Lecture No 2:

Construction Project Delivery

Options

What leads to the need to undertake

a construction project?
A problem has to be solved using a

constructed facility;
An opportunity for added value has been
identified and a constructed facility is
necessary;
Real value can be added e.g. generate income;
Intrinsic value added a prestigious project
e.g. monument; or

A decision made by higher authorities.

Project delivery processes:

Project conception; Project inception;
Project implementation: processes
include feasibility studies, tendering,
contract execution, other project
activities;
Need of standard professional
documents and codes of practice,
codes of practice in use (emphasis to
be made per discipline), conformity to
professional documents and codes.

Financing of projects: Self

financing, financing by public
funds; grant and credit financing
facilities (World Bank, ADB, etc.),.
Project Procurement Aspects
Public Procurement Act
Requirements: procurements of
consultancies, procurement of
works, procurement of goods.

Contract management:
Introduction to law of contract,
Parties to the contract, standard
conditions of contract,
appreciation of contract
management issues, fraud and
corruption, conflict resolution
(including conflict of interest).

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.

 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

Extreme alternative ways for organizing

delivery of projects:
Total responsibility
Doing everything into a contractor house using expertise
finance, design,
within the owners
execute, operate
organisation
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.

Before an engineering facility is

realized two essential functions have
to be performed:
Design;
Erection.
How much work in-house; and
How much to consultants and contractors
DESIGN
Idea
Feasibility
Preliminary design
Detailed design

ERECTION
and
COMMISSIONING

The words
Construction,
Installation; and
Erection
shall be used
interchangeable

The range of options includes:

All work in-house;
Design in-house and erection by a
contractor
Initial design brief in-house, design
by a consultant and erection by
main contractors who will use
subcontractors as necessary.

 All design and management by a

project manager, using several

trade
contractors
whom
work
directly for the owner (includes
design and build approach);
Raising the finance, design, erection
and
operation
by
a
single
contractor,
who
employs
consultants and subcontractors as
necessary.

The choice will depend partly on:

the Owners policy;
facilities which the Owner has available
in-house;
the size and type of the project.

There are advantages and

disadvantages of each.

For any system of procurement, the

Owner must decide what s/he wants - A
Brief
Avoid frequent changes of mind - it
costs more and delays!
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.

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;

Method 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;

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.

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 prepare 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.

Main disadvantage may be time

consuming.
This is the method that is known
as the traditional method which is
used very often main attention
in the course will be centered on
this method.

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);
Contractor is appointed on for
detailed design and erection;

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;

Main disadvantage: Costs my be

high;
Advantage: Speed; use of
contractors expertise may save
money;

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.

Main Disadvantage:
If the PM is not good the project can fail

very easily.
Costs may increase beyond budget.

Advantage: Speed

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;

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;

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;
Design in-house and erection by contractor.

The Public Procurement Act 2004 (PPA

2004) is based mainly on the
traditional method 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.

Covers supply of goods, construction,

professional (consultant services),
and non-consultant services.
Applies for all public institutions;
Not following the PPA 2004 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 2004
Regulations for Procurement
of Consultant Services

Regulations for Procurement of Goods,

Works, Non Consultant Services

Standard Documents

Guidelines

We shall examine the PPA in some

detail in the next lecture.