Contract for Construction - Assignment Example

The Village Hall Task 1 Every construction demands the selection of appropriate procurement approach and right form of contract. The main issue that every owner face is to choose the right form of contract for his construction. A contract is a mutual agreement between two parties. There are many forms of contracts like lump sum contract, a contract based on a bill of quantities, schedule of rates, contract, cost plus percentage of cost, cost plus fixed fee, target cost with variable fee contract and guaranteed maximum price contract (Gordon, 1994). Different contracts are selected for different construction projects. The selection of contract varies time to time and situation to situation. Likewise, the strategies for the procurement of building project have also changed in the last two decades. Now, new methods and approaches of procurement have been introduced to minimize the overall cost of the construction (Love, 2001). There are different kinds of procurement methods that are also sometimes called as procurement approaches. Different procurement approaches are traditional procurement, design and construct procurement, management procurement and collaborative procurement. Both right contract form and appropriate procurement approach contribute a lot in the success of all construction projects. The case of a village hall and its refurbishment also elaborating the need of an appropriate form of contract and procurement method. The committee would like to extend the contract if they manage to arrange the funds. Thus, it is very important for the Bury Port Community Council to select the right form of contract and procurement approach for the extension and refurbishment of the village hall. The selection of an appropriate form of contract is dependent on the objectives of the projects. The project objectives are scope of the project, which includes a quantity of the workload and design of the project. Moreover, the total expected duration of the project, the total cost and the project constraints all must be considered before selecting the form of contract (Elbeltagi, 1996). After analyzing the case of the village hall in which the cost of construction is increasing day by day, the most suitable form of contract is a cost reimbursement contract. The cost reimbursement contract is a form of contract in which the contractor will be reimbursed all the actual cost plus service fees that will be charged by the constructing party. The cost reimbursement contract is suitable in the case of village hall because it is the most appropriate form of contract for the emergency projects, repairs, alterations and maintenance work. It is also suitable for such a project in which the demands and requirement of the clients are vague. There are many advantages of using cost reimbursement contract like one can start construction without waiting for the final specifications of the contract. It is one of the flexible form of contracting. The case of a village hall and its extension require such a flexible form of contracting. The client can also choose its own procurement route in cost reimbursement contracting. The construction contract is mainly classified into two broad categories. One is fixed price and other is a cost reimbursement contract, which is also known as cost plus contract (Boukendour, 2003). In this case, I have selected cost reimbursement contracting because fixed price or lump sum contract is not appropriate for the construction of village hall. If we select lump sum or fixed price contracting then it will difficult for the Bury port community council to amend the contract in the future. It is difficult to estimate the actual cost of renovation of the village hall that is why reimbursement is the right form of contracting for this type of project. Moreover, it is impossible for the contractor and its administration to estimate accurate time of project completion, which is required in the lump sum contracting. In the lump sum contracting the rectification and changes can prove expensive and costly. Furthermore, there is a high risk contingency involved in the fixed price contracting. Thus, cost reimbursement contract is the most suitable form of contracting for the village hall renovation. In contrast, a suitable contract selection is not enough, but an appropriate procurement approach is also required for initiating any kind of construction project. The choice of procurement route totally depends on the choice of contractors as well as on the form of contracting of the project (SCALA, 1998). The selection of appropriate procurement route depends on different factors. The external factors that influence procurement routes include commercial, technological and legal aspect of the project. Likewise, client resources, project characteristics, cost issues and timings all are very important to consider while selecting the most appropriate procurement route (Davis, 2006). Procurement must be properly planned if a contractor wants a successful execution of the project. Only appropriate procurement process successfully allows the project to meet the requirements and obligations of the construction. The best way to choose a procurement route for the project is to make appropriate tradeoffs between the quantity, quality, cost and time. Moreover, the client must get best value by choosing best construction company and provide it with all innovative technology that needed. Likewise, risk sharing is also an important factor to avoid end losses that is why a suitable risk sharing way must be selected through which the contractor, client and designer could manage and share project related risk (RICS, 2010). There three procurements routes, one is traditional or sequential procurement route. The second type of procurement route is known as management orient procurement route, which includes management contacting as well as construction management approaches. The last one is known as integrated procurement route, which includes collaboration among different involved parties of the contracts (AAR Tret, 2015). In case of village hall, according to my opinion the best suitable route is the management oriented route. In the management procurement method, the overall designing of the project is the responsibility of the consultant and the contractor. Both the parties, defining packages of work and managing work separately. The client pays a management fee. The management contractor is appointed in the management oriented procurement route. The responsibility of management contractor is to manage the planning and construction of a project. There are also many sub-contractor involve to manage the overall work load. The contract of the management oriented procurement route depends on many conditions. One of the biggest advantages of the management oriented procurement route is its successful management that can achieve quality based construction on time (Charvat, 2000). As, I have chosen cost reimbursement form of contracting, it demands high involvement in the management of the client. Thus, in the case of village hall, in which any kind of cost can emerge any time, the management oriented is the most suitable route of procurement. The obligations of management contractor that can hire in the village