the project brief
(or can be assisted by a consultant);
• This is followed by preliminary designs and estimates
done by a Consultant;
• Owner then uses the prepared detailed design to select a
contractor to construct;
• Consultant supervises work performed by the contractor
• Contractor hands over constructed facility when
construction is completed to the satisfaction of the
Consultant.
 Option 3: Initial design brief in-house, design by a
consultant and erection by main contractor cont…
Main disadvantage:
• May be time consuming.
This is the method that is known as the traditional
method which is used very often
NOTE:
• Main attention in the course will be centered on this
method.
 Option 4: Design and Build
• Under this method of contracting, the owner
awards a single contract to the design-builder to
design and construct the Work.
• Thus, the design-builder undertakes responsibility
for both the design and construction of the project.
• The Owner prepares the project brief
(or can be assisted by a consultant);
• Client prepares preliminary estimate based on
prelim. designs; (or appoints a Consultant to
prepared prelim. Designs);
 Option 4: Design and Build
• Client supervises the erection to ensure that
performance requirements are met;
(or may appoint a Consultant to do so);
• Final project accepted on the basis of performance tests
by Consultant or Client;
Option 4: Design and Build
Main advantages:
 Selection flexibility.
 Team Concept.
 Single point of accountability for design and
construction.
 Enables fast-track delivery (construction
begins before design is complete), saving time.
 Facilitates alternative financing methods.
 Eliminates Owner concern with cost overruns.
 Design and Build
Disadvantages:
 No check and balance between architect and
builder.
 Owner must select a team rather than the best
architect and best builder.
 Difficult to control quality because design/build
team must
 Only meet minimum criteria standards.
 Method 5: Design and Manage
by a project manager
In this option the Owner
• Prepares the project brief (or can be assisted
by a consultant);
• Appoints a Project Manager to carry out the
design (or obtains design services from other
firms);
• Then appoints various contractors to perform
different aspects of the project.
• S/he remain responsible for the project design
and construction/installation/erection.
 Method 5: Design and Manage
by a project manager
Main Disadvantage:
– If the PM is not good the project can fail
very easily.
– Costs may increase beyond budget.
Advantage:
• Speed
Method 6: Raising the finance, design, and
construction operation by a single contractor
• Client may prepare a project brief and invite
contractors
• Contractor performs detailed feasibility study;
• Contractor raises funds for the project;
• Appoints consultant to perform detailed Design;
• Implements construction to completion;
• Starts operating the constructed facility
-say a bridge which s/he Then charges for
crossing;
• Operates the facility until the return on
investment is obtained;
 Method 6: Raising the finance, design, and
construction operation by a single contractor
• Advantage:
– Client does not use his/her own funds for the
project;
• Disadvantage:
– Client has little control unless by means of
legislation or special agreements;
 Summary
• There are many other combinations of the
above delivery methods.
• Government policy is now discouraging the use
of methods:
– 1-all in-house – design and erect;
– 2-Design in-house and erection by
contractor.
 PPA 2004 and PPA2011
• The Public Procurement Act 2011 (PPA 2011) is
based mainly on the traditional method of
appointment of consultant and then appointment
of contractor.
• However, it allows for other methods of
delivery within the Public Private Partnership
(PPP) Concept.
• Regulations and standard documents for the
same are widely available.
• It also includes a preference margin for
domestic consultants in order to encourage them
 PPA 2004
• Covers supply of goods, construction,
professional (consultant services), and non-
consultant services.
• Applies for all public institutions;
• Not following the PPA 2011 is breaking the
law;
• It is necessary for both public and private
sector to understand as it governs the
procedures that must be used in procurement.
 PPA 2011 Framework
PPA 2011

Regulations for Procurement of

Consultant Services,
Goods, Works, Non Consultant
Services

Standard Tendering Documents

Guidelines
 PPA 2004 Framework
• This public procurement framework shall be
used as the default framework for this course .