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1.0.0 Introduction .................................................................................................................................... 2 2.0.0 Project procurement systems. ........................................................................................................ 3 2.1.0 Separated and Cooperative System ............................................................................................ 4 2.2.0 Integrated System....................................................................................................................... 5 2.2.1 Package Deal. ......................................................................................................................... 5 2.2.2 Turnkey. ................................................................................................................................. 6 2.2.3 Develop and Construct. .......................................................................................................... 6 3.0.0 Management Oriented Procurement Systems ................................................................................ 7 3.1.0 Management contracting ............................................................................................................ 7 3.2.0 Construction management.......................................................................................................... 7 3.3.0 Design and manage .................................................................................................................... 8 4.0.0 Form of contract ............................................................................................................................. 9 4.1.0 The Zambia Institute of Architects (ZIA) Standard Form of Contract. ..................................... 9 4.1.1 Articles of agreement ............................................................................................................. 9 4.1.2 Conditions of Contract. ........................................................................................................ 10 4.1.3 Appendix .............................................................................................................................. 11 4.1.4 The use of the form in the Zambian construction industry. ................................................. 11 4.2.0 The International Federation of Consulting Engineers (FIDIC). ............................................. 12 4.2.1 FIDIC Conditions of Contract for Construction, the (New Red Book) ............................... 12 4.2.2 FIDIC Conditions of Contract for Plant and Design/Build, the (New Yellow Book) ......... 12 4.2.3 FIDIC Conditions of Contract for EPC Turnkey Projects, the (Silver Book) ...................... 13 4.2.4 FIDIC Short Form of Contract, the (Green Book) ............................................................... 13 4.2.5 FIDIC Design-Build Operate Contract (DBO) Gold Book .................................................. 13 5.0.0 The difference between the ZIA Standard Form of Contract and the International Federation of Consulting Engineers (FIDIC). ............................................................................................................. 14
Construction project management, a critical analysis of procurement systems and forms of contract. June 4, 2012 6.0.0 References .................................................................................................................................... 16
1.0.0 Introduction
A project is made up of a group of interrelated work activates constrained by a specific scope, budget and schedule to deliver capital asserts needed for to achieve the strategic goals of an agency. This paper is intended to discuss the planning and organisation of construction projects specifically through procurement systems and forms of contracts both locally and internationally. Project procurement has been described as an organised method or procedure for clients to obtain or acquire construction goods or products. Apart from the traditional approach, there are now other innovative procurement systems used by the construction industry worldwide. The different procurement systems differ from each other in terms of distributing responsibilities, activities, sequencing, process and procedure and organisational approach in project delivery (Wan Ali et al). The forms of contract published by the Joint Liaison Committee through the Zambia institute of architects are documents in which there has been an agreement established with the various institutions representing contractors, specialist contractors and sub-contractors to use in the execution of project contracts (Zambia handbook for practice for architects, 2003). Thus, they have been made acceptable by those who do tender. The Zambia handbook of practice for architects furthermore, describes a contract as a term which signifies the binding together of two or more persons over a common intention. It further defines a contract as an agreement which is meant by the persons involved called the parties to the contract to give rise to obligations expected at law. Internationally, the International Federation of Consulting Engineers (FIDIC), has devoted itself to the compilation of management documents for all kinds of projects among which the Fidic conditions contractions are the most influential and of the highest application (AJ Clark, 2008).
By Kezala Jere
Construction project management, a critical analysis of procurement systems and forms of contract. June 4, 2012
By Kezala Jere
Construction project management, a critical analysis of procurement systems and forms of contract. June 4, 2012
Figure 1.0- category of building procurement systems. Source-Masterman JWE(1996) Building Procurement Systems; An Introduction.
By Kezala Jere
Construction project management, a critical analysis of procurement systems and forms of contract. June 4, 2012
preliminary discussion with selected few contractors, submission of fixed tender and/or cost negotiation.
The Traditional Procurement System. Source- Wan Ali et al, The Effect of Procurement Systems on the Performance of Construction Projects.
Normally called the all in contracting. Here, a contractor is given the duty to do all that is required for the design, construction and delivery of the project. Therefore, the contractor will prepare the project brief, sketch and final working drawings, get all the approval from authorities, project money, construction, furnishing and commissioning of all equipments and passing on the project to the client.
By Kezala Jere
Construction project management, a critical analysis of procurement systems and forms of contract. June 4, 2012 2.2.2 Turnkey.
In Turnkey, a contractor is also commissioned to undertake the responsibilities for everything necessary and required for the construction, completion, commissioning and hand over the project. The word turnkey means that, upon completion, the client is given the key and he can then enter the project by turning the key (Allen, 2001).
2.2.3 Develop and Construct.
This is related to design and build. Here, the contractor is still given the responsibility for both the design and construction of the project. The difference is that, under this method the clients design consultants prepare the concept sketches or designs and passed them to the contractor who will develop them and produced the detailed working drawings. The contractor will then construct and complete the project based on what it has developed and produced. Here, the contractor does not need to look for a designer to do the job.