hall case can eliminate the risk of increasing the overall cost of the project. The management contractor will highlight the risky areas of the project. The nature of management oriented procurement requires the higher involvement of the employer in all stages of the project. Like in the extension and renovation project of the village hall, the committee and its members will have to be highly involved in all the stages of the construction. Such an involvement will bring down the cost of completing projects. The cash flows can be improved, if the village hall committee will select the management oriented approach. It promotes the better working conditions. Moreover, the employer has control over various activities of the contractor and it also ensures the fast-track construction (Hansen, 2004). Only one reason makes the management oriented procurement route not suitable for the renovation the village hall is lack of in-house expertise available in the Bury Port community council. On the other hand, the design and build procurement system can also be used in the case of village if there the administration is experienced to handle the construction of village hall. The design and building procurement is suitable with the cost reimbursement contract than the management oriented procurement route. The construction can start before time, but on the contractor’s risk. In the design and build only single contractor is solely responsible for the entire construction. Such a type of construction decreases the complexities of the whole procurement system. In the case like the village hall, where the requirements and specifications of the construction project are not clear, then the design, building procurement route can provide a safe way to both contractor and the client for entering into the construction agreement. The one of the biggest advantages of design and build procurement route is the single point of contract between the client and the contractor exists, that decreases the complexities of managing the contract. It has the advantage of dealing with the single organization that is responsible for all the construction activities. The use of this method also improves the communication process between the client and the contractor because it overlaps in many activities (Masterman, 2013). After analyzing the case of Bury port community council’s construction of village hall, the most appropriate form of contract is cost reimbursing contracting while the best procurement route is management oriented if Bury port community have a high level of expertise, otherwise design and building procurement route can also be selected by the community council. Task 2 As, I have selected cost reimbursement form of contract of construction, it will not that difficult to manage the problem of adjusting £40,000 in the terms of contract. The cost reimbursement contract allows the client to adjust the cost any time. It is one of the flexible ways of handling such a construction project that overall cost is difficult to estimate. The lump sum contracting does not provide any concession of adjusting the increased cost. The Bury port committee can extend the previous contract and can easily handle the problem. The appropriate procurement route for this problem is the design and building procurement route. The design and building procurement route can be used to solve this problem by signing a cost reimbursement contract with the contractor. The design and building procurement route is one of the simplest and cost effective procurement route. It has single point responsibility. Such a problem requires less involvement because the cost is already determined. The design and building requires only reasonable care and skill. The rectifications in the building of village hall are not of major kinds. They do not require any in house expertise and other management related skills that is why the best way to handle the problem is to select the design and building procurement route. The rectifications of any kind can be easily adjusted through design and building route (NCW, 2006). In addition, design and building route of procurement can prove a cost effective way in such kind of situation. The cost of rectification has already been assessed and where contractors input is not required. The design and building procurement route demands only performance requirements rather than a technical requirement. Like, in the case of village hall and its rectification related to ban of noisy events only demands such a contractor that provides the guidelines to Bury port committee on how to rectify the problem without providing the technical details. The technical details in the design and the building procurement route is not the matter of concern to the client, it solely the responsibility of the contractor team (Djebarni, 1996). Moreover, in such a case the Bury Port committee can choose lump sum or cost reimbursement contracting. The lump sum, can be used because there is no need to assess the cost again, as it has already been estimated. The contractor can be hired on the lump sum or fixed price contracting like total of total cost 40,000 pounds and the design and building procurement route can be used to eliminate all complexities among client and contractor. To sum up, it can be concluded that in all the construction projects, whether it is of Bury port village hall or any other kind of construction, all need appropriate and the right selection of procurement route as well as the form of contracting. The success and failure of all the construction projects greatly depend on the selection, procurement route and form of contracting. Therefore, all the clients who want to hire the contractor for construction services should do extensive research before selecting any procurement route and form of contracting. References AAR Tret, 2015. CONTRACTUAL ARRANGEMENT, Australia: AAR tret. Boukendour, S., 2003. The Option to Change One Construction Contract for Another, Quebec : University of Quebec . C.M.Gordon, 1994. Choosing appropriate construction contracting method. ASCE Journal of Construction, Engineering and Management, , 120(1), pp. 196-210. Charvat, W. C., 2000. The Architect’s Handbook of Professional Practice,. 13th ed. USA: AIA publishers. Davis, P., 2006. Building Procurement Methods , Australia: CRC Constructions. Djebarni, H. &., 1996. Criteria of Choice for Procurement Methods, Pontypridd: Centre for Research in the Built Environment. Elbeltagi, D. E., 1996. Construction Management. 1st ed. NY: Sage publishers. Hansen, S., 2004. Comparison of Various Procurement Systems And Their Implication in Project Cost, Time, Quality and Performance. UTM , 1(2), pp. 1-7. Love, S. &., 2001. To build or not to build? Assessing the needs of construction industry clients and their stakeholders. Structural Survey, 19(2), pp. 121-132. Masterman, J. 1. P. 4.-5., 2013. An Introduction to Building Procurement Systems.. 1st ed. Uk: Routledge. NCW, 2006. Procurement Method Selection Guidelines, Sydney: New South Wales (NSW) Department of Commerce. RICS, 2010. A comparative analysis of procurement methods used on competitively tendered office projects in the UK, London: COBRA. SCALA, 1998. A Guide to Standard forms of Construction Contract , London: Local Government task force . Read More

