Research for Game
The Traditional Delivery Method
In this arrangement the owner hires a design professional who prepares a complete set of contract documents for the owner for a design fee. With a complete set of contract documents in hand, the owner either negotiates a price with a general contractor or bids out the work through different bidding techniques. The general contractor is totally responsible for delivering the completed project as spelled out in the contract documents. The general contractor may subcontract out parts of the project, with each subcontractor reporting directly to the general contractor. The designer maybe involved in overseeing the construction work in the field; this depends on the owner’s needs and capabilities. In this delivery method no direct, formal relationship exists between the designer and the builder.
Used in projects that are not technically complicated or have been built before. Used in public projects. Not used in complex projects.
- Most owners, designers and builders have worked under this framework on many projects and therefore are familiar with the system. Their control systems, documentation and organizations are all set up to manage this process. The workers, subcontractors and vendors also understand the system improving overall job coordination.
- Double-checking system from contractor and designer.
- The owner can get a firm fixed price for the project before any work begins.Because an owner receives a complete set of contract documents before negotiating with or bidding out the work, it is reasonable to expect the contractor to provide a fixed price. The price can be fixed and firm or can be a cap with incentive clauses or be based on unit prices but in all types the owner will have a good idea of the final price before starting. To obtain this benefit the owner gives up the ability to fast track the project.
- The opportunity to get good price competition from the open market. With a good set of contract documents the job is advertised to everyone or some pre-qualified contractors are selected and provide prices where then the lowest bidder s selected.
- The owner does not have to be actively involved on a day-to-day basis.Owner sophistication and a large design/construction staff are not necessary. The owner needs to be involved in selecting the designer and at formal review points, as well as in general contractor selection, but is not involved in the overall management of the process.
- The contractor and subcontractors have no input until they are selected during the bid and award phase. Materials and methods specified might not be available or replaced by better ones but designer does not know. Contractor being available during design could save money in future. Some design firms hire construction consultants.
- Construction work can only start when design is finished. Time.
- In the case of an owner wanting to competitively bid the project and receive a firm and fixed price, it is difficult to phase or fast-track the project.
- In this arrangement the owner, designer, and contractor all work autonomously.
- This approach provides little opportunity for interaction and team building between the participants, so that when interpretations have to be made, and they are made differently, major conflicts can occur.
- Unforeseen conditions can also be a source of conflict and lead to changes in the contract between parties. What is unforeseen to one party (say, the contractor) may very well be assumed by another party (say, the designer).
Consultants and construction professional which can be referred to as a contractor are either from same company or through a joint venture. The design-build company hires designers and consultants and subcontractors and suppliers. The owner contracts with a single company early in the preconstruction stage and this company takes the project from conceptual design right through construction. (projects as manufacturing plants, refineries, off shore oil platforms, metro). Used in technically challenging projects and by industries faced with strong completion and that need to get a new product in the market quickly. Does not guarantee best price.
- Good communication can occur between design team and constructions team. This allows fast tracking.
- Good communication between the designers, the construction professional also allows good construction input into the design phase, allowing for constructability analyses and value engineering.
- Good cost estimating and scheduling should occur throughout the entire project.
- In general, this design-build arrangement allows easier incorporation of changes due to changed scope or unforeseen conditions than in the other arrangements since the coordination is to occur within the same company.
- Owner is less heavily involved and is outside the communication between the designers and the builders leading to faster communication and lower owner staffing.
- Though it is possible to give owner fixed price before project begins, this is not generally used in this arrangement. Company is hired before design so its hard to give a price and if one was given the owner will face the risk of lower quality as the firm will try to maintain its profit regardless of the cost. The owner goes in with only a conceptual budget and if the project is fast tracked the owner may not have a good idea of the final price until the project is already built.
- Loss of double-checking system.
- The owner have to be involved minimally can be sometimes a disadvantage. Faster completion but losses the ability to understand what is happening on the project and when a decision is needed problems might occur. Project could go in a way the owner doesn’t want due to fast track.
- Lack of owner involvement and the dependency that the owner has on the quality and ethics of the design-build firm. Contractor in traditional method is evaluated by the contract document and designer is often targeted by the owner to check the contractor’s work. In design build the designer works for the same company and is therefore required to critique and correct the work of the construction division.
Construction project management:
The owner hires a design firm and a construction management firm early before constructions occurs. The first firm to be hired and its responsibility are decided according to the level of involvement of owner and expertise of designers and managers. Owner hires designer who supplies contract documents in return for a fee. Subcontractors and suppliers are hired to return completed project in return for bid price. Construction PM advises owner on subcontractor selection, provides estimating and scheduling support in return for a management fee. Good communication is created in the beginning and usually continues through the end of the project. The team also expects changes and can prepare for what is to come. However, if anyone in the party is stiff this can damage the relationships making it harder to continue the process. Fast tracking can take place especially since the contractor is available at the beginning of the process. The owner in this method should be knowledgeable of all the process and activities taking place within the project compared to other two methods.
