Other Forms Of Construction Procurement Methods Construction Essay

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The Design and Build procurement process works on the basis that the Main Contractor is not only responsible for construction, but the design element of a project as well. The levels of responsibility and input from the perspective of the Contractor are far greater than that of the traditional form of procurement methods. From the Clients perspective, Design and Build is relatively low risk in terms of time and cost, but if the Client does not pay particular attention to the preparation of the document known as the "Employers Requirements", their expectation in respect of quality can be compromised.

Introduction

Design and Build is not a new phenomenon, this type of procurement method has been with us since medieval times. According to Jeffrey L. Beard et al, when Ictinus and Callicrates built the Parthenon, the master builder and master mason provided both a design and build service, to provide one without the other was unknown. Design and Build Contracts have been described as an arrangement between a contracting organisation and a client, where the contractor takes full responsibility for the design and construction of a project. The industrial revolution of the 18th Century in Europe and the 19th Century in the United States of America brought about the separation of these two key elements of a design and build contract. This led to the introduction of what we know today as the traditional design/bid then build method of procurement. The design/bid then build approach of construction procurement is where the client engages an architect who in conjunction with a structural engineer prepares the design, drawings and specification for a project. The design complete with drawings and specification are then issued to several contractors for pricing. Generally the contractor with the lowest price is then selected to build the project, but sometimes this is not always the case.

According to the Haskell Company (No Date), "Cost and time factors initiated the resurgence of the master builder approach. Since the 1960's, the percentage of Design-Build projects has increased dramatically. Today, non-residential Design-Build volume represents half of all construction in the United States of Amercia. The reason for this increase is simple; the Design-Build process provides a unique set of client advantages not available in any other delivery system". According to a report prepared by Handscomb ( 2004); "Design and build has shown a steady market penetration in some countries. In the United States of America and the United Kingdom, it has grown from less than 10 percent in the early 1980's to more than 30 percent today".

Prior to coming to the Middle East region in 2007, I was extensively involved in Design and Build type construction projects, albeit using the various different forms of the Design and Build Contract that are in circulation today; for example the Fédération Internationale Des Ingénieurs-Conseils (commonly known as "FIDIC") and the Joint Council Tribunal (UK) (commonly known as "JCT") have published their own editions of this type of Contract. The general principle behind all of these contracts is that the Employer has a single point of contact and that the Design and Build Contractor accepts total responsibility for both the design and construction of a project. Since arriving in the region and having worked in Oman, Bahrain & the United Arab Emirates, it is evident that the traditional (design, bid then build) type of Construction procurement method is extensively used, with little evidence of the design and build contract being utltised.

The region is synonymous for mega construction projects and could benefit from other forms of procurement strategies such as design and build. So why are not using this delivery method more? Similarly the employers in this region are notorious for setting ambitious time scales for the delivery of their projects. From my experience and initial research, it is generally accepted that the design/build contracting procurement strategy would help them save both time and cost and full fill their requirements for fast track projects.

If the industry and professionals within this region is to better understand the benefits of a design and build procurement method (either from a client and/or contractors perspective); then they must get a better appreciation of the different forms of design and build contracts that are currently in existence today, and where they are best used. Furthermore, both the contractor and client also need to get a better appreciation of the advantages and disadvantages of the different design and build contracts if we are to use this delivery method more within the Middle East.

Therefore, in this dissertation, the writer will attempt to answer some of the questions raised earlier in this introduction, particularly for those in the Middle region that may be interested at looking for alternatives. In addition to this, the writer will attempt to provide an insight into the views and perception of other construction professional within the region regarding the design and build procurement method.

Hypotheses

At the end of the research it is expected to arrive at the following conclusion:

Design and Build Contracts are not necessarily suited for every construction project; each and every project will have a unique requirement. However with education; the industry as a whole in the region could potentially benefit from this procurement method.

People in the construction industry within the region do not like leaving their comfort zones and are less likely to promote change and innovative ideas which may include the use of alternative methods of procurement for Construction projects.

Aims

There are two main aims for this research project. Firstly to identify what the benefits of design and build construction procurement method is to us here in the Middle East.

Secondly, to gauge what the overall consensus is on whether there is a future for the design and builds procurement method here in the Middle East.

Objectives

To compare and contrast the traditional design/bid and then build type of delivery method with the design and build method.

To critically analyse the benefits of a design and build construction procurement method.

To identify the various types of the design and build construction procurement methods and identify where they are best used.

To gauge the general perspective of the construction professionals in the industry, particularly people in the Middle East region on the future of the design and build procurement method

Chapter 2 : Research Methodology

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What is Research?

The Concise Oxford Dictionary defines research as "a careful search or inquiry; endeavour to discover new or collate old facts etc. by scientific study of a subject; course of critical investigation"

Research Strategy

Naoum (2007) has defined research strategy as "the way in which the research objective can be questioned".

Research strategies can be broadly classified into two groups;

Quantitative research

Qualitative research

Quantitative Research

Naoum (2007) suggests that Quantitative research is "objective" in nature and is used to measure how people feel, think or act in a particular way. This research focuses on gathering numerical data across a group of people. Quantitative research can be used for the following circumstances.

To collect factual evidence and study the relationship between these facts in order to test a particular theory or hypothesis.

To find facts about a concept, a question or an attribute.

In the context of research, the objective is to test or verify a theory rather than develop one.

