Procurement Types 3

Management Contracting

Management contracting can be known as an overlapping procurement system as the design, construction and tendering all overlap. This strategy is suited to more complex projects with accelerated commencement and completion.

The contractor is involved from the start of the design and is responsible for the integrated design and construction phase, the contractor offers the client a consultant service, based on a fee, for coordinating, planning, controlling and managing the design and construction.

Management contracting puts the contractors experience to use from the start, in the concept and design phase through to the construction, they advise the employer on the buildability of the design, plan the construction and discuss cost estimates. Contractor is responsible for tendering parcels of work and negotiating subcontracts with subcontractors (known as works/trade contractors). After client approval, management contractor enters contracts with the works contractors. The contractor manages the project for a lump sum or percentage fee, meanwhile the client has no contractual link with the subcontractors, however this leaves them vulnerable to the contractors’ failures.

Management Contract  normally follows three phases:

  1. Pre-appointment of the MC – After the initial design and feasibility have been arranged, employer invites offers from MCs
  2. Pre-construction period – during this time, the MC will help the design team by offering certain services such as advising on buildability/construction methods, etc.
  3. Construction period – the MC organises and co-ordinates the project, supervises the work and monitors cost.
Advantages
  • time saving potential for overall project duration by using construction packages and overlapping design and construction stages.
  • cost reduction potential by using competition to let work packages and by using value engineering efficiently § Friendly relationship – design and construction
  • late changes more easily accommodated
  • design team are under the clients control throughout the project
  • client has control over selection of trade contractors
  • liked by knowledgeable/experienced clients
Disadvantages
  • no cost certainty prior to commencement of work on site, or in fact until completion
  • needs informed client, able to take an active part in the process
  • design of later packages may affect work already completed on site leading to abortive additional costs
  • individual direct contracts with package trade contractors – no single point responsibility for their performance or quality of their design/workmanship
  • greater administration for the client
  • client takes responsibility for design team performance
  • client carries risk of the effects of non-performance by trade contractors, their financial failure
Construction Management

Like Management Contracting, this strategy is also used on more complex projects, construction management’s primary difference from MC is: Employer places a direct contract with each of the specialist trade contractors. This means that more experienced clients like construction management as they have more responsibility over the trade contractors and the construction manager is only liable for negligence, by failing to perform role with reasonable skill and care (unless greater liability is incorporated in the contract).

Advantages
  • time saving potential for overall project duration by using construction packages and overlapping design and construction stages.
  • Cost reduction potential by using competition to let work packages and by using value engineering efficiently
  • Friendly relationship – design and construction
  • Continuous coordination between the design and construction processes
  • late changes more easily accommodated
  • design team are under the clients control throughout the project
  • design team are managed by the CM
  • client has control over selection of trade contractors
  • liked by experienced clients
Disadvantages
  • no cost certainty prior to commencement of work on site, or in fact until completion
  • needs informed client, able to take an active role in the admin. of the process
  • design of later packages may affect work already completed on site leading to additional costs
  • individual direct contracts with package trade contractors – no single point responsibility for their performance or quality of their design/workmanship
  • greater administration for the client
  • client takes responsibility for design team performance
  • client carries risk of the effects of nonperformance by trade contractors, their financial failure No guarantee by the construction manager for total cost, time or quality of works. The owner has high risk.

 

In Other News

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Unfortunately, the lady that was due to be moving into the house at the end of the month has pulled her offer out and so the house is back on the market. 😦 sad times!

Procurement Type 2

Design and Build 

The procurement process ‘Design and Build’ is an integrated procurement process, meaning that the design and construction phases can overlap. Differing from the traditional process (described in my last post), the responsibility of the design and the construction lies mainly with the contractor as opposed to the client. The client and the contractor are tied together through a single contract however the client may hire a project manager to protect their interests. This type of procurement system would be reimbursed through a fixed lump sum or a GMP (Guaranteed Maximum Price). The risks undertaken in a design and build contract are carried by the contractor which usually safeguards the client. This route is good for time constrained projects because the design and construction phases are integrated.

