NZIA Lectures - D

Question 1

Time, quality and cost - pick two!

Answer 1

Time, quality and cost - pick two!

In the construction process of a 5 star hotel time will be sacrificed

In a factory quality will be sacrificed

High end home, time will be sacrificed

Rare that cost is sacrificed

Quality and time done sit well together

Question 2

Procurement Types

Answer 2

Traditional - most common

Design and Build

Management

GMP (Guaranteed Maximum Price)

PPP/PFI (Private financial Initiative)

Partnering

Question 3

Procurement - Traditional

Answer 3

• The architect is responsible for the designs, documents and observation. The contractor is responsible for the construction. Ie the client engages the consultants to design and document project
• For the completion of the documentation, the tender documents are prepared, and the contractor is invited to submit their tender for construction
  
  • Usually under single stage competitive basis
• Under this method the contractor is not responsible for the design, other than the temporary works
• Although some traditional contracts do allow for the contractor to design some specific parts of the works
• Main advantage of traditional method is that there is a greater certainty
  
  • Because the design is finalised before contractor has been engaged
  • Therefore easier to understand how much the project is likely cost
• There is some flexibility after tender through variations for example (Architectural Directions)
• This method may be slower than other forms of procurement as contractor is appointed only once the design is complete - contractor not able to give early input into design (ECI)
• There may also be cost disadvantages through this method - as cost rise if large number of changes are made
• The contractor has very little flexibility to manage price, as design is fixed

Question 4

What is a Design Build procurement type?

Answer 4

• This is a system that places responsibility for both the design and construction in the hands of the contractor
• Where the contractor does designa dn then construct works
• Advantages for time - overlapping design and construction
• Single point of responsibility - contractor
• Simpler and client is able to engage with contract and design team earlier int he process
• Cost - allows client certain amount of control. Preagreed price generally
• This means contractor will take on much of the financial risk
• As contractor responsible for design, they make make cost savings - impacts quality
• Under some design and build contractor a design team will work for the contractor instead of the client (novation)
• Novation - leaves the client without a independent design team
• Disadvantages
  
  • Quality - contractors may exploit a specification that is open for interpretation by choosing the cheapest option
  • Risk the client might have to pay more if contractor has to take an unreasonably high level of risk, due to lack of design clarity
  • Consider any changes will have cost and time implications

Question 5

Procurement - Management Contract

Answer 5

• The contractor has a management function. The work is divided into packages and these packages are let individually.
• Works are constructed by number of contractors, who are contracted to management contractor
• Management contractor appointed early on by client
• Management contractor experience is used improve cost and buildability
• Management contractor will advise on packaging and risk of interfaces(??)
• Agreement between client and management contractor is likely to cover pre-construction and construction activities - with a notice to proceed required
• Beneficial to client as they can retain the control of design while drawing on the experience of contractor
• Client is able to move the procurement and deliver risk to contractor who is responsible for project management and works.
• Rather contractor tendering fixed price, can provide cost savings for clients as well as time savings, by tending some of the work packages early, such as ground works, and then overlap the design and construction - quicker start on site
• Flexibility in design with changes being made during the contraction process
• This procurement route is not common in NZ but does work well

Question 6

Procurement - GMP (Guaranteed Maximum Price)

Answer 6

• The contractor agrees that the contract sum will not exceed a specified maximum. If the cost is higher, the contractor bears the additional cost
• IF the cost is lower than GMP, the savings may go to the client, the contractor, or a shared between both
• Contractor is incentivise to make savings
• Client has a secured max price
• Risk transfers from client to contractor in this method
• Because of this the contractor is likely to tender higher price
• Contractor pricing the risk that they are taking on
• This may be acceptable to clients if their priority is certainty rather lowest possible cost

Question 7

PFI (Private financial Initiative)

Answer 7

• A single integrated supply team is appointed for design, contraction and management and then operate it for a period of time
• Originated from the UK in early 90s
• Private financers provide their own money to deliver and maintain clearly defined public projects - 20-30 years
• In NZ a PFI is known as a PPP - Public private partnership
  
  • Partnership between government body and private entity
• Goal of providing public benefit - such as asset or service
• PPPs are long term and involve large companies
• Company takes a lot of risk - as remuneration of company is usually tied to performance

Question 8

Procurement - Partnering

Answer 8

• A collaborative management approach that encourages openness and trust. Commonly used on large, long term or high risk contracts
• Breaking down barriers between supplier and buying
• Agreement describes the way which the parities will conduct themselves
• Partnering can involve any or all contrsultants and clients
• Openness and collaboration
• Theory is that relationship between paities from linear to more equal
• The whole team becomes involved in management decisions and shared rewards for reaching objectives

Question 9

How to choose which Procurement method?