Qualitative Research

Naoum (2007) also suggests that Qualitative research is "subjective" in nature and can be divided into two main subcategories;

Exploratory Research - This research method is used when we have a limited amount of knowledge about the selected topic. The interview technique is usually selected as a method of data collection.

Attitudinal Research - This research method is used to evaluate the opinion, view or the perception of a person towards a particular subject.

This research method seeks out the 'why' and not 'how'. This type of research doesn't just rely on statistics or numbers, which are the domain of quantitative research.

Methodology

The research data necessary to complete this dissertation will be obtained from primary and secondary sources providing qualitative and quantitative information. The primary data will be obtained through a questionnaire and the secondary data through a literature review.

Literature Review

The fundamental reason for choosing this method of research is that it will enable the writer to collect empirical data that will enable them to compare and contrast the traditional design/bid and then build type of contract with the design and build contract. In addition to this, the empirical data will enable the writer to critically analysis the benefits of the design and build contract, as wells as the identification of the different variants of the design and build and where they are best used.

The literature review will obtain information published by industry journals, industry web sites and academic text books. Any other relevant and/or pertinent information will be obtained through the internet.

Naoum (2007) confirms that for a successful literature review, consideration must be given to the following:-

Knowing the sources of information: Identification of the appropriate literature which maybe from primary sources (academic research journals, theses, reports, and government publications), and/or secondary sources (text books, trade journals, newspapers), and/or reference guides (dictionaries, encyclopaedias).

Primary literature is acknowledged as being the most accurate source of information.

Understanding how the library works: Bell (1996) listed three important points that you need to bear in mind while conducting a literature research (How to find relevant published material quickly, avoid getting bogged down, recording information derived from reading)

Note-taking: Dunleavy (1988) comments that, when undertaking taking a literature review, one needs to get away from focusing too single-mindedly on what the author is trying to say, and instead focus on what you are trying to get out of a source.

Systematically organisation of the literature: Align the literature gathered and to file according to the chapters of the dissertation for future ease of reference.

Appraising and writing up the literature review: Upon concluding the literature review, only then will we be able to critically review the contributions of other people work to the subject area.

Both primary and secondary literature sources will be reviewed and the appropriate notes and data will be systematically kept in a literature file. Due to the geographical constraints of living in the Sultanate of Oman and the relatively high cost of traveling to the United Kingdom which would be needed to undertake a extensive literature review, the majority of the literature review will be done via the internet. Here a detailed search of journals, research reports, newspapers and magazines will be carried out to locate the established information needed to undertake this section of the dissertation.

Questionnaire

One of the main reasons for undertaking a questionnaire is they are suited to the gathering of mass information and opinions at a minimal cost (Naoum - 2007). Another reason for selecting a questionnaire is that it is an ideal method for collecting both Qualitative and Quantitative information from respondents.

A draft questionnaire will be produced and piloted in order to check that it will work successfully. The final questionnaire will primarily use closed questions in order to obtain both qualitative and qualitative data. The questionnaire will be targeted at the white collar construction professionals with within the Middle East. These individuals should be from Employers, Developers, Consultants and Main Contractors organisations in order to obtain a broad and balance views from the majority of the stakeholders in a project.

A questionnaire will allow the writer to gauge the general perspective of the construction professionals in the Middle East region as to the future of the design and build procurement method in this region.

The information provided by respondents in the context of this dissertation will be considered to be reliable because it will be from a diverse array of construction personnel and will be from different geographical areas within the Middle East.

In the event that the responses to the questionnaire fall below 40% after 4 weeks of issuing the questionnaire, then the contingency plan will be to supplement the questionnaire with interviews, albeit these interviews will be structured around the questionnaire.

Interviews

As stated above, in the event that the response rate to the questionnaire is below 40%, a series of face to face interviews will be held with a number of key people within the industry albeit within the Sultanate of Oman, preferably from a diverse range of disciplines i.e. Contractors, Developers and Consultants. The interviews will be structured around the questionnaire to help supplement the data gathered from the emailed questionnaire. If necessary, telephone interviews will be arranged with colleagues in order to supplement the data collect from the emailed questionnaire. Interviews are considered a great technique for gathering factual information as well as opinions.

Data Analysis

The data received from the respondents and/or if interviewee's will be collated and analysed using the descriptive statistic method. Where appropriate bar charts and/or histograms will be used to present the data gathered from the questionnaire and/or interviews. Each question and/or where necessary a group of questions will be accompanied with the appropriate narrative and analysis.

Reliability of Data

Walliman (2005) wrote that data can be misleading because it is elusive and ephemeral, In other words, the data collected from a respondent at any point in time may only be representative of a respondents mind set on a particular day, and at a particular moment in time. If the respondent is again asked the same question one month later, you may find their answer different to the answer obtained earlier.

Bais

To help overcome the practice of "selective bias" (Torgerson & Torgerson 2003), the questionnaire will be sent to a number of nationalities (Italian, French, India, Sri Lankan, Bahraini, Omani, Filipino). To a large extent, this will hopefully eradicate the potential for "selective bias".

Limitations of Survey

Due to the relatively small numbers of participants in the proposed survey, the results of the final report may not be a true and accurate reflection of the construction professionals in the Middle East region as a whole. This may be further compounded if the responses to the questionnaire are relatively low. However, for the purpose of concluding this dissertation, the results of this survey will be deemed to be a true representation of the thoughts and perceptions of a diverse array of professionals who live in different geographical areas within the Middle East.

