Lec-3 Pre-Construction Phase

Engr. Dr. Attaullah Shah

Introduction
Two important questions before start of the project:
Decisions regarding the relationships among the various parties. i.e. various project delivery systems that form the basis for the projects contractual relationships and dictate the span and duration of responsibility of each party. Basis upon which the contractor will be paid. We identify different types of contracts that are used to measure how the construction contractor will be paid for completed construction work.
Construction Management (EMgt:6501) 2

Methods of Construction Procurement

Methods of construction project procurement (Mastermann,1996).

Selection of project delivery system

All project delivery systems include three participants Owner, designer and construction organization Their relationships vary according to the different systems and ownerships. Project delivery systems Traditional designtenderbuild ( Design Bid Build)
choice for owners of most construction projects during many centuries

 Designbuild Single contract with an organisation that becomes responsible for both the design and the construction of the project One of the primary reasons for low productivity in the construction industry is the lack of integration of activities across the project life cycle. The DesignBuild Institute of America (1994) lists potential benefits from the designbuild method as follows.
Singular responsibility. - Quality. - Cost savings. Time savings. - Potential for reduced administrative burden Early knowledge of firm costs. - Balanced award criteria. Risk Management

 Project manager Adding a project manager between the owner and the architect/engineer and general contractor This arrangement implies that the project manager contracts with the designer and the general contractor.

 Separate prime contracts

The owner contracts directly with individual specialty contractors, each of whom can be considered as a prime contractor. There is no single general contractor to coordinate their work. An agency construction manager may be engaged , who will assist the owner in this coordination, but the chart makes it clear that the construction Manager is not related contractually to the several prime contractors.

 Buildownoperatetransfer (BOOT) The buildownoperatetransfer (BOOT) type of project has evolved as a means of involving the private sector in the development of the public infrastructure. The term BOT, for buildoperatetransfer, was first coined by the Turkish Prime Minister in 1984 in connection with the privatization of that countrys public-sector projects. Examples of projects that have used the BOOT approach include power stations, toll roads,parking structures, tunnels, bridges and water supply and sewage treatment plants. It is apparent that such an approach requires a complex organisational structure and carries considerable long-term risk for the project sponsor, while minimizing such risk for the governmental owner.

 Joint venture A voluntary association of two or more parties formed to conduct a single project with a limited duration Joint venture agreements are formed between construction firms or between design firms and construction firms; they do not include owners. The usual purpose of such an arrangement is to spread the risks inherent in large projects and to pool resources in a way that permits the joint venture to execute a project that would be beyond the capabilities of one of the parties individually.

Selection of type of contract

Lump sum/fixed price contractor is paid a pre-agreed fixed amount for the project, based on a contract for a specified amount of in-place finished construction work his type of contract is suitable for such projects as buildings, which can be completely designed and whose quantities are thus definable, at the beginning of the project. Two advantages to the owner of lump-sum contracts are the fact that the total cost of the project is known before construction begins and the lack of a need to monitor and approve the contractors costs. On the other hand, the owner bears the risk of poor quality from a contractor trying to maximise profit within the fixed sum;

 Unit price/measure and value In some other parts of the world, such a contract might be designated as a unit-price contract. This method determines the amount the contractor will be paid as the project proceeds by requiring that the actual quantities of finished product be measured and then multiplied by pre-agreed per-unit prices Contractors provide tenders based on estimated quantities provided by the owner, so that each tenderers price is based on a common set of quantities. Thus, prior to the work, the tender prices are based on estimated quantities, whereas during and after the work, the payment is based on actual quantities.

 Cost plus The owner pays the contractors costs related to the project plus a fee that covers profit and non-reimbursable overhead costs (1) cost plus a percentage of costs, under which the fee is an agreed-upon percentage of the costs and (2) cost plus fixed fee, wherein the fee does not depend on the contractors costs. Time and materials The owner pays the contractor based on effort expended, but there is no fee as such Materials are paid at their actual cost, while labour and equipment inputs are reimbursed at pre-agreed rates. This method is often used for design services, for which it is usually difficult to determine the total expected effort in advance, thus making a fixed-price design contract impractical.