Week 3 Lec Note(2)

8/3/2019 Week 3 Lec Note(2)

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CIVE1149CIVE1149 ConstructionConstruction(Project) Management(Project) Management

Dr Kevin ZhangDr Kevin Zhang

Room: 10.13.06Room: 10.13.06

Tel: 9925 3824Tel: 9925 3824

[email protected]@rmit.edu.au

Project ParticipantsProject Participants

ProjectOrganization

Client

Designer Builder

Owner (developer)Financier

Land supplieretc.

Main contractorSubcontractors

Suppliersetc.

ArchitectStructural engineer

Service engineers(Mechanical, electrical,

hydraulics, fireprotection)

Interior designerEnvironmental designer

etc.


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Client RequirementsClient Requirements

Ideal goals:Ideal goals: Low costLow cost

High qualityHigh quality

Rapid completionRapid completion

In realityIn reality setting up the prioritysetting up the priority Is there a particularly time limit?Is there a particularly time limit?

How important is this deadline?How important is this deadline?

What are the cost limitations?What are the cost limitations? Is a particular standard of quality required to attractIs a particular standard of quality required to attract

customers/tenants?customers/tenants?

The clientThe clients willingness to take riskss willingness to take risks

The likelihood of the client wanting to modify the design asThe likelihood of the client wanting to modify the design astime progressestime progresses

IS IT POSSIBLE???

Project Delivery Systems &Project Delivery Systems &

Contractual ArrangementContractual Arrangement

The interrelationships between the majorThe interrelationships between the majorparties collectively is referred to as theparties collectively is referred to as theProject Delivery SystemProject Delivery System. It presents the. It presents the

contractual structure and compensationcontractual structure and compensationarrangement that the owner uses to acquire aarrangement that the owner uses to acquire acompleted facility that meets its needs.completed facility that meets its needs.

The details of these relationships in theThe details of these relationships in thedelivery of a project are specified in adelivery of a project are specified in acontractual form which is calledcontractual form which is called contractualcontractualarrangementarrangement..


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Typical Project DeliveryTypical Project DeliverySystemsSystems

TraditionalTraditional

Construction ManagementConstruction Management

Project ManagementProject Management

Design and Construct (Build)Design and Construct (Build)

Public Private Partnership (PPP)Public Private Partnership (PPP) NovationsNovations

Strategic AlliancesStrategic Alliances

Major parameters pertainingMajor parameters pertaining

toto PDSsPDSs

Contractual ArrangementsContractual Arrangements ((----------------------))Determine to whom each party is contractuallyDetermine to whom each party is contractuallybound (Contract applies)bound (Contract applies)

Functional ArrangementsFunctional Arrangements ( )( )Determine who is responsible for overseeing theDetermine who is responsible for overseeing theperformance of each party in the PDS.performance of each party in the PDS.


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Client

Architect

Builder

Consultants Q.S.

Supplierssubcontractors

Tendered Lump Sum

Negotiated Fees

Traditional SystemTraditional System

Client (Principal, Proprietor):Client (Principal, Proprietor):

Acquire land and arrange finance;Acquire land and arrange finance;

Appoint an architect to prepare andAppoint an architect to prepare andcoordinate the design and documentationcoordinate the design and documentation

and manage the project potentially;and manage the project potentially;

Appoint a builder to organize theAppoint a builder to organize the

construction;construction;

May select to appointMay select to appoint specialist contractorsspecialist contractors..


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Traditional System (cont.)Traditional System (cont.)

Architect:Architect: Appointed by the client with a contract;Appointed by the client with a contract;

Carry out the conceptual and detail design;Carry out the conceptual and detail design;

Organize design team including structural engineer,Organize design team including structural engineer,service engineer (mechanical, electrical, fire safety,service engineer (mechanical, electrical, fire safety,hydraulic engineer), landscape designer, interior designer,hydraulic engineer), landscape designer, interior designer,quantity surveyor, etc;quantity surveyor, etc;

HaveHave contractual linkscontractual linkswith these specialist consultantswith these specialist consultants

and engineers;and engineers; Work as aWork as a project managerproject manager for the client, and oversee thefor the client, and oversee the

whole project design and construction;whole project design and construction;

Arrange documentation and administer the tender processArrange documentation and administer the tender processand help the client appoint a builder (most likely based onand help the client appoint a builder (most likely based onlowest price).lowest price).