Answer 9

• The nature of the project (size, complexity), apportionment of risk, responsibility for designs, price basis (lump sum etc).
• For example:
  
  • A residential house - traditional
  • A warehouse - design and build
  • PPP - hospital or prison
  • Partnering - tunnels

Question 10

Types of Construction Contracts

Answer 10

• SCC/SCC SF
• NZS 3910
• NZS 3915
• NZ 3916
• NZS 3917
• NBC/NBC SF
• Others
  
  • NEC and FIDIC

Question 11

SCC/SCC SF

Answer 11

NZIA Standard Construction Contract

• Standard contract for the use between the Client and Contractor where an Architect is engaged to administer the contract
• Written by NZIA
• Requires the Architect to administer contract
• Form smalls projects to large projects
• Short form for very small projects

Question 12

NZS 3910

Answer 12

• Conditions of contract for building and civil engineering construction
• Build only contract
• Most common form of contract
• Written by Standards New Zealand
• Traditionally used on commercial projects from small to large scale
• Contractor requires Engineer to administer it - which can be anyone from architect, engineer, or project manager

Question 13

NZS 3915

Answer 13

• A standard construction contract designed for situations where no person is appointed to act as an Engineer to the Contract.
• Where the client administers the contractor directly -
  
  • Similar to NZIA National Building COntractor - where clients can use when they haven’t engaged Architects beyond the BC stage

Question 14

NZ 3916

Answer 14

• A design and build contract. Responsibility for the design is moved form the principal to the contractor
• Similar to NZS3910
• Adapted for situations where the contractor is responsible for both the design and the build

Question 15

NZS 3917

Answer 15

• For use where the contract is intended to operate over a defined period.
  
  • Where the building needs to operate for a defined period of time
• Typically used for repair, maintenance or renewal works
  
  • Cleaning, painting etc

Question 16

NEC

Answer 16

• NEC suite of contracts, from consultant agreements through to construction contracts
  
  • Name for umbrella of contracts
  • Developed in ENgland
  • Designed to be simple and easy to understand
  • Big of sharing of risk
  NEC used in infrasturue projects oftenFIDIC is unlikely to be used in NZ but NEC is used oftenNEC used in some councils, notably Christchurch

Question 17

FIDIC

Answer 17

• FIDIC engineer and construction contracts
  
  • FIDIC publishes various forms standard contracts on a range of delivery models and model types
    
    • Construction works, large scale machinery, infrasturure, consultancy services
      
      • Each contract applies to specific area
        
        • Red book - construction contract
        • Gold book - design, build and operate projects

FIDIC is unlikely to be used in NZ but NEC is used often

Question 18

Contract Conditions

Answer 18

• Typically broken down to series of sections that setout the legal relationship between parties and allocation of risk and consequently the cost
• General conditions
  
  • Portion of contractor of the document, where the rights, responsibilities and relationships are defined. RUles that govern the relation
  • Backone of the entire contractor and encompasss every aspect of project
• Special conditions
  
  • Terms and conditions that are particular to that project
  • Amends the general conditions
  • I.e. if there is a extension of time clause in general conditions that are to do with Strikes, the special conditions could sat “except where the strike is confirmed to the Site”
  • Its not uncommon for a 50 million dollar project to have 50 pages of special conditions and 100 mil job to have a 100 pages
  • Something like the commercial bay project will have several hundred pages of special conditions
• Contract agreement lists what constitutes the contract. You dont need to attach every last piece of paper.

Question 19

Architects are not Lawyers!

Answer 19

Architects are not lawyers, they should not be giving legal advice to their clients

• The contract is an agreement between the client and contractor!
• Stay out of negationations
• Can help compile the contract - but avoid help negotiating contract, or offering advice as to how the contract can be amended.
• It is not uncommon to be asked about your thoughts on retentions or definition of practical completion.
• Special conditions come from lawyers and to a lesser degree from project managers.
• When architect is not administering the project as engineer to the contract, it is unlikely that architect will get involved in the special conditions, but may be asked to give feedback
• Some clients can have more specials than ptehrs
• Governments like to have specials despite the aims of the constructions
• Not uncommon for Banks who are lending money to developer to insist on number of special conditions

Question 20

Tendering

Answer 20

How does the tendering process work

Question 21

Communicate H&S Info

Answer 21

• Communicate specific Health and Safety Information to the tenders (Design and Safety Report)
• This is a legal requirement
  
  • Architect to take all reasonable practical steps to design structure to minimise the risk to H&S to people:
    
    • Build the structure
    • Use the structure
    • Inspect or maintain the structure
    • And demolition
  • During the tender phase it is important that the H&S report is issued to the contractor as the information contained with in may influence construction methodology and price
  • Each practices risk register may be different, but all should:
    
    • Identify the risk
    • What happens if the risk materialises
    • Where the risk control measure is
    • Who owns the risks
  • For example, during maintenance phase, the workers might fall from the roof and suffer an injury. The minimise risk the parapets can be increased to height of 1100mm to act as a barrier or a railing could be installed. In this scenario the risk owner would be the architect.
  • A practice note and proformas is available for this (explore further)
  • What is important is that the H&R risks are communicated to the contractors
  • Evaluation must be done fairly
    
    • Some architects make the contractors aware of the maximum points are in each area
    • Minimum is 2.8% (explore further)
    • If for a large project there is only a double of projects, you may remove some percent points
  • Generally several people are involved in tender evaluation. At the end of the evaluation the marks are added up giving an overall score. Then compared with other tendering scores. This is good as some people mark harder and some softer.
  • Price is left to last. Therefore not influenced by cost.

Question 22

Risk Transfer

Answer 22

• The commonly applied theory that the risk should be placed on the party best placed to bear it does not automatically create fair risk allocation
• To create fair risk allocation - allocate risk by a project by project basis, realistic and informed way
• Often risk is not clear till the project is underway
  
  • For the contractor this is too late to have a discussion for whether this is fair or not
• It is fair to say if the underlying relationship between the contractor and principal is sound then the prosepect of achieve a risk allocation that is fair to both parties increases considerability
• Best outcomes when there is trust in each other
• Sealant example - is it fair if the architect forgets sealant to the bathrooms in drawings but contractor has to pay for it because of industry standard. Yes in most cases but what if the contractor only had a limited amount of time to price.