It has the advantage of dealing with the single organization that is responsible for all the construction activities. The use of this method also improves the communication process between the client and the contractor because it overlaps in many activities (Masterman, 2013). After analyzing the case of Bury port community council’s construction of village hall, the most appropriate form of contract is cost reimbursing contracting while the best procurement route is management oriented if Bury port community have a high level of expertise, otherwise design and building procurement route can also be selected by the community council.

Task 2 As, I have selected cost reimbursement form of contract of construction, it will not that difficult to manage the problem of adjusting £40,000 in the terms of contract. The cost reimbursement contract allows the client to adjust the cost any time. It is one of the flexible ways of handling such a construction project that overall cost is difficult to estimate. The lump sum contracting does not provide any concession of adjusting the increased cost. The Bury port committee can extend the previous contract and can easily handle the problem.

The appropriate procurement route for this problem is the design and building procurement route. The design and building procurement route can be used to solve this problem by signing a cost reimbursement contract with the contractor. The design and building procurement route is one of the simplest and cost effective procurement route. It has single point responsibility. Such a problem requires less involvement because the cost is already determined. The design and building requires only reasonable care and skill.

The rectifications in the building of village hall are not of major kinds. They do not require any in house expertise and other management related skills that is why the best way to handle the problem is to select the design and building procurement route. The rectifications of any kind can be easily adjusted through design and building route (NCW, 2006). In addition, design and building route of procurement can prove a cost effective way in such kind of situation. The cost of rectification has already been assessed and where contractors input is not required.

The design and building procurement route demands only performance requirements rather than a technical requirement. Like, in the case of village hall and its rectification related to ban of noisy events only demands such a contractor that provides the guidelines to Bury port committee on how to rectify the problem without providing the technical details. The technical details in the design and the building procurement route is not the matter of concern to the client, it solely the responsibility of the contractor team (Djebarni, 1996).

Moreover, in such a case the Bury Port committee can choose lump sum or cost reimbursement contracting. The lump sum, can be used because there is no need to assess the cost again, as it has already been estimated. The contractor can be hired on the lump sum or fixed price contracting like total of total cost 40,000 pounds and the design and building procurement route can be used to eliminate all complexities among client and contractor. To sum up, it can be concluded that in all the construction projects, whether it is of Bury port village hall or any other kind of construction, all need appropriate and the right selection of procurement route as well as the form of contracting.

The success and failure of all the construction projects greatly depend on the selection, procurement route and form of contracting. Therefore, all the clients who want to hire the contractor for construction services should do extensive research before selecting any procurement route and form of contracting. References AAR Tret, 2015. CONTRACTUAL ARRANGEMENT, Australia: AAR tret. Boukendour, S., 2003. The Option to Change One Construction Contract for Another, Quebec : University of Quebec . C.M.

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