Builder (Contractor):Builder (Contractor): Appointed by the client with aAppointed by the client with amainmainororheadheadcontract;contract; AppointAppoint subcontractors and material supplierssubcontractors and material supplierswithwith

contractual arrangements (usually with lump sum price);contractual arrangements (usually with lump sum price); Fulfil all the obligations under the contract, namely toFulfil all the obligations under the contract, namely tobuild the facility within the agreed cost and timebuild the facility within the agreed cost and timebudgets and to the required quality standards;budgets and to the required quality standards;

Accept liability for construction performance andAccept liability for construction performance andcoordinate the overall construction process;coordinate the overall construction process;

Manage nominated specialist contractors;Manage nominated specialist contractors;

Paid a lump sumPaid a lump sumplus or minusplus or minusany variations incurred;any variations incurred;

Have a communication link with the architects ratherHave a communication link with the architects ratherthan the client.than the client.


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Risk sharing:Risk sharing: Client has aClient has a lowlow risk profile;risk profile;

Architect works as the agent of the client. A claimArchitect works as the agent of the client. A claim

cannot be made against the agent for acts performed ascannot be made against the agent for acts performed asagent of the client but must be made against the client;agent of the client but must be made against the client;

Contactor is responsible for the construction quality andContactor is responsible for the construction quality and

time, and take the risk of subcontracts.time, and take the risk of subcontracts.

The contract price paid to the contractor may be in theThe contract price paid to the contractor may be in theform of aform of a lump sumlump sum, a, a schedule of pricesschedule of prices, or a mixture, or a mixture

of both, or evenof both, or even costcost--plusplus..


AdvantagesAdvantages aa fairly accurate estimatefairly accurate estimate of the cost and construction time;of the cost and construction time;

The risk associated with design changes is expected to beThe risk associated with design changes is expected to belowlow

The clientThe clients financial risk associated with the constructions financial risk associated with the constructionstage is relativelystage is relatively lowlow;;

The availability of full documentation and the responsibilityThe availability of full documentation and the responsibilityof the design consultant to administer the contract isof the design consultant to administer the contract isexpected to ensure theexpected to ensure the highest level of quality controlhighest level of quality control;;

Selection of the low bidder ensures that theSelection of the low bidder ensures that the lowestlowestresponsible priceresponsible price is obtained.is obtained.

All bidders are treatedAll bidders are treated equallyequally and there are no favourites.and there are no favourites.

Standard forms of contracts exist in which the legal rightsStandard forms of contracts exist in which the legal rightsand obligations of the parties have been well defined.and obligations of the parties have been well defined.


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DisadvantagesDisadvantages Construction cannot start until the project is fully designedConstruction cannot start until the project is fully designed

and documented, whichand documented, which extends the periodextends the period of the wholeof the wholeproject and increase the financial risk and burden of theproject and increase the financial risk and burden of theclient;client;

The builder tends to be in anThe builder tends to be in an adversarialadversarial situation with thesituation with thearchitect/client (high potential of conflict);architect/client (high potential of conflict);

The variations of design after the award of contract areThe variations of design after the award of contract are

costly;costly; The lack of the builderThe lack of the builders technological and managements technological and management

expertise and input into those aspects of the design willexpertise and input into those aspects of the design willweaken the constructabilityweaken the constructability;;

If the builder goes bankrupt, payments made to theIf the builder goes bankrupt, payments made to thebuilder not passed onto the subbuilder not passed onto the sub--contractor may have to becontractor may have to bepaid again.paid again.


Contract StrategiesContract Strategies The design for the project is established withoutThe design for the project is established without

involving the prospective general contractor. This isinvolving the prospective general contractor. This isconditional on the design team having broad siteconditional on the design team having broad siteexperience in availability of resources and knowledgeexperience in availability of resources and knowledgeofofbuildabilitybuildability, industrial relations and safety aspects., industrial relations and safety aspects.If this is not the case, the client should appoint aIf this is not the case, the client should appoint aconsultant with construction knowledgeconsultant with construction knowledge on a fee basis;on a fee basis;

The client requires the architect (consultant) to provideThe client requires the architect (consultant) to provideadvice and monitoring the project through design,advice and monitoring the project through design,documentation and construction stages;documentation and construction stages;

The time available for the project is such that theThe time available for the project is such that thedetailed design is completed before constructiondetailed design is completed before constructioncommences;commences;

Standard forms of general conditions of contract areStandard forms of general conditions of contract areused for the traditional system (AS2124).used for the traditional system (AS2124).