Ethical Consideration

In the covering email and/or letter that will accompany the questionnaire, each of the participants will be advised of the nature and/or the purpose of my research. Furthermore, the writer will ask each participant to obtain the consent of their manager to participate in the survey if they have any uncertainty whatsoever. The writer will also confirm in the covering email that the information provided by the respondents will remain confidential. For the purpose of this dissertation, "confidentiality" is taken to mean that the participant will not be identifiable in any way by a reader of the final report or dissertation. Furthermore, it will be made clear to the participants that they can with draw from the survey ant any time and their response will be destroyed accordingly.

Chapter 3 : Literature Review - Compare and Contrast the various types od Traditional / Design and Buld procurement methods

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Introduction

To understand the concept of a design/build method of delivering a project, this can be better explained by comparing it to a traditional construction delivery method.

Shapiro Hankinson & Knutson Law Corporation (year not known) describes a traditional contract as an arrangement that involves three parties i.e. the client, the designer and the contractor. The client appoints the designer to prepare drawings and specifications. These contract documents inclusive of the drawings and specification when complete are issued to various contractors for pricing. Normally the lowest priced contractor is appointed to construct the project according to the design plans and specifications. The client warrants the sufficiency of the plans and assumes any liability for defects for them to the contractor. The contractor is responsible for any defective construction and workmanship, but is not liable for design defects. The designer is responsible for any design defect, but the designer is not liable for any defect in the construction. A more in-depth look at this type of construction procurement method can be found latter in this chapter.

In contrast to the traditional forms of construction procurement, Shapiro Hankinson & Knutson Law Corporation (year not known) then describes a design and build contract as an arrangement where the client enters in to a single agreement by which the design/build contractor performs both the design and construction of the project. The client sets out their requirements in a document called the employers requirements. This document must clearly set out any performance standards, aesthetic and functional requirements for the proposed project. Furthermore, this document must also identify any specific requirements in relation to the project. For a simple building with little consideration for aesthetic, the emphasis of the employer's requirements is on the contractor delivering the project at a competitive price and time. Where the client has already undertaken a substantial amount of the design works, the client may wish to transfer the design responsibility to the contractor. In some instances, the employer's requirements may also describe the process of delivering the project. The employer's requirements will need to be a detailed and concise document to avoid the potential for any misunderstandings. From time to time, the client may stipulate in the employers requirements that it is the contractors responsibility for acquiring land, and for financing the project. This arrangement is often referred to as a "turnkey" contract. In either a design/build or turnkey arrangement, the contractor's objective is to satisfy the client's performance specifications rather than to adhere rigidly to the design professional's plans and specifications. In addition to this, the contractor remains responsible for any faulty workmanship in construction; the contractor is also liable for any deficiencies in design under this arrangement. Again, a more in-depth look at this type of construction procurement method can be found latter in this chapter.

3.1 Traditional Procurement (Design, Bid then Build)

Normally there are three distinct phases in traditional procurement method which are generally undertaken in a sequential and systematic order. These phase are not unique to the traditional procurement method, and can be generally found in all construction procurement methods, albeit in the design and build type of contract procurement, some of these phases are done concurrently to save time.

Design phase - Here the Client retains the services of a number of consultants and/or advisor to design the project and provide cost advise. The consultants will work with the Client to identify their requirements. These requirements will then be developed into conceptual and schematic design and be fully costed. If the Client then decides that the project is affordable, then the conceptual and schematic designs will be fully developed into the final tender documents.

Bidding phase - Here the preferred contractors obtain the tender documents and then carry out a wide variety of task that will enable them to price the works and these tasks include inter alia:- decision to tender, project appreciation, pre tender meetings, pretender site visit, obtaining quotation from subcontractor and suppliers, preparing pretender method statements, preparing the pretender programme, analyzing the tender and deliverables, preparing pre tender health & safety plan, preparing pretender risk assessment, preparing pre tender quality plan, prepare estimate, assessment of preliminaries, tender adjudication.

Construction phase. The Contractor makes the clients requirements a reality by constructing the project according to the drawings and specification.

Other features of the traditional procurement methods include inter alia:-

Traditional contracts require the Client to appoint a professional consultant to administer the contract.

Time is needed to prepare the full tender documentation for the Contract to price.

Design and construction are not generally done concurrently which consequently increases the overall time of a project.

The Client to one degree or another has cost certainty because the contract sum is known at the outset.

It has been suggested that this form of procurement method should be used in the following circumstances:-

Where the design quality is critical and the client wishes to control the design process and be involved in selecting, engaging and directing the design team

The outline design has not been sufficiently development and changes are likely to occur.

The designer has sufficient expertise in a particular field and they do not need the support of a design/build contractor or specialist subcontractors.

The client has sufficient time to allow the detailed design works to be completed before inviting contactors to tender.

Inexperienced clients

Where a client wants time predictability

Where the project is complex and were functionality of a project is the prime objective

The main types of the traditional procurement methods are briefly discussed and described below:-

3.1.1 Lump Sum Contracts - It is generally accepted that there are two types of lumps sum contracts "with quantities" and "without quantities". Lump sum contracts "with quantities" are generally priced on the basis of drawings, specification and Bills of Quantities (also known as "BOQ") albeit the Contract is not subject to re-measurement. It is the Contractors responsibility of ascertain whether the Bills of Quantities are correct and their price is deemed to representative of the quantity ascertained from the tender drawings. Lump sum contracts that are "without quantity" means that the contractor is required to ascertain his own quantities from the drawing and specifications without the benefit of a BOQ prepared by the Client.