 

There are 4 Design and Build options:

1. Develop and Construct 2. Novated Design and Build 3. Package Deal 4. Turnkey

  1. Develop and Construct

Where the client appoints the design team and the detail they achieve varies as the contractor is responsible for the development of the design, going into more detail before submitting bid proposals. Design normally progressed to outline planning stage and possibly to full planning approval point and then the client can invite competitive tenders based on a detailed project concept. This process still requires one organisation to take responsibility for design and construction of the project

  1. Novated Design and Build

Client appoints consultants to carry out the conceptual design and tender document. Once the contractor has been appointed, the client transfers the design team to the successful bidder to carry out the detailed design. The contractor takes on responsibility for the design work carried out to date, sometimes together with the original design team. The consultants’ fees are normally predetermined by the client. Some designers resist this practise because the contractors and consultants may have a conflict of interests.

  1. Package Deal

A package deal is used for repetitive projects whereby projects are relatively simple. The client would need to be relatively flexible. You would gain a complete ‘off the shelf’ product but it would probably be quite a standard design.

  1. Turnkey

A contractor is responsible for overseeing absolutely everything and at completion it would just be a case of handing it over. This is used in more complex projects and is also known as EPC.

Design and Build Advantages
  • The client has only to deal with one firm, giving single point responsibility
  • Benefits from the contractor’s experience during design
  • Friendly relationship between the design team and the construction team (not adversarial as in traditional)
  • Price certainty before construction starts, provided the ERs are adequately specified and changes are not introduced
  • Reducing the project duration by overlapping design and construction phases.
  • The total cost may be reduced by reducing changes to minimum due to early collaboration between designers and constructors
Design and Build Disadvantages
  • Difficulties in preparing comprehensive brief or set of ERs.
  • Client commitment to a concept design at an early stage; often before the detailed designs are completed.
  • Bids are difficult to compare different design solutions, proposals and programmes.
  • No design evaluation: unless consultants are appointed
  • Client changes can be expensive: no BOQ, no competition
  • Design liability is limited by the standard contracts available.
  • Quality may be compromised as the client relinquishes control to the design and build contractor.
  • Total cost may be increased due to higher risks transferred to contractor
close up photo of dog wearing sunglasses

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Summary of Scope & Project Definition

This weekly upload is going to be a study blog, written to help me revise my course, Project Management BSc. Hopefully, it will also create a good overview for anyone else looking to study the same thing.

According to the APMBoK 6th edition, “Scope comprises the totality of the outputs, outcomes and benefits and the work required to produce them”. Simply put, the scope is the entirety of a project, from the beginning to the end of project, what it comprises of and the benefits realised after its completion.

Scope management is the process that is used to control the outputs and outcomes and identify the benefits. “Scope management is the process whereby outputs, outcomes and benefits are identified, defined and controlled (APMBoK 6th)”  

Without scope management, a project is at risk of scope creep, whereby the project exceeds its intended criteria and therefore increasing in cost, time, disputes, quality, etc. and can ultimately cause the project to fail. 

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There are 6 steps to defining a project: 

  1. Requirement management – this involves assessing, capturing and documenting the needs and objectives that are required by the stakeholders.
  2. Defining the project scope – to do this you need to confirm the key aspects of the project, such as, project objectives, deliverables, milestones, technical requirements, limits and exclusions and reviews with customer.
  3. Determining the Priorities – essentially you will need to establish what areas within the project are critical and which can be compromised if necessary. E.G. time, cost or quality. These priorities should be made clear within the development phase but can change throughout the life cycle. 
  4. Create a Work Breakdown Structure – a WBS is a hierarchical outline (map) that identifies the work elements involved in a project. This is a helpful way to plan a project because you can use it to break down the scope. It also helps manage plan, schedule, and budget as well as defines communication channels and assists in coordinating the various project elements.The lowest level in the WBS is the work packages.
  5. Integrating the WBS with the Organisation – You can use an Organisational Breakdown Structure (OBS) to do this. An OBS shows how an organisation is going to manage its work responsibility within the project.
  6. Coding the WBS for the Information System – this highlights the levels and organisational levels of the WBS, it’s work packages, and budget and cost elements.

 

The Responsibility Matrix

Using the WBS and OBS you can construct a Responsibility Matrix, RAM. A RAM is used to allocate the work packages to people, organisations or 3rd parties. A RAM can include information such as who is responsible, should be consulted or informed about certain tasks.

https://www.apm.org.uk/body-of-knowledge/delivery/integrative-management/organisation/

Thank you to the continued support on this blog series 🙂