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Construction ManagementConstruction Management

Construction Management is an example ofConstruction Management is an example ofmanagedmanageddelivery method, which isdelivery method, which ischaracterised by a more active role for thecharacterised by a more active role for theclient as a member of the project team.client as a member of the project team.

It attempts toIt attempts to uniteunite a threea three--party team ofparty team ofclient, architect and construction managerclient, architect and construction manager

into ainto a nonnon--adversarialadversarial, cohesive contractual, cohesive contractualrelationship, all with a common goal to serverelationship, all with a common goal to servethe project objectives and the clientthe project objectives and the clients needss needsin the best possible way.in the best possible way.

Client

Architect Construction manager

Consultants SuppliersSubcontractors

TenderedAmounts

Q.S.

Fee + Reimbursable

Fees


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Client



TenderedAmounts

Q.S.

Fee + Reimbursable, etc.

Fees

ConstructionConstruction

Management (cont.)Management (cont.)

Client:Client:Acquire land and arrange finance;Acquire land and arrange finance;

Appoint an architect to prepare and coordinate theAppoint an architect to prepare and coordinate the

design and documentation (together with thedesign and documentation (together with theconstruction manager);construction manager);

Appoint an construction manager to organize theAppoint an construction manager to organize theconstruction andconstruction and seek his advice on the design asseek his advice on the design aswellwell;;

Select and appoint subcontractors based on theSelect and appoint subcontractors based on therecommendation of construction manager;recommendation of construction manager;

Work in the project team actively and is involvedWork in the project team actively and is involvedin the projectin the projects days day--toto--day affairsday affairs..


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ConstructionConstructionManagement (cont.)Management (cont.) Architect:Architect:

Appointed by the client with a contract;Appointed by the client with a contract;

Carry out the conceptual and detail designCarry out the conceptual and detail design with thewith the

knowledge input from the construction managerknowledge input from the construction manager;;

Organize design team including structural engineer,Organize design team including structural engineer,

service engineer (mechanical, electrical, fire safety,service engineer (mechanical, electrical, fire safety,hydraulic engineer), landscape designer, interiorhydraulic engineer), landscape designer, interior

designer, quantity surveyor, etc;designer, quantity surveyor, etc;

Have contractual links with these specialistHave contractual links with these specialist

consultants and engineers;consultants and engineers;

Help construction manager arrange documentationHelp construction manager arrange documentation

and administer the tender processand administer the tender process..


Management (cont.)Management (cont.) Construction Manager:Construction Manager:

Appointed by the client in two optional ways (Appointed by the client in two optional ways (agency CMagency CM oror nonnon--agency CMagency CM););

Under the agency CMUnder the agency CM,,

CM can be a contractor, design consultant or any other consultanCM can be a contractor, design consultant or any other consultant.t.The key selection criteria in appointing a CM is theThe key selection criteria in appointing a CM is the knowledge andknowledge andexperienceexperience that person has of managing construction;that person has of managing construction;

CM operates as the clientCM operates as the clients agent in managing construction,s agent in managing construction,coordinating and administering the activities of subcontractorscoordinating and administering the activities of subcontractors;;

CM also helps the clientCM also helps the client prepare documentationprepare documentation (including technical(including technicalissues in the design), separate the construction work into tradeissues in the design), separate the construction work into tradepackages and select subcontractors (with direct contract with clpackages and select subcontractors (with direct contract with cl ientientbut overseen by the CM);but overseen by the CM);

CM has no contract to build.CM has no contract to build.

CM has direct communication with both the client and the architeCM has direct communication with both the client and the architect.ct.

CM is paid a fee for overheads and profit margin and isCM is paid a fee for overheads and profit margin and isreimbursed for incurred construction costs.reimbursed for incurred construction costs.


