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Articles from the Silver Shemmings Ash Team on contractual matters, recent case law changes and items of interest in the construction and property world

Construction Procurement Routes by Brandon Silver

July 17, 2018 | Silver Shemmings

construction procurement

What Are The Different Procurement Routes?

There are three main types of construction contract for the execution of construction work. The differences between the three forms of contract are dictated by the varying procedures and levels of risk transferred onto the client and contractor.

The first type of contract is the traditional contract. The main feature of this contract is that the design process is separate from construction. The consultants lead on design and the contractors are responsible for the execution of the construction works. The consultant, usually the architect, acts as the contract administrator.

The second type of contract is a design and build contract. In this form the contractor is responsible for the design and construction of the works. The design phase is influenced by the client’s requirements, which is in the form of an initial design scheme and the contractor’s proposals.

The final type of contract is a management contract. There are several variants of this but the main two are management contracts and construction management.  In management contracts the management contractor manages the execution of the construction work on behalf of the client.  If their obligation is total the arrangement is referred to as ‘Design, Manage, Construct’. Construction management agreements are slightly different as here the client takes more risks as with this arrangement there is usually a lead designer, a construction manager, and the client is responsible for directing the project and entering into all trade contracts.

Which Procurement Route Is the Best For You?

There are strengths and weaknesses with each of the different construction contracts listed above. It is therefore dependent on the client’s needs and priorities as to which procurement route is the best for them. The traditional contract is the most popular contract of choice and it has some  strengths. Indeed, the traditional contract is good for quality as there is a full design in place before tender, and there is design control through the contract administrator. If it is a lump sum contract then there is cost certainty, as the cost is determined before construction work is started, subject to of course no variations being instructed. The weaknesses, however, of the traditional contract are that because design and construction are separate sequential processes, the overall programme for the project tends to be relatively long, and it would not be beneficial in regards to cost certainty at the outset if substantial changes are instructed and/or there are restrictions subsequently imposed by the employer as on the execution of the Works.

The design and build form of contract in contrast provides for less time being spent on the project, as there is overlap of design and construction. The design and build contract is also beneficial in that it is easier to arrange changes in design and there is a single point of responsibility. The potential pitfalls of a design and build contract however is that it might have a detrimental effect on quality, particularly if the cheapest route to meet contract specification is delivered.

Finally, the management contract has the strength of being beneficial for complex projects as there is individually appointed packages to the best suited sub contractor. The construction management agreement has the detriment of not being good for inexperienced clients as the risk is high for them as they are appointing trading contractors.

KEY TAKEAWAYS

  • The procurements methods differ on how the risks are to be allocated, how the work is to be coordinated and where the responsibility for design is to be placed
  • Different factors to consider when choosing the most appropriate contract for the client include cost, time, quality, the client’s expertise and the size and location of the project

Author Brandon Silver

At Silver Shemmings Ash, we provide seminars and training alongside our core activities in contentious and non-contentious matters, the purpose if these is to facilitate a greater knowledge and understanding of construction and property law. There remains a considered lack of training in such areas for companies and one to which we look to address

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