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!