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ConstructionConstructionManagement (cont.)Management (cont.) Construction Manager:Construction Manager:

Under the nonUnder the non--agency CM (not typical)agency CM (not typical)

Before the construction stage, nonBefore the construction stage, non--agency CM undertakesagency CM undertakes

much the same tasks as agency CM. However, after themuch the same tasks as agency CM. However, after the

commencement of construction, noncommencement of construction, non--CM contracts toCM contracts to managemanage

and constructand construct the construction (compared with agency CM);the construction (compared with agency CM);

The construction work will not be divided into trade packagesThe construction work will not be divided into trade packages

(separate contracts with the client). CM prepares(separate contracts with the client). CM prepares

documentation and selects subcontractors directly (withdocumentation and selects subcontractors directly (withcontract); thecontract); the CMCMss role looks like a contractor under therole looks like a contractor under the

traditional system;traditional system;

The CM constructs the facility through the work of theThe CM constructs the facility through the work of the

subcontractors. Normally, the CM normally doessubcontractors. Normally, the CM normally does notnot

undertake constructionundertake construction tasks himself.tasks himself.



Risk sharing:Risk sharing:

Client takes most of the risks (particularly under theClient takes most of the risks (particularly under the

agency CM);agency CM);

Under the nonUnder the non--agency CM, the CM takes the risk ofagency CM, the CM takes the risk ofconstruction;construction;

Architect takes the risk of design;Architect takes the risk of design;

Agency CM is paid with a fee plus reimbursement +Agency CM is paid with a fee plus reimbursement +

Incentives (which indicates a risk sharing. For nonIncentives (which indicates a risk sharing. For non--

agency CM, use guaranteed construction sum).agency CM, use guaranteed construction sum).


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ConstructionConstructionManagement (cont.)Management (cont.) AdvantagesAdvantages

Fast track;Fast track;

Improved constructability;Improved constructability;

NonNon--adversarial climate can improve work efficiency;adversarial climate can improve work efficiency;

Since the client assumes more risk, the project is less reliantSince the client assumes more risk, the project is less reliant ononrisk contingencies and the client has a better control over riskrisk contingencies and the client has a better control over risk;;

Greater flexibility to make design changes as the projectGreater flexibility to make design changes as the projectproceeds;proceeds;

The CM method should attract more competitive prices fromThe CM method should attract more competitive prices fromseparate contractors;separate contractors;

Information flow is greatly enhanced;Information flow is greatly enhanced;

Teamwork reduces the incidence of contractual disputes;Teamwork reduces the incidence of contractual disputes;

Breaking up work into packages allows the client to control theBreaking up work into packages allows the client to control thebudget and to change, omit or postpone work where thebudget and to change, omit or postpone work where thebudget is likely to be exceeded.budget is likely to be exceeded.



DisadvantagesDisadvantages Total construction cost isTotal construction cost is unknownunknown until the project isuntil the project is

completed;completed;

The client carriesThe client carries more riskmore riskand is more exposed to theand is more exposed to the

adverse impact of risk (much of the financial risk is transferreadverse impact of risk (much of the financial risk is transferreddfrom the builder to the client);from the builder to the client);

The clientThe clients involvement and evolution of the design processs involvement and evolution of the design processcan have a detrimental effect on the cost;can have a detrimental effect on the cost;

Unless special provisions are made there may beUnless special provisions are made there may be no incentiveno incentivefor the CM to contain costs;for the CM to contain costs;

Liquidated damages are almost impossible to enforce becauseLiquidated damages are almost impossible to enforce becauseof the difficulty of proving who is to blame;of the difficulty of proving who is to blame;

NonNon--agency CM could have a conflict interest with the clientagency CM could have a conflict interest with the clientwhen exposed to the possibility of a financial loss.when exposed to the possibility of a financial loss.


