Contract Types Flashcards
Name five alternative Methods when it comes to procurement contracts?
Negotiated Price Contract
Cost-Plus contract
Two-stage tender
Construction Management
Design and Construct
What is a Negogiated Price Contract procurement?
The traditional relationship between the client and the architect is maintained, contract documentation is substantially or fully completed and a tender is negotiated with one or more selected contactors. A traditional contract is signed when a satisfactory price is achieved and the architect administers the contract.
What is a Cost-Plus contract procurement?
The traditional relationship between the client and the architect is maintained, contract documentation is substantially or fully completed and a management fee covering overheads and profit is negotiated with one or more selected contractors. The successful contractor builds the project using in-house and sub-contracted labour. A modified contract is signed and the architect administers the contract. It is usual for the sub contract tendering to be administered by the contractor but vetted and approved by the client and/or the architect.
What is a Design and Construct contract?
In design-and-construct arrangements the client enters into one contract for the design and construction of a building or project with an organisation, generally based on a building company which provides both design and building services. A ‘guaranteed price’ is negotiated between the contractor and the client, based on the client’s brief or requirements, previous projects of a similar nature, a risk assessment by both parties and a building margin (usually generous). The contractor’s project priorities, minimum cost, minimum time and maximum profit are often in conflict with the client’s priorities. The design team functions as a normal design team, but with the contractor effectively acting as the client, interpreting the client’s requirements against the known maximum cost. Both the design and construction will be tailored by the contractor to fit within the guaranteed price. In most cases the client is the contractor and it is the architect’s duty to put the interests of the client (the contractor) in front of the interests of the building owner or occupier. The process lacks independent assessment or monitoring and the architect is often unable to deal directly with the client or user. Except in the case of very simple or repetitive buildings, design-and-construct project delivery provides clients with little assurance that they will receive an end product that fully satisfies their needs or expectations and unreasonably exposes architects and other design consultants to depressed fees with little or no reduction in liability.
What is a Construction Management contract?
A construction manager has expertise in both building and management and is contracted to the client to provide management services only. The provision of materials and labour is through a series of separate contracts between individual suppliers and contractors and the client. The construction management organisation acts as the owner’s agent to administer the separate contracts, plan and supervise construction, and manage the construction services provided by the design consultants, including the architect.
While the construction manager may be engaged when all design and documentation is complete, they are more often engaged during the design or documentation process to assess buildability and to endeavour to see that the design is tailored to meet the client’s budget and other requirements. As a single overall tender is not necessary before work begins, an early start on site is possible by completing the documentation, tendering and letting contracts for the early trades while documentation for later trades is still in progress.
The construction manager is paid on a fee-for-service basis and has no vested interest in project finances and can provide independent advice to the owner as a consultant. The construction manager is not bound by the project budget and all risks are borne by the owner and the separate contractors.
The role of the architect and the relationship with the owner and the construction manager may be much the same as in traditional contracts between architect, client and contractor. It is more common, however, for the construction manager to take over some of the architect’s traditional roles, such as certification, during construction. It is increasingly common for the architect and other design consultants to be novated to the construction manager. Construction management may be an advantage for very large projects, where an early start on site is necessary or where part or all of the project is occupied (ie shopping centres).
What is a Two-Stage Tender contract?
The traditional relationship between the client and the architect is maintained. The first-stage tender is sought using sketch plans and an outline specification and the selection of the contractor is based on the overhead and profit rate, resources, and site and management facilities offered.
Documentation is developed with the contractor and principal subcontractors as part of the design team. The price is built up progressively from elemental subcontract prices prepared by the subcontractors. The design will be tailored throughout the process to meet the client’s budget and other requirements. The design input from the contractor can be valuable, allowing a thorough analysis of buildability and providing a realistic basis for assessing the cost benefit of various aspects of the design.
What is a Two Stage Tender Contract procurement?
The traditional relationship between the client and the architect is maintained. The first-stage tender is sought using sketch plans and an outline specification and the selection of the contractor is based on the overhead and profit rate, resources, and site and management facilities offered.
Documentation is developed with the contractor and principal subcontractors as part of the design team. The price is built up progressively from elemental subcontract prices prepared by the subcontractors. The design will be tailored throughout the process to meet the client’s budget and other requirements. The design input from the contractor can be valuable, allowing a thorough analysis of buildability and providing a realistic basis for assessing the cost benefit of various aspects of the design.
What is Construction Management procurement?
A construction manager has expertise in both building and management and is contracted to the client to provide management services only. The provision of materials and labour is through a series of separate contracts between individual suppliers and contractors and the client. The construction management organisation acts as the owner’s agent to administer the separate contracts, plan and supervise construction, and manage the construction services provided by the design consultants, including the architect.
While the construction manager may be engaged when all design and documentation is complete, they are more often engaged during the design or documentation process to assess buildability and to endeavour to see that the design is tailored to meet the client’s budget and other requirements. As a single overall tender is not necessary before work begins, an early start on site is possible by completing the documentation, tendering and letting
contracts for the early trades while documentation for later trades is still in progress.
The construction manager is paid on a fee-for-service basis and has no vested interest in project finances and can provide independent advice to the owner as a consultant. The construction manager is not bound by the project budget and all risks are borne by the owner and the separate contractors.
