Ian McCann explores the benefits for developers who look beyond the safe option of the design and build procurement route.
For many years, the procurement route of first resort has been design and build as through this approach one contractor is responsible for the entire design and construction of a project. If anything goes wrong then one party is clearly liable.
As construction methods and designs have become more intricate and adaptable, then it may now be time for the contractual chain to reflect this. Always selecting the design and build route can be seen as defensive, with the prevailing mindset being "who will I sue if it all goes wrong?", when it could be, "how can we best work together to save me time and money?".
Perhaps the time is now right to consider a more positive approach to procurement. Two previously unfashionable forms of procurement, management contracting and construction management, are now worth reviewing a when properly managed both can save time, money, and increase the quality of the finished product.
Both methods allow for various work packages to be issued as the work progresses on site and the design develops. The design does not need to be fully developed before actual work begins, so a shorter lead in period allows for a significantly earlier completion.
The standard argument against these methods is price and the lack of a clear, final cost from the start (for example, the approach to the Scottish Parliament building). Let's be clear - this procurement method did not result in any greater costs than would have been incurred if design and build had been used instead. As court lawyers the world over will tell you there are any number of examples of design and build projects that have gone well over time and budget.
Despite these concerns, both these approaches, especially construction management, are being used throughout Scotland with considerable success.
The design and build approach is still popular with the developer community as it provides a fixed lump sum figure (albeit one that can fluctuate) for the project. What tends to be is overlooked is that a contractor often has to price in the dark when asked to provide a fixed lump sum. As Donald Rumsfeld once said:-
"There are known knowns; there are things we know we know. We also know there are known unknowns,"
It is these 'known unknowns' that cause the problems. To price these accurately, the contractor needs to be very cautious and include a raft of possible contingencies. This results in developers paying a premium to ensure that they get a "fixed" price contract at the outset. Is this really best value?
What is often lost in the drive to save money, but what a developer really wants, is a quality product at project completion. Design and build appears to deliver this because the work is executed by one party and will therefore get it right. But is that really the case when we look back at the fixed lump sum and the thorny question of profit?
This is the dichotomy at the heart of design and build. The client wants a quality finish, on time, at a specified cost but the contractor wants to make a profit despite the "known unknowns". The contractor is working to a fixed lump sum so he knows roughly how much he is going to get paid. As matters progress, he knows how much he has paid out, so he will have an approximate idea what his final profit should be and by how much it is likely to fluctuate as practical completion looms. There may be additional commercial pressures to maximise profit by being more 'creative' on quality as time runs out.
This sort of pressure does not exist on the contractors in management contracting or construction management and therefore quality will not be squeezed in this manner and a better quality project can ultimately be delivered.
In summary, with the huge amount of infrastructure work that will be required for both the London Olympics and the Glasgow Commenwealth Games, perhaps it is now time for the construction industry to be creative and review its mantra of "design and build good, construction management bad" to "design and build good, construction management better"1. This updated approach will help ensure that quality, value for money projects are produced on time and budget.
Footnote:1. With apologies to George Orwell
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