3.1.2 Measurement Contracts - Normally the contractor prices drawings, specifications and BOQ that contains indicative quantities. The BOQ is subject to measurement based on the actual quantities that can be ascertained from the final design drawings and the Contract sum is adjusted accordingly. Another variant of this type of the measurement contract is where the contact is based on drawings and specifications together with a schedule of rates and/or prices.

3.1.3 Cost Reimbursement Contracts. This type of contract is commonly known as "Cost Plus". This type of contract is generally used where it is difficult to quantify and/or define the scope of works to be executed by the contractor. This type of contract is acknowledged to be high risk from the perspective of the Client because the total cost of the project is not known until completion. The Contractor is generally reimbursed their proven cost for labour, plant and materials plus a percentage addition for site preliminaries, overhead and profit.

Some of the perceived disadvantages of the traditional procurement methods:-

Often the Contractor is not involved until the design is finalized, and they are not given an opportunity to participate in the discussion regarding buildability, construction technologies to be utilized, alternatives etc.

A potential adversarial contractual relationship, particularly between Contractor and Consultants

There is a greater risk of time and cost overruns, particularly when the deign and or scope of works has not been fully finalized.

Some of the perceived advantages of this the traditional procurement methods is:-

The Client retains more control over the design phase of a project

The Client has more access to the design team.

The design team is employed by the Client and they look out for the interest of the Client.

The Client is better able to compare the bids of the Contractors because there is a common basis for pricing.

3.2 Design and Build

The main types of the design and build procurement methods are briefly discussed and described below:-

Akintoye (1994) identifies the following six forms of the design and build procurement method;

traditional design and build

develop and construct

design and manage

design, manage and construct

novation design and build

package deal (including turnkey)

Whereas Rowlinson (1987) identifies three broader types thus;

pure design and build

integrated design and build

fragmented design and build.

3.2.1 Pure Design Build / Traditional Design and Build

As described previously, the pure design and build (also commonly known as the traditional design and build method) is an arrangement where the client enters in to a single agreement by which the design/build contractor performs both the design and construction of the project. The client sets out their requirements in a document called the Employers Requirements. This document must clearly set out any performance standards, aesthetic and functional requirements for the proposed project. Furthermore, this document must also identify any specific requirement in relation to the project. In a design/build, the contractor's objective is to satisfy the client's performance specifications rather than to adhere rigidly to the design professional's plans and specifications. In addition to this, the contractor remains responsible for any faulty workmanship in construction; the contractor is also liable for any deficiencies in design under this arrangement.

It has been suggested by the New South Wales Government of Australia (2008) that this form of procurement method should be used in the following circumstances:-

the client wishes to determine the concept design;

the requirements for the developed design can be clearly described, for example through established standards for products and materials, details and finishes;

a fully developed design would introduce risks associated with buildability or the coordination of design and construction;

there are proprietary designs or construction processes that may offer advantages over special one-off designs; or

the agency does not have sufficient time to manage the design to completion.

The pure design and build management process can be illustrated as follows

Client

Contractor

Construction

Designer

Figure 1 - Mosley (1990)

3.2.2 Integrated design and build

With integrated design and build which includes "Design and Manage" and "Develop and Construct", similar to management contracting, the main contractor is paid a fee to assume the responsibility and to manage the subcontractors as well as the designers..

Design and manage

With this form, the contractor assumes more of a management role, although design is still the responsibility of the contractor. The contractor does the design and then manages all other aspects of the project.

It has been suggested by the New South Wales Government of Australia (2008) that this form of procurement method should be used in the following circumstances:-

there are many or significant unknown factors, such as undefined scope, unpredictable risks and changeable project objectives, that cannot be resolved before it is necessary to let a contract in order to meet the project program;

project threats and opportunities are complex and require management collectively by the contracting parties and other participants;

there are many complex or difficult stakeholder interfaces and relationships;

the interests of key participants need to be brought together early in the project;

industry input and innovation during the design stage are desirable, for example to take advantage of emerging technology, specialist construction expertise or other opportunities;

completion times are tight and fixed;

project funding is fixed.

Develop and construct

With this form, the main contractor inherits a partially designed structure to which he has to complete in accordance with the requirements of the project. The Contractor is free to develop this design either using his own in-house design team or he can appoint a designer of his own. The contractor is not forced to use the designer who prepared the concept design and this is where this type of arrangement differs from the Novation type of arrangement.

It has been suggested by the New South Wales Government (2008) of Australia that this form of procurement method should be used in the following circumstances:-

the client wishes to determine the concept design;

there is a significant risk of delays or changes to the project scope as issues are resolved with stakeholders or investigations are completed, and the client is best placed to manage these activities;

the requirements for the developed design can be clearly described, for example through established standards for products and materials, details and finishes;

a fully developed design would introduce risks associated with buildability or the coordination of design and construction;

there are proprietary designs or construction processes that may offer advantages over special one-off designs; or

The client does not have sufficient time to manage the design to completion.

This integrated design and build management process can be illustrated as follows:-

Client

Other Consultants

Design Build Firm

Construction

Design

Figure 2 - Integrated Design & Build - Mohamed (2005)

3.2.3 Fragmented design and build

Package deal

The RICS COBRA (2004) states for this delivery method, the contractor will provide standard buildings and/or systems that are adapted to suit a client's needs.

