What is procurement?

The overall process of acquiring construction work or services\nWhat should

be considered when selecting a procurement route?\nThe specifics of the project\nThe client
objectives regarding cost, time, control, quality and risk
What are the main procurement methods?
Traditional / general contracting\n\nDesign and
build\n\nManagement contracting\n\nConstruction 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\n \nThe 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\nIf the design is substantially completed at time of contractor selection\nThe client wishes
to retain control over the design and specification\nCost certainty at start on site is important\nThe
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\nDesign led can ensure quality\nPrice certainty before
commencement\nWell known procedures\nChanges are reasonably easy to arrange and value
What are the disadvantages? Overall project may have a longer duration than others sequential
process\nNo contractor design and planning input \nStrategy based on price competition could
lead to adversarial relations\nDual point of responsibility design team for design and contractor for
construction\nIf 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\nWhere the client wishes to minimise their risk not got
responsibility for design\nFor technically complex projects benefit of contractors
expertise\nWhere 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\nEarlier commencement on site\nEarly price certainty\nBenefit of contractors
experience harnessed during design

What are the disadvantages of D&B? Client may find it hard to prepare a sufficiently
comprehensive brief\nClient has to commit to a concept design early\nVariations from the original
brief are difficult to arrange and often expensive\nHarder to compare tenders harder to determine
if getting value for money\nEase of fabrication may be prioritised above aesthetic quality\nMay 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\n\nCan 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)\n\nThey may have inhouse design
capabilities\nOR 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?
design team to give them remedies for breach of contract

A collateral warranty to the

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\nThey have the responsibility for the construction works
without actually carrying them out\nNot all of the design need be completed before the first works
contractors start work\nThe MC selects the works contractors through competitive open book
tenders\nThe client reimburses the cost of these packages to the MC plus their fee\nThe 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\n\nWhere 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\nThere is contractor contribution to the design and planning
process\nChanges can be accommodated in packages not yet let if they have no further
impact\nThe 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\nChanges to the design of later packages may affect
packages already let expensive\nThere is little incentive for the MC to reduce costs\nMay become
a post box system\nIn 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\nThe
construction managers supervises the construction process and coordinates the design team\nThe
CM has no contractual links with the trade contractors or members of the design team\nTheir 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\nWhere early start on site is key\nFlexibility in design,
procurement, construction strategy\nWhere price certainty before commencement is not
key\nWhere 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\nConstruction manager can contribute to the design and
project planning processes\nRoles, risks and relationships for all parties are clear\nChanges in design
can be accommodated without paying a premium\nPrices may be lower due to direct contracts with
trade contractors\nClient 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\nChanges to later packages may adversely affect packages already let
expensive\nNeed an informed, pro active client\nClient 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\n\nUnder 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
If the client wishes to start on site asap what procurement route would you recommend?
Depends on their other requirements such as cost and quality\n \n\nIf 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

What if they wanted an early start but also cost certainty, what procurement route would you
recommend? Then design and build might be the most appropriate\nAllows design and
construction to be overlapped rather than being sequential\nTenders are based on the provision of
all services so the client gets a lump sum price
What is GMP? What does it mean to you?
Guaranteed maximum price\n \nA lump sum
contract under which there is no adjustment of tender price unless the SCOPE required by the client
changes\n\nThe contractor includes the additional risks involved in the design development process
in his tender price
What are the advantages of GMP?
Greater price certainty contractor takes risk of design
development and unforeseen occurrences\n\nGreater control of overspending contractors
interests to alert the team to expensive items of design development\n\nQuicker settlement of final
account
What are the disadvantages of GMP? The client may pay too much contractors risk allowance
may be higher than in reality\n\nScope changes are likely to be very expensive\n\nCan be
adversarial trying to decide whether changes are design development or scope changes