PROFESSIONAL PRACTICE 1(QSB 60604)

GROUP ASSIGNMENT

GROUP MEMBER

• Ng Wai Khong (0317980)• Leong Karr Khei (0324362)• Loh Pey Mun (0318572)• Sherlyn Ang (0317977)• Michael Chang (0319198)

The Malaysian economic downturn has affected

developers in delivering and meeting key property

development and sales targets

Due to inventory fluctuation, unstable market

condition and tighter lending requirements

Proposed project : 20 storey condominium Type of project : Residential

Location of the project : Kuala Lumpur

Intensify affordability by

fractionalizing the cost of

land and building among

consumers

What is construction procurement?

• A process whereby client chooses a specialized method to implement a project

• Involves setting up a contractual network of designers, contractors, financiers and other agents to design, construct and manage a project

• Identify the best way of achieving the objectives of client

Factors to consider when selecting procurement

methods

• Time

• Capital cost

• Operating cost

• Environment

• Market value of the project

• Flexibility and

• Prestige

• Traditional procurement method

• Management contracting

• Construction management

• Design and Build

Common procurement methods

Traditional Procurement Method

• The ‘least risk’ approach

• The client will selects and appoints the consultant team comprising

of architect, engineer, quantity surveyor, etc to design the building

and prepare tender documents

• Design will normally be completed before the main construction

contract is let

• Contractors are then selected through open tender, selective tender

or negotiation

Traditional Procurement Method

Sequence

ConstructionCompetition(Tendering)

DesignBrief

Relatively slow prior to the commencement of construction

• Competitive fairness• Relatively low tender preparation costs • Satisfactory public accountability• Procedures well known• Design changes reasonably easily arranged

Advantages

• Slow to start on site (no concurrent working)• Open to abuse when design incomplete (resulting in less

certainty)• Contractor not involved in design or planning (poor

buildability) • Potential for adversarial relationships • Design risk rests with the client

Disadvantages

MANAGEMENT CONTRACTOR

• Procurement route which is fairly similar to Construction Manager.

• MC will be appointed in the early stage (design is not completed et)

• The construction duration will be shorten.• Enhance buildability development in terms of cost.

Management Contractor (MC)

• MC are responsible and works direct with different

work contractors.

• MC act as a dominant.

• Client only have direct contract with the MC

Differences between MC and CM

• An agreement and contractual relationship between

parties that would exist.

• Insurance to designers or sub-contractors where the

client may provide coverage to them when dispute

arises.

Collateral Warranty

• MC provides services:

• -advising and planning on the development schedule.

• -cost planning.

• -cost control.

• -monitoring the site and key performance.

Why client prefer MC?

• MC can participate in the early stage where the design process and

construction process can overlapped where it generally helps to

reduce the development time.

• The contract sum will be the total of each separate work trades that

are tendered differently because all the works trade will be break

down into various work packages.

Pro’s of MC

• Management contracting will not be able to be precise and certain

of the final cost unless the final works and contract have been sign

with confirmation.

• Variation may occur during the construction period where the cost

of variations and re-measurement can lead to a higher cost than the

original traditional method.

Con’s of MC

COMPARISON

Traditional Management Contracting

Requires longer period of time for completion as the overall complete design prior to contract award

Time for design & construction phases

Allow the shortest total project time since design and construction phase are overlapping

Less flexible for the employer to declare any design variations since the contract sum is fixed before commencing the project.

Flexibility to change specification

Greater control over the change of design of the project without sacrificing cost control.

Contractor may lack of incentives to point out any potential mistakes and missing parts in the design due to the fixed contract sum.

Control of quality standards Contractor has the freedom to choose and evaluate specialist subcontractors and suppliers to collaborate with them.

Traditional Management Contracting

• No cost certainty during design phases.

• Cost certainty after commitment to construct.

• Cost monitoring at each stages.

Cost certainty • No firm price at commitment to construct.

• Contractor not responsible for managing cost of works.

Better for cost and quality. Summary Better for time and quality.