This form of procurement method should be used in the following circumstances:-

The scope of work from one project to the next is repetative i.e. supermarkets, cinemas etc.

Design, Manage and Construct

This form is closely resembles the design and manage arrangement. The fundamental difference is that the Contractor undertakes some of the construction and not the whole process. He essentially co-ordinates all the functions even those that are not his responsibility.

The integrated design and build management process can be illustrated as follows:-

This fragmented design and build management process can be illustrated as follows:-

Client

Contractor

Builder

Subcontractors

Designer

Figure 3 - Fragmented Design and Build - Mohamed (2005)

3.2.4 Novation design and build

The client engages the services of a designer to design the project to the extent set out in the design service agreement. The client then enters into a design and build arrangement with a contractor. When the construction contract is let, the client novates the design service agreement to the contractor. The Contractor then assumes the responsibility for the completion of the design as well as construction.

It has been suggested by the New South Wales Government (2008) of Australia that this form of procurement method should be used in the following circumstances:-

the agency wishes to control the concept design;

the project has special design needs;

there is significant extra benefit in making the contractor responsible for all design and documentation, and giving the contractor full access to the original designer and its knowledge of the design issues; or

the specifications for the developed design can be clearly described, for example through established standards for products and materials, details and finishes.

The novated design and build management process can be illustrated as follows:-

Client

Builder

Designer

Fig 4 : Novation design and build system Wadani (2004)

3.3 Other forms of Construction Procurement Methods

In order for any would be Client to decide which is the right construction procurement method for them, first of all they need to have a basic understanding of all the different types of the contracts and/or procurement methods that are available to them today other than the traditional and/or design and build methods of procurement.

Therefore, we will take this opportunity to briefly discuss the various other options available to the Client.

3.3.1 Two Stage Tender Procurement

Simon Rawlinson (2006) confirms that the intent of the two stage tendering process is to competitively appoint a Contractor in the early stages of a project even though the design is not complete and there is a limited amount of design information available. The first stage tendering process is typically split into two parts i.e. a technical proposal consisting of outline programme, method statement and any other deliverable identified by the client; and a financial proposal for design fees, contractor preliminaries and mark-up for the initial design stage. The first stage of this procurement method is generally concluded when a preferred contractor is appointed and both the client and the contractor enters into a preconstruction services agreement.

Simon Rawlinson (2006) also confirms that the second stage is generally managed by both the client and contractor. The client relies on competition between the preferred contractor and other contractors who are invited to tender for the various construction packages that arise during the course of the project. Typically the preferred contractor has an advantage over their competition and they are awarded upto 80% of the value of work packages.

It has been suggested by the New South Wales Government of Australia (2008) that this form of procurement method should be used in the following circumstances:-

When the clients wants to appoint a main contractor ahead of the completion of design, and they require a quicker start on site.

Securing the involvement of a contractor for pre-contract services on a competitive basis, to obtain input on build ability, sequencing and subcontractor selection.

Retaining greater client involvement in the pre-selection and appointment of contractors.

Motivating the designer and contractor to use innovation to minimize cost.

Transferring a greater degree of design and other construction risk to the contractor

3.3.2 Public Private Partnerships (commonly known as PPP)

Balfour Beatty PLC (Year Not Known) describes the PPP arrangement as the bringing together of the public body and a private company for the benefit of the public, in a long-term relationship for the delivery of public infrastructure, community facilities and related services that was originally provided for by the public sector. Drawing on the best of the public and private sectors, PPPs provide additional resources for investment in public sectors and the efficient management of the investment.

It has been suggested that this form of procurement method should be used in the following circumstances:-

3.3.3 Management Contracting

Longworth Consulting (2009) describes the Management Contract arrangement as a two stage "fast-track" procurement method. The client appoints the designer and management contractor separately in the early stage of the project so that they can work alongside each other. The management contractor will also help to develop a construction programme and contribute to the design and costing of the works. The management contractor obtains competitive prices from subcontractors and specialist for each of the proposed work package. The management contractor essentially manages the process. The payment to the management contractor is the cost of the package plus a fee.

It has been suggested that this form of procurement method should be used in the following circumstances:-

Securing the involvement of a contractor early in the design stage, to obtain input on build ability, sequencing and contractor selection.

The client wants an early start with construction whilst the brief is fully developed.

Complex projects

3.3.4 Construction Management

Teacherweb.com describes construction management as a professional service that applies effective management techniques to the planning, design, and construction of a project form inception to completion for the purpose of controlling time, cost and quality.

The concept of Construction Management is similar to Management Contracting, the Client appoints Contracts directly and the Construction Manager, manages the process on behalf of the Client.

It has been suggested by the New South Wales Government of Australia (2008) that this form of procurement method should be used in the following circumstances:-

there are many or significant unknown factors, such as undefined scope, unpredictable risks and changeable project objectives, that cannot be resolved before it is necessary to let a contract in order to meet the project program.

project threats and opportunities are complex and require managing collectively by the contracting parties and other participants;

there are many complex or difficult stakeholder interfaces and relationships;

the interests of key participants need to be brought together early in the project.

industry input and innovation during the design stage are desirable, for example to take advantage of emerging technology, specialist construction expertise or other opportunities

completion times are tight and fixed;

project funding is fixed.