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ConstructionConstructionManagement (cont.)Management (cont.) Contract StrategiesContract Strategies

Depending on the extent of work and the degree of risk, aDepending on the extent of work and the degree of risk, aarchitect may be engaged on a lump sum or a percentage feearchitect may be engaged on a lump sum or a percentage feecontract; the architect is engaged early in the conceptual stagecontract; the architect is engaged early in the conceptual stage;;

A construction manager is engaged as early as possible, eitherA construction manager is engaged as early as possible, eitherat the end of the conceptual stage or in the beginning of theat the end of the conceptual stage or in the beginning of thedesign stage.design stage. Under theUnder the agency CM,agency CM, the CM is contracted withthe CM is contracted withlump sum management fees with a guaranteed maximum price;lump sum management fees with a guaranteed maximum price;if the guaranteed maximum is exceeded, the CM would usuallyif the guaranteed maximum is exceeded, the CM would usuallybe liable to pay for the excess; in the opposite case, the CMbe liable to pay for the excess; in the opposite case, the CM

may earn a share of savings.may earn a share of savings. Under the nonUnder the non--agency CMagency CM, the CM, the CMis contracted with costis contracted with cost--plus with a payment of a lumpplus with a payment of a lump--sumsummanagement fee.management fee.

Trade contractors/subcontractors are engaged usually withTrade contractors/subcontractors are engaged usually with lumplumpsum contracts based on competitive tenderingsum contracts based on competitive tendering;;

Standard forms of general conditions of contract with minorStandard forms of general conditions of contract with minorrevisions/conditions can be used for CM (AS2124revisions/conditions can be used for CM (AS2124--1986).1986).

Project ManagementProject Management

Project ManagementProject Managementas a project delivery method,as a project delivery method,refers to a unique organization structure with therefers to a unique organization structure with theproject manager as a leader of the team for theproject manager as a leader of the team for theprocurement of a project; it is distinct from a body ofprocurement of a project; it is distinct from a body of

knowledge or a process known asknowledge or a process known as ProjectProjectManagementManagement..

The PM delivery method is a more refined form ofThe PM delivery method is a more refined form ofthe agency CM method with the addition of a projectthe agency CM method with the addition of a projectmanager who assumesmanager who assumes total responsibilitytotal responsibilityofofmanaging the project from inception to completionmanaging the project from inception to completion(including both design and construction).(including both design and construction).


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Client

Project Manager

Builder

Consultants

Q.S.


Tendered Lump Sumor Fee + Reimbursable

Architect

Fee

Fee

Fee

Client

Project Manager

Builder

Consultants

Q.S.


Tendered Lump Sumor Fee + Reimbursable

Architect

Fee

Fee

Fee


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Project Management (cont.)Project Management (cont.)

Client:Client:

Acquire land and arrange finance;Acquire land and arrange finance;

Appoint and empower a project manger toAppoint and empower a project manger to

represent the clientrepresent the clients interests interest as the leader of aas the leader of a

project team in procuring the products;project team in procuring the products;

Act as a member of the project team butAct as a member of the project team but fullyfully

representedrepresented by the project manager in dayby the project manager in day--toto--day decision;day decision;

HaveHave only contract relationshiponly contract relationship with architectwith architect

and builder.and builder.


Project Manager:Project Manager: Have contract relationship with the client;Have contract relationship with the client;

Represent the client to manage the project from theRepresent the client to manage the project from theinception to the completion on a dayinception to the completion on a day--toto--day basis and isday basis and is

required to act in the clientrequired to act in the clients best interest;s best interest; Be responsible for the development of a strategic plan,Be responsible for the development of a strategic plan,

organization of the necessary resources both human andorganization of the necessary resources both human andphysical, coordination and integration of activities at eachphysical, coordination and integration of activities at eachstage of the projectstage of the projects life cycle and control of the entires life cycle and control of the entireprocess;process;

Make recommendations to the client on the selection of theMake recommendations to the client on the selection of thearchitect and builder;architect and builder;

Do not have contract relationship with architect and builderDo not have contract relationship with architect and builder..


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Architect:Architect: Appointed by the client with a contract butAppointed by the client with a contract but overseenoverseen by theby the

project manager;project manager;

Carry out the conceptual and detail design;Carry out the conceptual and detail design;

Organize design team including structural engineer, serviceOrganize design team including structural engineer, service

engineer (mechanical, electrical, fire safety, hydraulicengineer (mechanical, electrical, fire safety, hydraulic

engineer), landscape designer, interior designer, quantityengineer), landscape designer, interior designer, quantity

surveyor, etc;surveyor, etc; Have contractual links with these specialist consultants andHave contractual links with these specialist consultants and

engineers;engineers;

Have communication link with builder and report to projectHave communication link with builder and report to project

manager.manager.


