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Construction

Construction procurement is the process of identification, selection and commissioning of the inputs required to construct a project. There are a number of alternatives available and each reflect the differences in the allocation of risk and responsibility in relation to the project characteristics. A Lead Advisor and/or Project Manager should advise on the relative benefits and disadvantages of each option. The choice of procurement should be made early in the process as it can dictate the terms and conditions upon which the project team may be engaged.

Construction Procurement
Construction procurement is the process of identification, selection and commissioning of the inputs required to construct a project. There are a number of alternatives available and each reflect the differences in the allocation of risk and responsibility in relation to the project characteristics. A Lead Advisor and/or Project Manager should advise on the relative benefits and disadvantages of each option. The choice of procurement should be made early in the process as it can dictate the terms and conditions upon which the project team may be engaged.

Procurement Methods
There are various methods of procurement which can be broadly classified under the following headings: 1. 2. 3. 4. 5. 6. 7. Traditional Design and Build Two Stage Tendering Public Private Partnerships / Private Finance Initiative Management Contracting Construction Management Framework Agreements

Each method has different aspects of risk transfer and no one method can be classed as best overall.

Traditional Procurement
In this method the Contractor builds to a defined scope of works for a fixed price lump sum. The client retains the responsibility for the design and the project team. The contractor will be appointed normally following a tender process or negotiation and will sign up to a contract for the works. There are a number of standard forms of building contract available for this purpose.

Design and Build Procurement


The Client appoints a building contractor, as before standard forms of contract are available for this purpose to provide a completed building to an agreed cost and programme. The Contractor is responsible for design and construction. The Contractor can be chosen through a tender process or through negotiation. The Client can appoint a consultant to oversee the

works. Maximum risk is transferred following this method of procurement, although a commercial response to design in order to address contract conditions can result. An alternative is to appoint a contractor when designs have been developed in order to retain control of the important elements of design and specification. The Design Team can then transfer their contractual obligations to the contractor and complete the designs on behalf of the Contractor. This process is called Novation.

Two Stage Tender Procurement


In this process, the Contractor is appointed on the basis of a first stage tender which determines the level of overhead and profit for each Contractor. The Contractor then works with the Project Team during the second stage to develop the designs and establish detailed costings for separate project work elements. This process will provide for a fixed price on a detailed design basis. The provider can then enter into a contract on this fixed price basis and also pursue the opportunity to novate the Design Team as with the Design and Build Procurement route as previously noted. This process requires a long second stage period in which to design and tender the different work elements and therefore a start on site would occur later than normal.

Public Private Partnerships


Public Private Partnerships (PPP), particularly Private Finance Initiatives (PFI) projects are created for the provision of services and not specifically for the exclusive provision of capital assets such as buildings. It is therefore preferable to investigate PPPs as soon as possible after a user need has been identified rather than leaving it until a conventional construction project has been selected as the solution. It should be noted that the tendering process in this procurement route is expensive and requires negotiation rather than competitive tendering. In comparison with other procurement routes the time from commencement of the project to attaining a start on site is substantially longer.

Management Contracting
This is a fast track strategy which overlaps the design and construction stages and allows early elements of the construction process to be commenced before design has been completed. The Management Contractor is engaged to manage the overall contract in return for a fee. The Management Contractor can therefore be appointed early in the design and can advise on buildability and programming. In addition to the contract with the Management Contractor, the contracts for the individual work packages are between the Management Contractor and the individual sub-contractors. A cost plan is utilised to control the development costs although actual costs cannot be obtained until the final work package has been awarded.

Construction Management
This is also a fast track strategy where individual elements of the project are let before the design of later work packages or elements have been completed. The provider will appoint a Construction Manager to manage the overall contract in return for a management fee as with Management Contracting. Also, as before, the project can benefit from early involvement of the Contractor. In this process the contracts for the sub-contractors are placed directly between the Client and the sub-contractor and the Client will need to have a high level of involvement during the design development and the construction phases of the work. As with

Management Contracting, the final costs will only be known once the final work elements have been awarded.