3.3.5 Framework Agreements

The Regional Improvement Efficiency Committee of the United Kingdom describes the framework arrangement as a long term agreement with a supplier and/or contractor, which establishes the term governing contracts that are to be awarded in the future during an agreed term (duration). The intention of the framework agreement is to bring together suppliers and contractors with the relevant expertise and experience which can result in savings to both parties where a number of projects are involved.

It has been suggested that this form of procurement method should be used in the following circumstances:-

Where there are repetitive works and/or call offs that will occur over a defined duration.

Where there is a need for collaborative procurement and a need for early contractor's suppliers.

Chapter 4 : Literature Review - Critical analysis of the Design and Build Procurement Methods

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Introduction

If the potential readers of this dissertation within the Middle East region are going to get a better appreciation of the design and build contract arrangement, first of all they must understand the advantages and disadvantages of this type of contract from the Clients and Contractors perspective.

Arguments for Design & Build

Both Ndekugri and Turner (1994) argue that the Design and Build contract is often completed in a shorter duration because of the integration of the design and construction phases of a project. From a Clients perception this is one of the most important benefits this type of arrangement has to offer. Because the design/build contractor is both designing and constructing the proposed facility, procurement and the construction phase can begin sooner than the more traditional design/bid/ constructed type arrangement. This time savings tends to results from the project being designed in phases which enables the contractor to begin the construction works earlier. With the traditional design/bid/ construction arrangement, the contractor does not normally start building until the designer has completed the design and the project has been awarded.

Saxon (2000) also supports the argument that one of the main benefits of this design and build arrangement is that it tends to reduce the construction cost and allows the client to start earning revenue sooner than had he elected to use the traditional procurement method.

This is illustrated below:-

Time Saving

Fig 5 xxxxx

Ndekugri and Turner (1994) also argue that another important benefit is the broad scope of the design/build contractors responsibility for the project. In traditional construction projects, problems often occur when the designer blames the contractor and vice versa for problems in the operation of the facility. On occasions in traditional construction projects, protracted litigation is necessary to resolve any dispute between the designer and contractor when they continue to blame each other for the problems. In design/build contracts, the design and build contractor is responsible for both the design and construction of the project and retains the full responsibility for the outcome of the project, except for matters for which the client retains responsibility. The designer and contractor are the same entity, so blaming each other does not excuse the design and build contractor. The design/build contractor is completely responsible for both construction and design defects. The client can recover directly from the design/build contractor for deficiencies in either design or construction of the project. Therefore, the client need not determine initially whether a defect was caused by an error in design or construction. In a more traditional construction contract, this issue must be resolved so that the client can determine whether the design professional or the contractor is at fault.

Haskell (year not known) believes that another benefit of the design and build arrangement is that where the design and construction personnel work together and communicate as a team, the client will benefit from the continuity between designer and builder.. In a design/ build project the same entity has the expertise to design the project as well as the responsibility of building the project. Therefore they are unlikely to suffer communication problems and because they are working as a team, they are better able to optimize the design and better able to evaluate alternative materials and construction methods efficiently.

Shapiro Hankinson & Knutson Law Corporation (year not known) also believes that another favourable feature of this arrangement is that the design/build contractor is liable for any additional cost that he may incur due to errors, omissions or ambiguities in his drawings and/or specification. In traditional contracts the client warrants the sufficiency of the specification and drawings, and he becomes liable to the contactor for any increased costs because of deficiencies in the drawings and specifications. In a design/build contract, the design/build contractor is responsible for design as well as construction and agrees to meet the employer's requirement's which includes any performance specifications rather than merely building the structure. The consequence of this is the minimization of claims for extra payment and the design/build contractor cannot request extra compensation on account of his own mistakes or assumptions.

In some instance, the design/build concept has been taken a step further, thus providing the client with more options and/or advantages. For example, the design/build contractor, might offer a "turnkey" procurement solution, this generally means that they will offer the client a full package which includes the testing and commissioning of the facility, as well as training the clients staff in the operation of the facility. The concept is that when the facility is finished and ready for handing over, all the client has to do is "turn the key". Other variations of the design/build procurement method includes for the design/build contractor offering finance for the project. Alternatively the design/build contractor may offer a "BOLT" type arrangement i.e. they will build the project, then operate the facility for a given amount of time, in consideration for this, the client then leases the facility for the defined term, then after the expiry of the term, the ownership of the facility is then transferred back to the client.

Schiff Hardin LLP (ii) (year not known) again argues that only with design/build contracts, is the client able to obtain performance warranties because the designer and contractor are not in a position to blame each other because technically they are a single entity. For example it is common for the design/build contractor to warrant that a proposed facility when completed will yield a predetermined output (process 2000 cans of coke per hour). This requirement can then be linked to the liquidated damages clause in the event that the output falls short of the predetermined output of a facility.

In most design/build contracts, the contract price is fixed price/lump sums, this gives the client some degree of price certainty.

In summary, the proclaimed advantage of the design/build procurement method appears to be the following:-

(i) Clients with limited access to technical consultants or their own in-house technical departments may find such contracts attractive. Similarly it is also perceived that because the design/build contractor is responsible for design, and construction inclusive of quality, the client will benefit from the reduced cost of third party inspectorates and contract administration, However you could argue that this is an disadvantage to the client, because at the end of the day, contractors and design consultants are profit driven and this situation could lead to a compromise in the quality of the project.

(ii) Because the design and construction are integrated and the personnel are working together for a common goal. They are better able to optimise the design and build ability of a project. They are better able to evaluate alternative materials and methods of construction. Innovation and team work should result in cost savings. This could be to the disadvantage of a client, especially if all the innovation occurs during the design development stage and the client does not get to see any of the benefits for the cost savings nor does he get a share of the cost saving.

