SUPPORTING NOTES

How to Organize a Project - Framework

Using the dramas combined method to demonstrate and explain the key points. There are three dramas in presentation, each of them represents a typical way to build up the contract of three types:

• Traditional procurement – Real Estate Development project

• Design-build procurement -HKU Wildlife Park project

• Management contracting/ Construction management – Cherry Park project

Workflow of Procurement Process:

Procurement 1.Concept “Procurement”: activities undertaken by a CLIENT or EMPLOYER seeking to bring about the CONSTRUCTION of a design project undertaken by design consultants. In short, it is a solution to the question: “How do I get my project BUILT”

2.Factors Influencing Procurement Choice

“External factors”: economic, commercial, technological, political, social and legal factors;

“Client Resources”: client’s knowledge, experience and the degree of client involvement;

“Project Characteristics”: size, complexity, location and uniqueness of the project;

“Ability to make changes”: the extent to which design can be completed and the possibility of changes occurring;

“Cost issues”: need for price certainty by the client;

“Timing”: it is important that an adequate design time is allowed

3.Main Procurement Methods

Traditional / Conventional Design – Build Management Contracting / Construction Management

4.Risks

The chosen strategy should balance risks against project objectives at an early stage. The key criteria for most clients are:

• time (speed or certainty of completion date)

• cost (price level or cost certainty)

• quality (functionality and performance)

Procurement Method 1: Traditional / Convention Procurement 1. Concept The design process is separate from the construction. Full documentation (like drawings, work schedules, bills of quantities) must be supplied by the client before the contractor can be invited to tender for carrying out the work. Besides, this procurement can minimize the risk of the company and guarantee the quality of the design. 2. Types of Traditional/Conventional Contracts Lump Sum Contract With lump sum contracts, the contract sum is determined before construction work is started. Contracts ‘with quantities’ are priced on the basis of drawings and firm bills of quantities. ‘Without quantities’ means a contract priced on the basis of drawings and usually another document, such as a specification or Schedule of Rates (SOR). Re-Measurement Contract The contract sum is not finalized until completion of the project, where it is assessed on re-measurement to a previously agreed basis. This type of contract can arise where the works to be carried out by the contractor cannot for good reason be accurately measured before tender. Cost reimbursement Contract the sum is calculated from the actual costs of labour, plant and materials to which an amount is added to cover overheads and profit. The overhead and profit amount can be a fixed-sum, percentage, or some other reimbursement payment. This type of contract is only generally used where the circumstances of the project preclude other alternatives or where a partnering ethos is in place, as it can be quite high risk for the client. 3. Advantages of Traditional Procurement Its accountability due to a competitive selection; And its competitive equity as all tendering contractors bid on the same basis; The design lead and the client are able to have a direct influence which can facilitate a high level of functionality and improve the quality in the overall design; Price certainty at the award of the contract; Variations (changes) to the contract are relatively easy to arrange and manage; and a tried and tested method of procurement which the market is very familiar with. 4. Suited Projects Projects which price is certain before construction and allows sufficient time for client to prepare full documentation and in which the client wants to appoint designers and contractors separately are suitable for this kind of procurement. Procurement Method 2: Design-Build Procurement 1.Concept This procurement works on the basis that the main contractor is responsible for undertaking both the design and construction work on a project, for an agreed lump-sum price. The employer has control over any design elements of the project that are included in their requirement, but once the contract is let responsibility over design passes to the contractor, the employer has no direct control over the contractor’s detailed design. Besides, the contractor can carry out the design in a number of ways. They will often appoint their own consultants or use their own in-house team. It is also common practice for the contractor to take on the employer's consultants and continue to use them to complete the detailed design under what is known as a novation agreement. 2. Types of Design-Build Contracts Package deal or turnkey contracts the employer accepts a proposal based on a standard design from the contractor, effectively providing a single point of responsibility as the contractor is responsible for the design and construction of the entire project. Design and build contract project documents are compiled with the contractor's design obligations relating to the whole of the works in mind. 3. Advantages of Design-Build Procurement For clients, it is time saving and reduce separated procedures because they only deal with one firm. Price certainty is obtained before construction commences as the client’s requirements are specified and changes are not introduced. The use of a guaranteed maximum price with a savings option split can stimulate innovation and reduce time and cost. Besides, the overlap of design and construction activities can reduce project time. Last but not least, is its improved constructability due to contractor’s input into the design. 4. Suited Projects Projects that are standard, simple, time-saving and clients’ design aspiration is functional rather than prestigious are suited for this approach. Procurement Method 3: Management Contracting / Construction Management Procurement 1.Concept In outline, Management procurement is a method where construction work is completed using a series of separate works or trade contracts which the main contractor is responsible for managing. The contractor does not actually do the physical work, but is paid a sum for managing the project through the various works packages. The employer starts by appointing consultants and a contract administrator to prepare drawings, a project specification and cost plan. The employer has control over design throughout the project through their professional team. 2. Types of Management Procurement Management Contracting With management contracts, the employer appoints a professional team and a management contractor who is responsible for managing the works. The management contractor does not directly undertake any of the construction, this is spilt into packages and carried out by works contractors. Although contractually responsible for the works contractors, the management contractor is not liable for any default by a works contractor, provided they have complied fully with the terms of the management contract Construction Management With construction management contracts, the employer will appoint a professional team with either an in-house manager, or enters an agreement with a construction manager to oversee the work. The construction manager does not directly undertake any of the construction work, this is split into packages and carried out by trade contractors. The employer appoints the trade contractors and is directly responsible for them. The construction manager manages the works, but the employer has a major role in directing the project. 3. Advantages of Management Procurement The client deals with only one firm, which enables improved coordination and collaboration between designers and constructors; The flexibility for change in design Overlapped design and construction time-saving Contractor assumes risks and responsibility of integration and management Good constructability and buildability: contractor’s input into the design Roles, responsibilities, risks for all parties are clear. 4. Suited Projects This method is particularly beneficial for fast-track complex projects where minimal design information is available at the start of the project. Risk Allocation “Traditional” procurement allocates least risk on clients because of the Certainty of cost and time for a design developed by an architect employed by the client. However, this is a sequential and consequently slow process. “Design-build” procurement allocates more risk on client than the first kind. It has Relative speed and cost certainty but design will usually be the responsibility of a contractor and consequently the client will lose some control over the design process. “Management contracting or construction management”allocates most risk on client, the cost of which is uncertain almost until completion. However, the good side is that is has relative speed for a design developed by an architect employed by the client.

Conclusion

This table is to sort out the above procurements, contracts and their characteristics.