Builder (Contractor):Builder (Contractor): Appointed by the client with aAppointed by the client with alump sumlump sumcontract orcontract orfee +fee +

reimbursablereimbursablecontract;contract;

Appoint subcontractors and material suppliers withAppoint subcontractors and material suppliers withcontractual arrangements (usually with lump sum price);contractual arrangements (usually with lump sum price);

Fulfil all the obligations under the contract, namely to buildFulfil all the obligations under the contract, namely to buildthe facility within thethe facility within the agreed cost and time budgetsagreed cost and time budgets and toand tothe required quality standards;the required quality standards;

Accept liability for construction performance and coordinateAccept liability for construction performance and coordinatethe subcontractors;;the subcontractors;;

Have a communication link with the architects and report toHave a communication link with the architects and report tothe project manager.the project manager.


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Risk sharing:Risk sharing: While the client empowers the project manager to lead theWhile the client empowers the project manager to lead the

team and be the main dayteam and be the main day--toto--day decisionday decision--maker, the clientmaker, the client

assumes the responsibility for contracts with other teamassumes the responsibility for contracts with other team

members;members;

In the absence of aIn the absence of a guaranteed maximum priceguaranteed maximum price, the project, the project

manager assumes the lowest level of risks; with a guaranteedmanager assumes the lowest level of risks; with a guaranteed

maximum price, the risk will naturally increase.maximum price, the risk will naturally increase.

Architect needs to assume the risk associated with designArchitect needs to assume the risk associated with design

mistakes;mistakes;

The contract price paid to the builder may be in the form of aThe contract price paid to the builder may be in the form of a

lump sum, a schedule of prices, or a mixture of both, or evenlump sum, a schedule of prices, or a mixture of both, or even

costcost--plus.plus.


AdvantagesAdvantages The PM method should complement most of the advantagesThe PM method should complement most of the advantages

associated with the CM method;associated with the CM method;

It provides aIt provides a more professional approachmore professional approachto the overallto the overall

management of the project, particularly suitable for a clientmanagement of the project, particularly suitable for a clientwho does not have the time and/or expertise to manage thewho does not have the time and/or expertise to manage theproject;project;

The client may replace the project managerThe client may replace the project manager withoutwithoutadverselyadversely affecting any of the existing contract;affecting any of the existing contract;

A lumpA lump--sum fee or an incentivesum fee or an incentive--based fee to the projectbased fee to the projectmanager ensures motivation and performance;manager ensures motivation and performance;

The PM is an ideal approach to handle fastThe PM is an ideal approach to handle fast--tracking and fortracking and forprojects withprojects with complex nature and high riskscomplex nature and high risks..


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DisadvantagesDisadvantages The client is exposed toThe client is exposed to a high level of riska high level of risk;;

While the client carries a lot of risk, the client isWhile the client carries a lot of risk, the client is not involvednot involvedin dayin day--toto--dayday decision making;decision making;

The project manager needs to be appointed at the early partThe project manager needs to be appointed at the early partof the conceptual stage, which may not always be possibleof the conceptual stage, which may not always be possibleor convenient;or convenient;

The project manager must be givenThe project manager must be given functional control overfunctional control over

resourcesresources including a fund for paying separate contractors.including a fund for paying separate contractors.


Contract StrategiesContract Strategies The project manager is the clientThe project manager is the clients agent based on as agent based on a

contract (generally, fees) and appointed at the early part ofcontract (generally, fees) and appointed at the early part ofthe conceptual design stage;the conceptual design stage;

The architect and builder are appointed by the client withThe architect and builder are appointed by the client withthe recommendation of the project manager;the recommendation of the project manager;

The PM is basically a fastThe PM is basically a fast--tracking in nature and thetracking in nature and thecontracts between the client and other parties are decidedcontracts between the client and other parties are decidedbased on the negotiation and the taking of risks.based on the negotiation and the taking of risks.