(iii) The design/build contractor is a single-point and both the designer and builder are jointly and severally liable and/or responsible.

(iv) In the event of a latent defect and/or litigation by the client, the joint financial resources of a design/build contractor will be greater than those of the individual designer and builder.

(v) Most design/build arrangements will tend to be lump sum in nature, meaning that they will usually offer greater certainty as to final cost.

(vi) Payment by fixed instalments at certain milestone stages, rather than by evaluation, may be preferential to both Design/Builder and/or Client

(vii) In the event of a post-completion failure of the project, the client will not be concerned to discover whether the failure is due to the design on the one hand or defective work or materials on the other.

viii) From the design/ build contractors perspective, due to the increase in risk that is inherent of a design and build contract the reward will be greater i.e. more profit. However with more risk, comes more pain when things go wrong for a design and build contractor.

ix) From the perspective of a design and build contractor, another benefit from the is that due to the specialised nature of a design and build arrangement, not all contractors have the required skill set to undertake projects with the design responsibility. The consequence of this is less competition. However, from a client's perspective this could be a disadvantage because of the likely hood of higher prices due to the reduction in competition.

x) There is considerable evidence to confirm that the speed of construction may be superior in these types of contracts.

Arguments against Design & Build

As suggested in previously, clients should stop thinking that design and build arrangements need less input from third parties than the traditional method. Some clients believe that because they have appointed a design/build contractor who ultimately has a single point of responsibility, there is no need to appoint third party inspectorate and/or cost advisor. This belief can compromise the quality of the project, as the design and build contractor will attempt to complete the project as cheaply and quickly as possible.

Schiff Hardin LLP (i) (year not known) argues that because the designer is no longer employed directly by the Client, they may find it more difficult to access information that would have ordinarily been available to them under a traditional project. The client may feel that he has less control over the design phase and design intent because the relationship between designer and client is not the same had it been in a more traditional project. Similarly the client in a traditional contract retains the services of the designer during the construction phase to act as a watch dog for compliance with the drawings and specification. But in a design and build contract, the designer no longer works for the client and the designer allegiance is with the contractor

Hanscomb (2004) confirms that one of the disadvantages of a design and build arrangement is that disputes often occur when the employer requirements are not specific enough and left open to the interpretation of the parties. As a result the client may perceive that he is getting X, but the design/build contractors interpretation is Y. As a result the client may not get what he envisaged. This may also led to litigation if the parties cannot mutually resolve the difference in interpretation of the employer's requirements.

As confirmed before and by Schiff Hardin LLP (i) (year not known), due to the specialised nature of the design and build arrangement, the client may find it difficult to obtain competitive quotations. This form of delivery method quite often excludes smaller companies who are unable to act as the project leader in a design and build environment. It is quite common for design/build contracts to negotiated rather than issue documents for a competitive bid. The client may also find it difficult to induce contractors to produce preliminary designs unless they are compensated for their costs.

From a design/build contractor's perspective and especially in a competitive tender situation, they are at risk of spending substantial amounts of money on a preliminary design and/or concept and there is no certainty if they will recover this cost. From a client perspective they could perceive this as an advantage in a competitive bidding situation because they do not need to compensate the contractors for their preliminary design costs.

It is also commonly believed that it is almost impossible to make any genuine appraisal and/or comparison of the cost of a competitively bid design and build tender especially where their designs differ significantly. Schiff Hardin LLP (year not known) maintains that if a client puts a design and build tender out to bid, this inevitably results in a competition to under-design a facilitate without any regard to quality, functionality, maintainability.

It could also be argued that where both design/build contracts and clients lack experience in this type of delivery approach, this could have a huge detrimental impact on the delivery of the project and the expectations of the parties. In other words, if a naive client and/or contractor believes that the other party is responsible for a deliverable associated with the project, and later it transpires they are not, then an unexpected cost might arise that was not anticipated.

Rowlinson (1988) also argues that from the client's perspective, it is difficult to make a comparison of the various preliminary design proposals submitted by design/build contractors. Each design and build contractor will each develop a concept design that satisfies the employer's requirements albeit using lots of different methods and/or techniques.

Unless the client incorporates a mechanism in the contract that gives him an opportunity to have an input into the detailed design, the client's input into the detailed design will be limited and this may result in the finished article not being as they envisaged and this could then lead to disputes. Conversely, if the client employs a designer to carry out the detailed design and then by novation, the client transfers the design liability to the design and build contractor, this could result in higher costs for the client. This could have a detrimental effect on the ability of the design and build contractor to optimise the design and construction of the project and to evaluate the merits of alternative materials and construction methods as described in item 3.2.9 (ii).

Schiff Hardin LLP (i) (year not known) also believes from a client's point of view that the terms of a design and build contract themselves generally favour the design and build contractor. Therefore it is recommended that any client thinking of using the design and built procurement methods should work closely with a lawyer experienced in construction law and in particular the design and build contracts. Conversely, the design and build contract will generally consider this to be an advantage.

Shapiro Hankinson & Knutson Law Corporation (year not known) argues that under a lump sum design and build arrangement, it can get confrontational on how to determine what money is due to the design and build contractor. The main difficulty is the ability to assess the design/builder's progress, particularly where there is no independent party that can arbitrate between the parties and make independent assessment. To overcome this problem they suggest that an objective milestones stone be incorporated into any contract together with a predetermined sum for payment when the respective milestone is achieved.