(Commonly used by real estate developers in commercial building industry)
It has a number of variations:
- Program management (owner needs assistance through entire process)
- Professional management
- Construction management (owner does programming and designer selection alone + look to construction manager to do work)
- Professional construction management
This entirely depends on the expertise of the management team, during which phase is the management team hired and what responsibilities the owner assigns to them.
- Good comm. Between owner, designer and contractor through whole project
- Encourages collaboration, allowing construction people to critique and influence design of the project just as the designers have a part in contractor selection and in reviewing the work in the field. Leads to a good value-engineering program.
- It allows phasing since designer and contractor sits early and develops schedule
- Close comm. makes it easy to deal with any variations minimizing the impact of the project. Changes are anticipated.
- The owner receives the cost benefit of the competition between the subcontractor bids.
- Good cooperation and comm. Is needed between owner designer and construction manager.
- Is heavily dependent on the shared mutual respect between parties.
- High owner involvement is necessary on construction management arrangement for the delivery method to work.
- Requires a more sophisticated owner than required in other methods. Sometimes PM is hired or construction management company.
- Encourages fast tracking since construction management team gets involved early in the process.
Requirements for legal Contract:
- Competent Parties
- Proper Subject Matter
- Agreement of the Parties
Types of Contracts:
- Lump Sum
- Unit Price
- Cost plus fee
Contractor agrees to provide a specific amount of work for a specific sum. In this type, both parties try to fix any conditions as precisely as possible. Ensuring that the drawings and technical specification are as complete and concise as possible is to ensure since signing the contract obligates both parties for the aforementioned exchange of benefit. A defined and agreed-upon project description and dollar amount is committed to by both parties before beginning work. This is typically used by owners who want to reduce the amount of risk prior entering into the construction.
- Owner knows before project starts the final price he will pay for the project.
- Designer finishes all construction documents then the owner negotiates or bids out the project with a contractor. They agree on a final contract amount then work begins. So there is a complete design beforehand
- Requires highly accurate contract documents cause if the scope changes or errors exist the contract will be renegotiated exposing owner to more financial risk.
- Preparation of construction documents takes time and the project can’t start until design phase is finished. This takes long time and negates the possibility of fast tracked projects.
Unit Price (Re-measured):
Owner and contractor agree on unit price for major elements of project. Owner/Designer provides estimated quantities (Un-priced BOQ) then he will ask contractors to bid the job by calculating unit prices for these items and final price. Contractor’s overhead, profit, expenses have to be included in the unit prices he provides.
- Many projects it is hard to know exact quantities thus this type all parties will know the unit price and the contractor will get payment according to quantities done multiplied by the unit price.
- Provides owner with competitive bid situation allowing fair price for work
- Eliminates the risk of getting a fixed price and then renegotiating for example because of site conditions.
- Work can begin before design is completed, speeding up project completion.
- Quantities may not be as prematurely measured leading owner to increased financial risk
- Inaccurate estimates lead to unbalanced bid that increase the project cost to the owner.
- The owner must personally monitor the actual quantities used.
- Delivery tickets invoices must be checked and validated.
- Final price is not known until the last item of work is measured and invoiced by contractor.
Cost + Fee Contracts:
Contractor/designer works on project and they are paid by the owner for the project cost + additional flat fee or % of costs as a profit. Owner should clearly identify which costs will be reimbursed and which the fee will cover. It is good when the project scope is hard to define or fast tracking is needed. Used in both construction management and design-build delivery methods but is last resort
A variation of this type of contract is called a guaranteed maximum price (GMP). In this type of contract, the contractor is reimbursed at cost with an agreed-upon fee up to the GMP, which is essentially a cap; beyond this point the contractor is responsible for covering any additional costs within the original project scope. An incentive clause for bringing the project under the GMP might be included.
- The lesser the percent overhead, the better
- The lesser GMP the better
- The lesser fees and percentage cost
- Contractor, owner, designer sits together at an early stage encouraging value engineering, estimating and scheduling.
- Contractor can start work early without a clear scope since all costs are covered and profit is guaranteed.
- Risk with the owner that even if there is a GMP the project still starts with a lot of unknowns.
- GMP will cap costs however quality maybe sacrificed to keep under GMP. If no GMP the quality of the project will increase but the cost and time will increase too.
- This type needs a reputable contractor/ Construction manager because he should be trusted.
Contract changes reasons:
- Change in owner requirements, scope of project changed.
- Unforeseen conditions at time contract is signed.
- Omissions or design features that cannot be built as specified.
 Joint venture is the legal binding of two companies for the purposes of providing a competitive advantage that would be difficult to attain alone.