DESIGN & BUILD

• Popular & modern procurement route• Main Contractor is responsible to design and

construct• Single point of responsibility - Contractor

Design & Build

• Client appoints Design Consultants to draft a layout of design (50%). Tender document will be prepared according to Approximate BOQ.

• Approximated BOQ is given to few selected D&B contractor including the design layout. Everything need to be done according to Employer’s Requirements.

• After the selection has done, and the D&B contractor has done all the design and details drawing. The employer’s QS will then produce a Final BQ based on Approximate BOQ.

• Once Final BQ is agreed by both parties, it will be converted into Lump Sum Contract

Design & Build Steps

• Submitted to Client by D&B Contractor.• Provide client an amount of project cost.• If the final cost exceeds GMP, sum payable by

client remains as GMP• If lower than GMP, saving will be shared among

Client and Contractor in 70:30 basis.

Design & BuildGuarantee Maximum Price (GMP)

Design & Build Advantages & Disadvantages

Advantages Disadvantages

Project delivered time can be reducedContractor might produce low quality work, if Client doesn’t have a full concept of the project (Employer Requirement)

Maximum amount payable can be obtained before design is completed (GMP)

Employer right need to pay more, if unreasonable request is given to contractor

Contractor will have all responsibility(Single point responsibility)

Compare between bidders will be difficult as different bidder have different design, which means price may vary

Client can select the most ideal design of the selected Contractor’s proposal.

• The management contractor(MC) is reimbursed for completed work and plus a management fees as his profit.

• To avoid any argument, the 2 parties should specify how much is the reimbursable fees to the MC before the project start

Type of Contract[ Cost Reimbursement Contract ]

• Cost Plus Fixed Fee Contract (CPFF)• Cost Plus Incentive Fee Contract (CPIF)• Cost Plus Award Fee (CPAF)• Cost Plus Percentage of Cost (CPPC)

Cost Reimbursable Contracts can be allocated into 4 categories :

• MC is paid for all incurred costs and then plus a fixed amount, which is agree in both parties before enter into the project, and it will not be change.

• MC can’t to overprice a job to cover profit for any unknown work. So, client has the benefit in financial. Client only pay for works that carry out by the MC.

Cost Plus Fixed Fee Contract (CPFF)

• This agreement allow the client to have more flexibility to change designs and material during the projects procees.

• Client have the control in the decision of making process and with the controlling of money spent.

• Client has the right to know all the details about the project, for example the cost of materials and labour at every stage of the construction process.

• Final cost may be less compare with the fixed price contract because MC can’t to increase the price to cover their risk.

• This is so called “open book process.• And also is a monitoring system .

• Client can’t know exactly how much is the cost for the project, and making it difficult to budget.

• Client take an indeterminism risk that the construction works will not spiral out of control, even legally and there is very little incentive for the MC to have the job done with quickly and inexpensively.

• Client requires a high level of trust, good relationship, and good communication between the parties.

• To overcome the problem and to limit the risk of the client, client can hire a specialist construction lawyer to draft a special conditions and request to be included in the CPFF contract and client should be cautious after obtaining the required legal advice before enter into the contract.

• To overcome the problem and to limit the risk of the client, client can hire a specialist construction lawyer to draft a special conditions and request to be included in the CPFF contract and client should be cautious after obtaining the required legal advice before enter into the contract.

CONCLUSION

QUALITY COST

RESOURCES WORKMANSHIP

Management Contractor (MC)

• Homebuyers are more attracted to quality rather than on price.

• Quality can be control through MC.• Through discussion between MC and client

during construction process can improve the quality.

Quality

• More transparent cost data.• Through CPFF, the contractor will limit it cost

so that it won’t exceed the fixed fee cost.

Cost

• Contractually in relationship with different work packages.

• Different work packages provide different resources from different sources.

Resources

• Contractually in relationship with different work packages.

• Different work packages provide well-trained skilled workers.

• Save time hence maintain the quality of works.

Workmanship

• Variation is less due to typical floors in condominium.

• For specialized project and not suitable for typical condominium.

• Fast track project.

In Compare to D&B

THE END~ THANK YOU ~