Framework Agreements
Framework Agreements can be established with single suppliers or with a limited number of suppliers. Frameworks can allow suppliers to be brought together with the relevant expertise and experience which can result in savings to both parties where a number of projects are involved. These agreements can cover different forms of procurement including Design and Build, Traditional, etc. The LSC are currently developing framework agreements for consultancy services accross the country. These should be available for use by colleges by early 2008. Following on from this, the LSC will also be working on developing a contractors framework.

Pre Construction
At this stage the project brief should be finalised, a preferred option agreed and the detailed design should be delivered within the identified parameters of cost, time and quality. Clear definition of the project is necessary in order to attain a successful outcome.

Previous Actions
Preconstruction encompasses the development of the detailed design, formulation of the tender documentation, undertaking the tender process and concluding the contract documentation. The choice of procurement route will determine how much of these stages overlap but by the start of this stage, a number of issues will have been addressed and actions taken, including the following: Feasibility completed LSC support for preferred option attained Alternative site secured, disposals agreed Surveys and statutory requirements concluded Statutory authorities, utilities information concluded including consultation with the planning offices Development cost plan prepared Project team appointed. This should include main contractor representation as soon as is practical. Project execution plan and programme established

Statutory Obligations
It is the duty of the design team to effect compliance with a statutory control and attain the appropriate consents e.g. consents for planning, Building Regulations, means of escape. Planning approvals can be a complex process and may require the appointment of specialist consultant to assist in attaining a successful approval.

Value Engineering
This is a process of examining the function of a building to ensure that it is delivered in the most cost effective way. It involves reviewing the design proposals at each stage of the design process to analyse whether client objectives have been achieved without over design or specification and at minimum cost. In major and complex projects this process may be best

facilitated by a specialist in this field. In less complex projects this can be lead by the project manage

Tender Process
The tender process will be dictated by the choice of the procurement route. This will include short listing contractors including compliance with the European Union directives, issuing tender documentation, receiving tenders, tender interviews and selection. As an alternative to this competitive tendering process, tenders may be negotiated where this proves to be a better option for obtaining value for money.

Contractor Involvement
It is advisable to bring a contractor into the design team as early as is practical. The type of contract may dictate when this is possible, but there are a number of benefits to be gained, such as efficient material choices, early buildability advice, negating abortive design effort and specialist cost advise. The LSC endorses such early involvement.

Tender Activities and Contract Execution


There are numerous activities that lead to a contract signature and commencement of construction and all should be advised by the Project Manager and detailed on the master programme. The following are examples of some headline activities. The Project Manager should ensure that tender returns and openings comply with a providers standing orders. The contract amount should reflect a 95% cost certainty in line with LSC requirement for a detailed capital application approval. LSC approval is sought prior to signing a contract. Confirmation is required that loan arrangements are in place, associated land acquisition and disposal contracts have been executed, formal Board of Governors minutes noting support are provided together with a tender report confirming value for money has been attained. Actions are initiated to provide cost savings should budget requirements dictate it. The programme should ensure that the client understands the terms of the contract. Arrangements are in place for formal signature and exchange of contracts. A letter of intent may be utilised to expedite a start on site if appropriate. All CDM regulations are being complied with. Consultant novations have been instigated.

Post Contract Construction


The change from pre-construction to the construction stage reflects all the preparation required to define your project that allows the construction work to start on site.

Pre-start Meeting

This meeting takes place to establish roles and responsibilities, lines of communication, proper working arrangements and health & safety issues. The arrangements for quality control are clarified which normally involves the introduction of a Clerk of Works to the team. The Clerk of Works is responsible for inspecting the works and confirming that the construction works are in compliance with the clients requirements.

Design Management
This can be a demanding and complex process. The Project Manager should clarify the responsibilities of the lead designer and other project team members and should formulate a design management plan as a basis for managing and controlling the design process. The lead designer will be responsible for the coordination and integration of the work of all design consultants.

Project Coordinator
The Project Manager should arrange and convene regular progress meetings to review the project status and identify any actions necessary to deliver the design management plan. Follow up actions are controlled by the issue of minutes to all parties. The lead designer will convene, chair and minute all design team meetings. The cost consultant will attend these meetings to advise on costs, update the project cost plan and monitor design development against the agreed budget. The Construction Design and Management Co-ordinator will attend these meetings to advise on the health and safety aspects of the project. The Project Manager may attend these meetings, although not essential. He will receive minutes of these meeting and will report on these and all other matters to the Client on a regular basis. Client approval and sign off to the design will be required at the conclusion of the process.