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Design and Construct (D&C)Design and Construct (D&C)

A major cause of dispute and delay in projects isA major cause of dispute and delay in projects is latelateresolution of design detailsresolution of design details. The D&C method reduces. The D&C method reducesthis potential problem by assigning the design task tothis potential problem by assigning the design task tothe building contractorthe building contractor there is athere is a single point ofsingle point ofresponsibilityresponsibility for the project.for the project.

The D&C method is referred to as a package deal or aThe D&C method is referred to as a package deal or a

turnkeyturnkeymethod. The client does not want to bemethod. The client does not want to beenmeshed in the details of the project delivery andenmeshed in the details of the project delivery andhence gives the builder the responsibility for both thehence gives the builder the responsibility for both thedesign and construction.design and construction.

Client

Builder

Consultants

SuppliersSubcontractors

Tendered Lump Sum

Architect

Tendered AmountsNegotiated Sum


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Design and Construct (cont.Design and Construct (cont.

Client:Client: Acquire land and arrange finance;Acquire land and arrange finance;

Work a de facto project manager (mayWork a de facto project manager (may engage a specialistengage a specialistconsultant as a superintendentconsultant as a superintendent););

Appoint a D&C contractor (builder) and supervise theAppoint a D&C contractor (builder) and supervise thecontractorcontractorwork;work;

Considering that D&C projects are expected to be fastConsidering that D&C projects are expected to be fast--tracked, direct involvement of the client in the project istracked, direct involvement of the client in the project isessential;essential;

Experienced clients have no reason to engage independentExperienced clients have no reason to engage independentsuperintendents since they have the necessary expertisesuperintendents since they have the necessary expertiseinin--house; inexperienced clients should consider using thehouse; inexperienced clients should consider using thetraditional method.traditional method.

Design and Construct (cont.Design and Construct (cont.

Builder:Builder: Appointed by the client in a lumpAppointed by the client in a lump--sum contract;sum contract;

is the single point responsibility for delivering the project,is the single point responsibility for delivering the project,

managing design and construction including time, cost,managing design and construction including time, cost,quality and safety;quality and safety;

Can be a company with capacity to design and construct orCan be a company with capacity to design and construct or

contract the design and construction out;contract the design and construction out;

Appoint design consultants (including architect) andAppoint design consultants (including architect) and

subcontractors with direct contractual relationship as well assubcontractors with direct contractual relationship as well as

oversight relationship;oversight relationship;


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Design and Construct (cont.)Design and Construct (cont.)

Architect (not an independent party withArchitect (not an independent party withcontract to the client):contract to the client): Usually isUsually is a brancha branch of the builderof the builders company but can bes company but can be anan

independent companyindependent company appointed by the builder;appointed by the builder;

Carry out the conceptual and detail design with theCarry out the conceptual and detail design with theknowledge input from builder and other subcontractors;knowledge input from builder and other subcontractors;

Organize design team including structural engineer, serviceOrganize design team including structural engineer, serviceengineer (mechanical, electrical, fire safety, hydraulicengineer (mechanical, electrical, fire safety, hydraulic

engineer), landscape designer, interior designer, quantityengineer), landscape designer, interior designer, quantitysurveyor, etc;surveyor, etc;

Have contractual links with these specialist consultants andHave contractual links with these specialist consultants andengineers.engineers.


Risk sharing:Risk sharing: BriefBriefis the most important document in appointing the D&Cis the most important document in appointing the D&C

builder; if the brief is not of sufficient details or unclear,builder; if the brief is not of sufficient details or unclear,disputes may arise over the required standard or quality;disputes may arise over the required standard or quality;

The client assumes the lowest risk provided that the brief isThe client assumes the lowest risk provided that the brief isclearly defined;clearly defined;

Whether a D&C contract is tendered or negotiated, it may beWhether a D&C contract is tendered or negotiated, it may bedifficult to estimate the contract price accurately due to a lacdifficult to estimate the contract price accurately due to a lackkof documentation; the builder would include aof documentation; the builder would include a contingencycontingencywhich could be either too high or too low;which could be either too high or too low;

The builder takes most of the risks (usually recognized as theThe builder takes most of the risks (usually recognized as thehighest risky project delivery method for builderhighest risky project delivery method for builder););

If the builder contracts the design and construction tasks out,If the builder contracts the design and construction tasks out,the designers and the subcontractors may have to takethe designers and the subcontractors may have to takecorresponding risk.corresponding risk.