The Integrated Process of Project Designing and Construction in the Design and Build Procurement System. Source- Wan Ali et al, The Effect of Procurement Systems on the Performance of Construction Projects.
By Kezala Jere
Construction project management, a critical analysis of procurement systems and forms of contract. June 4, 2012
By Kezala Jere
Construction project management, a critical analysis of procurement systems and forms of contract. June 4, 2012
- The Process of Project Designing and Construction in the Management Contracting & Professional Construction Management Procurement System. Source- Wan Ali et al, The Effect of Procurement Systems on the Performance of Construction Projects.
By Kezala Jere
Construction project management, a critical analysis of procurement systems and forms of contract. June 4, 2012
The Process of Project Designing and Construction in the Design and Manage Procurement System. Source- Wan Ali et al, The Effect of Procurement Systems on the Performance of Construction Projects.
This is a section of the ZIA standard form of contract which includes details of the client called the employer and those of the contractor such as their physical addresses. In it is also describes the type of structure the client wants to be built. In it is also specified the place where the building is to be built. In it is a further indication that the client has sourced the drawings and bills of quantities showing and describing that the works to be done are to be prepared under the direction of the Architect (s). The article of agreement is detailed as follows: The contractor is expected to carry out and complete the works. The employer would pay the contract sum payable in away specified according to what the parties agree. It also includes an instance that in the event that that the project architects dies the client should nominate another person to replace the deceased architect of which the contractor should not object. In addition, the new architect is entitled to disregard any certificate, opinion, given by the architect for the time being. This also applies to the quantity surveyor.
By Kezala Jere
Construction project management, a critical analysis of procurement systems and forms of contract. June 4, 2012
Lastly, the article of agreement ends with details of the witness of the contract who signs the form in the presence of the client and contractor and any relevant personnel present.
In this section it is where the most bulk of the ZIA standard form of contract is because it is in this section that what everyone involved in the project is supposed to perform is in print to the detail. it includes the following: Contractors obligation. The basis of the agreement is that what is included in the Tender Documents is what the Contractor agrees to build, and the Contractor must be careful at the time of tendering his price, that there are no anomalies and ambiguities in what he understands as the scope of the Works. This is why it is so important that the description of the works included in design drawings, schedules and specifications are specific and fully described. Architect instructions. Contract documents. Royalty and patent rights. Foreman in charge. Access for architect to the works. Variations, provisional and prime cost sums. Contract sum of the project. Materials and goods unfixed off-site. Practice completion and defects liability. Sectional completion. Insurance of the works against fire. Possession completion and postponement of the site. Damages for non-completion. Extension of time. Nominated sub-contractors. Fluctuations. Outbreak of hostilities.
By Kezala Jere
10
Construction project management, a critical analysis of procurement systems and forms of contract. June 4, 2012
War damage.
4.1.3 Appendix
The appendix gives specific details of the contract in the following areas: Defects liability, usually six months. Percentage to cover professional fees. Date of possession. Date for completion. Liquidated and ascertained damages at a given rate per day. Period of delay by: Reason of lose or damage caused by any one of the contingencies. For any reason other reason. Prime cost sums the contractor desires to tender. Period of interim certificates. Period of honouring of certificates. Percentage of certified value retained. Limit of retention fund. Name of bank or Building Society. Period of final measurement and valuation.
According to the times newspaper article on Zambia: Building Contract, a Way to Avoid Unforeseen 'Sandy Grounds'. The officially recognised and widely used Standard Form of Building Contract (With or Without Quantities) used in Zambia was last revised in 1972 but has more recently been ignored by some and replaced with various contracts mostly devised for general one-off use rather than tailored to our particular needs in Zambia. Contracts are normally entered into willingly by parties who want to state in advance how the contract will be executed and agree in advance how disputes will be resolved and who want to make sure, so far as possible, that their interests and objectives will be served and not frustrated by the agreement.
By Kezala Jere
11
Construction project management, a critical analysis of procurement systems and forms of contract. June 4, 2012
Most building works undertaken in Zambia are only described on basic drawings, being the minimum that the Planning Authority requires for granting a Building Permit, and they do not describe the works completely. The ZIA standard form is contracts is limited to be used only for major projects and those in which a registered architect has been engaged by a client to do his work. In other words there no proper agreement if a building owner engages a builder to do his work.
This can be used in any kind of Engineering Construction Contract. Conditions of Contract for Construction are recommended for building or engineering works designed by the employer or by its representative, the engineer. Under the usual arrangements for this type of contract, the contractor constructs the works in accordance with a design provided by the employer. However, the works may include some elements of contractor-designed civil, mechanical, electrical and/or construction works.
4.2.2 FIDIC Conditions of Contract for Plant and Design/Build, the (New Yellow Book)
Conditions of Contract for Plant and Design-Build are recommended for the provision of electrical and/or mechanical plant, and for the design and execution of building or engineering works. Under the usual arrangements for this type of contract, the contractor designs and provides, in accordance with the employers requirements, plant and/or other works, which may include any combination of civil, mechanical, electrical and/or construction works.