The role of the architect and the relationship with the owner and the construction manager may be much the same as in traditional contracts between architect, client and contractor. It is more common, however, for the construction manager to take over some of the architect’s traditional roles, such as certification, during construction. It is increasingly common for the architect and other design consultants to be novated to the construction manager.
Construction management may be an advantage for very large projects, where an early start on site is necessary or where part or all of the project is occupied (ie shopping centres).
What is the procurement: Design and Construct?
In design-and-construct arrangements the client enters into one contract for the design and construction of a
building or project with an organisation, generally based on a building company which provides both design and building services. A ‘guaranteed price’ is negotiated between the contractor and the client, based on the client’s brief or requirements, previous projects of a similar nature, a risk assessment by both parties and a building margin (usually generous). The contractor’s project priorities, minimum cost, minimum time and maximum profit are often in conflict with the client’s priorities.
The design team functions as a normal design team, but with the contractor effectively acting as the client,
interpreting the client’s requirements against the known maximum cost. Both the design and construction will be
tailored by the contractor to fit within the guaranteed price. In most cases the client is the contractor and it is the architect’s duty to put the interests of the client (the contractor) in front of the interests of the building owner or occupier.
The process lacks independent assessment or monitoring and the architect is often unable to deal directly with the client or user. Except in the case of very simple or repetitive buildings, design-and-construct project delivery provides clients with little assurance that they will receive an end product that fully satisfies their needs or expectations and unreasonably exposes architects and other design consultants to depressed fees with little or no reduction in liability.
What are the perceived advantages of Design and Construct procurement?
The advantages of the D&C contract are commonly considered to include:
- that the client is dealing with one entity on a contractual basis throughout the life of the project from
inception to delivery - that this one entity will provide the end product
- the relative ease of the integration of the design expertise and the building expertise
- the increased opportunity for the shorter duration of the project, by not having to follow a normal tendering
approval process - security of knowledge in respect of cost and time of the project at an early stage & the single total price.
These are seen as advantages when compared to most other contractual arrangements, in particular to traditional forms of contract, which involve separate engagement of architect, consultants and contractors.
What are the perceived disadvantages of Design and Construct?
The disadvantages of D&C contracts are commonly considered to include the:
- lack of cost competitiveness, or at least the client’s control over it
- lack of independent or impartial professional advice by an architect or consultants having no commercial
interest in the outcome of that advice - non-disclosure in the marketing stage of all the ramifications of the ‘deal’ and resultant reduced
performance or quality of finish.
In many cases clients are aware of these shortcomings, but do not necessarily consider them to be of great
significance. It is apparent that they believe that careful choice of the contractor in the first instance is sufficient to outweigh the disadvantages. In fact D&C contracts do not specify the quality of all components and rarely define quantity (the drawings are generally schematic).
D&C organisations in many cases counter the claim of lack of cost competitiveness in the calling of tenders for subcontract work and offer the client a share of any resultant savings usually in an agreed proportion.
The lack of independent advice is often overcome by the engagement by the client of independent or audit
consultants as advisers. This is outside of the contractual arrangement with the D&C contractor.
The problem of cost competitiveness can be overcome by the calling of tenders for the D&C contract. This is quite common among government authorities who are required to account to the public for budgeting and the expenditure of public money. It is essential that the brief of the client’s requirements is properly and accurately prepared and forms part of the tender documents.
What does Fast tracked procurement typically mean?
Design documentation and Construction work conjunctively.
“Fast-tracking (or phased construction) is a generic term used to describe a number of building-delivery methods designed to shorten the overall time between the decision to proceed with a project and its completion. In a fasttrack project, design and construction activities overlap rather than proceed sequentially, which allows construction to commence before all design or documentation is completed. Compared to the traditional process of designing, documenting, pricing and building, fast-tracking may deliver a project in less overall time. “
Procurement: “Fast-tracking” cons?
Supportive infrastructure for flexibility with design maybe become REDUNDANT or ABORTIVE WORKS.
INEFFICIENCES IN DESIGN such as over-sized risers and ducts, plant rooms and service spaces, due to inadequate information being available at an early design stage and the need to ensure that elements designed later will fit.
the actual construction cost and the cost of EXTENDED CONSULTANT SERVICES will usually be higher as more people are required for a shorter period, often more documents are required to meet trade-package requirements and more time will be spent on site.
EXPERIENCED ARCHITECTS/staff only
A lot MORE COORDINATION by the architect due to documentation as TRADE PACKAGES. Therefore experienced architects required
If not properly controlled and coordinated, the PACE of building can get ahead of the available information.
Procurement: “Fast-tracking” pros?
In a fast-track project the client may achieve savings in financing costs and holding charges and be rewarded with an earlier cash flow, building sale or occupation due to the shorter timeframe.
What should the client be informed of by the architect when entering into “fast-track” procurement?
It should be clearly explained to the client about the potential risks in the LIMITATION OF DESIGN CHOICES if work starts before the entire design is understood/finished.
The architect needs to help the client understand the complexity of the decisions and the EDUCATED GUESSWORK that is required by fast-track and the risks associated with the lack of the customary checks and balances that are exercised in traditional design and construction.
The architect will be forced to make ASSUMPTIONS and should advise the client about the likelihood of such changes and delays resulting in extra costs, so they can be accounted for in the project budget and a BIGGER CONTINGENCY fund can be established.