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AdvantagesAdvantages Time is saved because D&C is also fast tracked in nature;Time is saved because D&C is also fast tracked in nature;

The knowledge input of builder can improve constructability;The knowledge input of builder can improve constructability;

The client has only one party to deal with, improved directThe client has only one party to deal with, improved direct

communication and management;communication and management;

Variations will be minimised as the builder is in charge of theVariations will be minimised as the builder is in charge of the

design and construction;design and construction;

The client knows the final cost right at the start if using lumpThe client knows the final cost right at the start if using lumpsum contract;sum contract;

The builder has more flexibility to select the design andThe builder has more flexibility to select the design and

construction methods which are the most suitable for him.construction methods which are the most suitable for him.


DisadvantagesDisadvantages It only suitsIt only suits straight forward conventional projectsstraight forward conventional projectswhichwhich

can be adequately described in a brief;can be adequately described in a brief;

The variations from the client will cost a lot after theThe variations from the client will cost a lot after theaward of the D&C contract;award of the D&C contract;

It isIt is the builder who appoints the architectthe builder who appoints the architect, which may, which maymean lesser quality materials or techniques are usedmean lesser quality materials or techniques are usedthan other project delivery methods;than other project delivery methods;

It is very hard to define a clear brief at the project earlyIt is very hard to define a clear brief at the project earlystage, which may cause disputes at the end of thestage, which may cause disputes at the end of theproject over whether the project satisfies the clientproject over whether the project satisfies the clientssexpectations.expectations.


23/24

23

Design and ConstructDesign and Construct(cont.)(cont.)

Contract StrategiesContract Strategies Payment to the builder, covering both the design taskPayment to the builder, covering both the design task

and the construction, is generally onand the construction, is generally on a lump suma lump sum basis;basis;

the contract sum is established by competitive tenderthe contract sum is established by competitive tenderbased on the clientbased on the clients brief, ors brief, or negotiated based onnegotiated based onestimatesestimates prepared by the clientprepared by the clients advisors (in this case,s advisors (in this case,

could be Costcould be Cost--Plus);Plus);

The design work would more often than not beThe design work would more often than not beperformed for the builder by an architectural firm withperformed for the builder by an architectural firm with

subsub--consultants, on a set fee basis negotiated with theconsultants, on a set fee basis negotiated with the

builder.builder.

Subcontractors are engaged usually withSubcontractors are engaged usually with lump sumlump sumcontracts based on competitive tenderingcontracts based on competitive tendering..

Client



TenderedAmounts

Q.S.

Fee + Reimbursable,etc.Fee

Client

Architect

Builder

Consultants Q.S.


Tendered LumpSum

Negotiated Fees

Client

Project Manager

Builder

Consultants

Q.S.


Tendered Lump Sumor Fee +Reimbursable

Architect

Fee

Fee

Fee

Client

Builder

Consultants


Tendered Lump Sum

Architect

Tendered AmountsNegotiated Sum


24/24

NovationNovation

ARCHITECT

Client

OTHER CONSULTANTSSUB CONTRACTORS

FINANCIERS LAND AQUISITION

HEAD CONTRACTOR

CONTRACTURAL

Functional

NOVATED

CONTRACT

POST NOVATION

COMPLIANCE ADVICEPRE NOVATION

GOVERNMENTCONTRACTURAL

Functional

GOVERNMENT CONTRACTS WITH ONE PARTY (SPECIAL PURPOSE VEHICLE)

ALL RISK INCLUDING COST, PERFORMANCE & DESIGN TAKEN BY SPV SPV WILL PASS ON RISK WITHIN CONSORTIUM

SPECIAL PURPOSE VEHICLE (COMPANY)

FINANCIER

OPERATOR D&C TEAM

INVESTORS

PROJECT MANAGER ADVISORS

PROJECT

PERFORMANCE SPEC

ADVISORS

FINANCE

LEGALS

DESIGN TEAM

PROBITY

PROJECT MANAGER

Public Private PartnershipPublic Private Partnership

Date post:	06-Apr-2018
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Week 3 Lec Note(2)

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