Site Establishment
Once the contract has been signed the contractor can start on site. The Project Manager should agree operational procedure and site administration issues, for example: Clarify site boundaries, survey adjacent properties. Note: a party wall surveyor may be required to agree any restrictions and or awards. Security, means of escape Accommodation and site welfare facilities Health and safety issues

Risk Management
Formal risk management should continue into this stage and will seek to identify and mitigate specific construction related risks such as: Disruptive activities with the potential to delay and/or add cost Health and safety on the site personnel and for the general public

Time, Cost and Quality Management


The main contractor will have the responsibility for managing the works on site to meet the contract requirements. They should provide, and update when necessary, a detailed

construction programme to allow the project to be monitored and regularly report on progress. Although the contractor has the responsibility to supervise the works, the Design Team has the responsibility for inspecting the works. Where the Design Team have been novated to the contractors team under the contract, the Project Manager should agree alternative arrangements for these inspections. Specific appointments may take place in either scenario to undertake or assist in this role, for example, a Clerk of Works.

Project Monitoring
The Project Manager should report regularly to the Client to an agreed structure including the following issues: Overall project status Current expenditure Anticipated final costs Variation and the reasons for same Updated cashflow Existing and anticipated problems with proposed mitigation, risk register update Planning status Team performance Quality management Approvals as required

Change Control
Time and cost implications of introducing variations to the contract requirements increase exponentially as you move from the design stage and through the construction stage. As such, the project should be clearly defined prior to contract signature and any changes avoided if at all possible, during the construction stage. Strict change control procedures should be applied to minimise the impact of any unavoidable changes and should include client approvals informed by accurate assessments of time, cost and quality implications.

Disputes Management
Disputes are generally avoided through well defined projects, clear briefing, contracts that openly identify the risks and a culture of co-operation and trust. Problems can still arise though and a staged approach should be adopted to deal with them. The following is a generic approach to dispute resolution stages. 1. Discussions should take place between Principals. 2. A mediator should be appointed. Settlements through this process should be agreed in writing. (Note: A mediator has no powers of enforcement). 3. Appointment of an independent adjudicator. The right to appoint an independent adjudicator is provided under the Housing Grants, Construction & Regeneration Act 1996 and can give recourse to a quick decision on an identified dispute. 4. Formal arbitration or litigation these are usually long and costly processes and should only be used as a last resort.

Completion and Occupation

The requirements for defining when the project is practically complete should be included in the contract requirements, including requirements for testing, commissioning and handing over the building. Prior to handover the Client should ensure that he is ready to take over and manage the facility with regard to such issues as: Security Insurances Cleaning Maintenance Fitting out Moving in furniture and equipment Training Employing personnel

Commissioning
It is the responsibility of the Project Team that the building is ready for use. This includes checking that all equipment, systems and environmental services are in working order and meet the contractual specification. Sufficient time should be allowed for testing, commissioning, inspection and training of all personnel.

Operating and Maintenance


Prior to, or at handover, the Client should receive the owners manual. The construction design and management regulations now cover the production of the operating and maintenance manuals. It is the CDM Co-ordinators role to ensure that they are delivered as part of the Health & Safety file. These manuals should include all details of the completed building with input from the contractor, sub-contractors and designers. It should include such information as: Test reports and certificates Guarantees and warranties from suppliers and manufacturers Maintenance information on materials and operating systems Operating instructions As built drawings

Defects
When the building is handed over at practical completion, the Client's Design Team and Clerk of Works will have ensured that it is substantially defect free. Time will uncover defects though that were not apparent at handover and under most standard forms of contract, the contractor must rectify defects for which they are liable. This is normally limited to a period of time, usually 12 months, at the end of which the project will be inspected to certify final completion. The Project Manager will arrange for the Client to instigate a system of reporting defects and arranging access for the contractor to remedy the same.