Generally the design/build contractor will prepare a document to accompany his tender known as the Contractors Proposals. This document sets out his methodology of how they intend to satisfy the performance specifications set out in the employer requirements. The Joint Tribunal Council in the UK warns clients that in the event of conflict between the employer's requirements and the contractor's proposals, the latter are stated to prevail. They further advise clients that when evaluating tenders, adequate time must be given to checking these proposals, particularly as the contract conditions refer to the Employer having satisfied himself that the Contractors Proposals are acceptable. Similarly the client should allow adequate time to checking the proposals to ensure that they are getting what they envisaged. Conversely, this could be looked upon as an advantage to the client, for the contractor may have optizmed the performance specification of the client and/or the contractor may have introduced innovation and beneficial alternatives and methods

An Unknown Author (date not known) argues that another disadvantage of the design and build contract is that it is not flexible enough to accommodate change. Therefore clients are advised to the maximum extent possible, that they should avoid change. If is often found that when foreseen and/or unforeseen changes occur, the clients budget cannot accommodate the additional costs and they are left with no alternative but to either reduce the scope of works and/or comprise the quality of the project in order to reduce cost. This will inevitably lead to a product that is not what the client envisaged at the start of the project.

In summary, the proclaimed disadvantages of the design/build procurement method appears to be the following:-

(i) In the traditional design/build situation, only if the client employs third party inspectorates and/or cost advisors at his expense will he be able to safe guard his interests. By doing this, this appears to be at odds with the concept of a design and build contract i.e. the design/ build contractor is a single entity that are jointly and severally responsible for both defects in design and workmanship.

(ii) Because of the specialist nature of the design and build contract, there are only a limited number of design and build contractor that are capable of undertaking work using this arrangement. This consequently results in less competition and ultimately less competition will result in higher prices

(iii) From the client's perspective, compared with the traditional design/bid and construct arrangement, the client inevitably loses control of both the design and construction phase. Even if they were to engage independent advisors, they have limited influence over the whole process; all they can do is monitor for compliance with the employers requirements.

(iv) It has been suggested that where it has been possible to compare both forms of delivery methods i.e. design and build verse design/bid and the construct; there was little evidence that the optimisation of design and the evaluation of alternative materials and methods of construction have yielded a cost saving for the client. In my opinion all benefits that occur due to innovative ideas generally occur post contract and the cost benefits remain with the design and build contractor

(v) Particular attention should be given to the drafting of design/build contracts and employer requirements because of it bespoke nature. The client should seek legal advice particularly from a construction lawyer who are well versed in the field of design and build projects. This legal advice invariably increases the total cost of the project for the client.

(vi) Where clients elect to competitively tender a design and build project, from the contractor's perspective, the cost of preparing preliminary designs and the tender are generally substantial because the contractor will have to engage the services of a design professional. This cost will need to be recovered in all subsequent tenders if the contractor is not successful. In some instances, some design and build contractors will decline to bid and this will unavoidably result in a less competitive environment.

vii) Where the client has elected to appoint a designer to undertake a relatively detailed design. After which the client decides to novate both the designer and their design to the design/build contractor. From a contractor's perspective, this will limit their ability to optimise the design and construction as well as review alternative methods and materials. Conversely from the client's perspective, he regains control over the design and construction phase of the project.

viii) The would be client has a duty to conduct some investigation into the capabilities and experience of the would be design and build contractor. Particular attention should be paid to the track record of the preferred contractors. Design and build contractors who are relatively new to this form of delivery method can themselves become a problem because of their lack of experience. Wardani et al. (2006) concluded that resourcing is influential to the success of design/build projects where a higher knowledge and understanding of the design-build processes can reduce problems within the combined design and construction phases

xi) The client should where possible avoid changes once the concept design and tenders have been fully evaluated and the design and build contractor has been appointed. If required, any decision for change should be made as quickly as possible. Xiao and Proverbs (2003) argue that variations during the construction stage are risk factors that are disruptive to the achievement of project goals.

vii) Schiff Hardin (ii) (year not known) wrote that issues relating to insurance and bonding affect the relationship between the design-build parties. Errors and omissions by the designer are generally excluded from the contractors insurance policies, and errors and omissions by the contractor is generally exclude from the insurance policies of the designer. Surety bonds can also lead to similar problems, for example, performance bonds may not cover design services. Satisfactory bonding or insurance obligations are likely to be either commercially unobtainable or prohibitively expensive.

Chapter 5 : Design and Build Case Study

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Introduction

To gauge the knowledge, feelings and perceptions of the construction professionals in the Middle East to the design and build form of procurement, a questionnaire was distributed to a number of people in different counties within the regions (See Appendix xxxxx for a blank copy of the survey). This survey was sent out to xxxxxx people and had a return rate of xxxxx %.

Q1. Location In the Middle East :

Q2. Which category best described your role/position within the construction industry?

Q3. How many years have you worked in the Construction Industry?

Q4. Which one of the following sectors in the Construction Industry do you prefer?

Q5. Which one of the following sectors of the construction industry does your company specialize?

Q6. What is the approximate Turnover of the organization you work for?

Q7. How many people work for your organization?

Q8. Which one of the following construction procurement methods did your current project follow?

Which one of the following construction procurement methods have you used the most extensively?

Which one of these construction procu

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