By Kezala Jere
12
Construction project management, a critical analysis of procurement systems and forms of contract. June 4, 2012
This is applies to the lump sum contract project where the Contractor takes participation in the design work.
4.2.3 FIDIC Conditions of Contract for EPC Turnkey Projects, the (Silver Book)
Conditions of Contract for EPC Turnkey Projects are recommended where one entity takes total responsibility for the design and execution of an engineering project. Applied to the turnkey are projects of infrastructures or large-scale factories, where the Contractor takes on more work and risk while the Employers participation is small (private financing or government financing), but it is strictly defined upon the investment and construction period.
4.2.4 FIDIC Short Form of Contract, the (Green Book)
It can be used in all kinds of small-scale projects. These Conditions of Contract are recommended for engineering and building work of relatively small capital value. However, depending on the type of work and the circumstances, the Conditions may be suitable for contracts of considerably greater value. They are considered most likely to be suitable for fairly simple or repetitive work or work of short duration without the need for specialist subcontracts. This form may also be suitable for contracts which include, or wholly comprise, contractor-designed civil engineering, building, mechanical and/or electrical works.
4.2.5 FIDIC Design-Build Operate Contract (DBO) Gold Book
The DBO approach to contracting combines design, construction, and long-term operation (and maintenance) of a facility into one single contract awarded to a single contractor (who will usually be a joint venture or consortium representing all the disciplines and skills called for in a DBO arrangement. Public private partnerships, PPPs, are this arrangement). Basically the success of a true DBO contract depends on the commitment of the Contractor to the complete project and the best way to do that is to cover the whole design-build and the operation elements in a single contract. That is why FIDIC chose a single long term Performance Security with a substantial reduction in value on completion of the designbuild but with an on-going commitment by the Contract to perform and complete the operation service.
By Kezala Jere
13
Construction project management, a critical analysis of procurement systems and forms of contract. June 4, 2012
The format of a DBO arrangement can be based on either a green field scenario (D-B-O), or on a brown field scenario (O-D-B). Either is quite common, however the contractual requirements and procedures are quite different. The other important factor considered in DBO document is the length of the operation period, since the conditions suitable for long-term operation are not necessarily suitable for a shortterm operation. From the experience of the DBO members it was decided that the most useful period to consider was 20 years operation again giving guidelines in the Guide if a shorter period would be required Risk control in DBO contract DBO can be viewed as a complete method in PPPs. This method is a long-term process including procurement, construction, operation, and transfer, in which high risk should be pay the most attention to.
Employer, Requirement s, Contract Dat a, Representat ive t o Administ er the Cont ract .
5.0.0 The difference between the ZIA Standard Form of Contract and the International Federation of Consulting Engineers (FIDIC).
From the above mentioned detailed description of the two forms of contacts (that is the ZIA standard form of contract and FIDIC) it can be noticed that they have different approaches towards contract management.
By Kezala Jere
14
Construction project management, a critical analysis of procurement systems and forms of contract. June 4, 2012
To start with the ZIA form of contract is not designed for civil engineering contracts; there is a lot that can be learnt from the differences between these two standard forms. The FIDIC contracts provide a central role for the Engineer in the certification process during the performance of the works. It is the Engineer who performs the certification process that in other contracts is performed by a role described as the Superintendent, Architect or similar. While in the ZIA form this is done by an Architect.
The FIDIC form of contract can be used for almost any situation. For example The Construction Contract is based on the Employer providing the design with help from the independent consultants. The other FIDIC contracts contemplate the design being performed by the Contractor. The EPC/Turnkey Projects Contract is used when the Contractor not only takes most of the risk in design and construction, but it also has to hand the project over to the Employer in a fully operational state.
By Kezala Jere
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Construction project management, a critical analysis of procurement systems and forms of contract. June 4, 2012
6.0.0 References
1. Dr. Mirosaw J. Skibniewski, (2008) Introduction to FIDIC Conditions of contract, PDF document accessed from www.e-construction.com on 28/6/2012. 2. Masterman J W E (1996) Building Procurement Systems: An Introduction, E & FN Spon, London 3. Nael .g banny,(1998) The fidic form of contract-4th. Edition Blackwell Science, London. 4. Philip Jenkinson (2003) FIDIC Conditions of Contract Overview of the FIDIC FORMS OF CONTRACT, 5. Rosli Abdul Rashid et al, (2007) EFFECT OF PROCUREMENT SYSTEMS ON THE PERFORMANCE OF CONSTRUCTION PROJECTS, 4. The Aqua Group (2001) Tenders and Contract for Building- 3rd. Edition Blackwell Science, London. 5. Zambia Institute of Architects, (2003) ZAMBIAN HANDBOOK OF PRACTICE FOR ARCHITECTS, Royal Institute of British Architects. London. FIDIC standard form contracts, http://www2.fidic.org/resources/contracts accessed on 28/06/2012.
By Kezala Jere
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