Management Contracting - Essay Example

? Management Contracting Management Contracting Design-build Contract A design-build contract refers to an outstanding type of project delivery system used in construction as well as renovation projects. In this kind of contract, the client awards the project to a contractor. After the client enters into the contract with the contractor, the contractor is responsible for all design as well as construction work needed to complete the project (Shapiro & Shapiro 2007). This will allow the client to deal with one source during the construction of the innovative and eye catching new property as opposed to coordinating various parties. If the client awards the design-build contract to a builder, the builder is responsible for hiring all engineers and architects needed to complete the work of designing the new property. The client has the right to reject or approve design options; however, he is no longer responsible for managing or coordinating the design team. When the owner approves the design, the same contractor directs the construction process of the new property and hires subcontractors if needed. Most clients’ sign build contracts after a negotiation as opposed to a bid process. This type of contract is beneficial to the client in various ways. For instance, the client would serve a simple role in the construction process and his management and administrative responsibilities will be less. The contracts also give rise to an atmosphere that is team oriented and may reduce legal and claims problems during the construction of the new project (Shapiro & Shapiro 2007). It also has estimates and budgets that are more accurate and the contractors complete the project faster. The potential benefit of faster construction in design to build contract with one-contractor lies in the fact that there is only one contractor handling the job and since they have designed the project, they have a better understanding of the manner to build it. The client will also have the advantage of a single point of responsibility (Chapell 2007). Furthermore, time required during the construction stage is lesser because the contractor designs and builds easier designs. The main disadvantage of design-build contract is lack of checks and balances allied to this delivery system. Disadvantages may also rise early on in the construction process if the contractor presents the design that is not special in terms of design or quality, the contractor may be attempting to reduce costs and increase buildability. This can generate friction because the client may argue and ask the contractor to get better designs, which have higher level of finish. In other cases, the client may also feel overwhelmed because of lack of adequate construction experience, which may result in difficulties when coordinating directly with the contractor as the projector progresses. This lack of experience on the client’s part may cause project delays or increased expenses (Chapell 2007). NEC3 contract NEC3 contract is a family of contracts that facilitate the implementation of sound management practices and principles and defining legal relationships (NEC 2010). The contract is a positive as well as a progressive form of contract that allows every part to participate in and contribute to the successful delivery of facilities, buildings, as well as best value solutions. The client and the contractor collaborate and their collaborative working across the whole construction process boosts the likely project outcomes. The contract stimulates good management of the relationship between the client and contractor and the work included in the contract (NEC 2010). The contract offers clients and contractors project focused outcomes leading to the achievement of the client objectives for the projects in terms of ultimate performance, quality, time and cost aspects. The NEC3 contract is advantageous in that it designs a system for managing the construction project interfaces. It also gets all the parties to sign up to the contract and the collaboration between project managers, designers, contractors and the client create a better product. The contract offers the Works in accordance with Works Information. The NEC contract also encourages collaborative procurement in a manner that develops solutions to the complex issues that crop up in a regeneration project (NEC 2010). For instance, the client can include key performance indicators for the projects, which could be measurable deliverables, which can lead to extra rewards for the project team. The client can link achievement of KPIS to additional bonuses. The main disadvantage of NEC contracts is that they are problematic where expectation that the programme is up to date is not being satisfied. Influencing a long outdated programme with holdup taking place much later results in an effect, which is far from the realism of the real advancement on the project. A courts authorization on this matter is appropriate. Additional Option The third option entails asking a firm to mastermind the whole project under some form of management contract. In this kind of arrangement, the client pays the management contractor a fee to act as the principal’s agent in employing subcontractors also known as trade contractors. The management contractor works alongside the client and coordinates the activities of engineers, architects, subcontractors, and inspectors. This enables use of a contraction manager expertise in the same manner as a contractor. However, when it comes to contract work, the construction management only makes recommendations to the principal in respect of the individual trade contracts. He also receives progress claims as well as payments. The firm has to conduct itself properly and with transparency to avert any misunderstanding on a trade contractor’s part as to the role of the construction manager. The management contractor has to clarify to the trade contractor(s) that he or she is acting as an agent for the principal. Any payments that the management contractor makes are usually from the client and the contractor should make this clear to the trade contractor. Failure to spell out clearly, can cause the management contractor to be personally liable for uncertified payments. This option is advantageous in that it overlaps the design as well as the construction stages and enables the client to start early components of the process of construction awaiting the design to be completed. It is also advantageous in that the client can appoint the construction manager early in the design to advice on programming and buildability. In addition to the client contract with the management contractor, the management contractor manages the work packages for the individual sub contractors (Alberta Infrastructure 2001). Asking a firm to mastermind the whole project under some form of management contract best fits this project because the client requires complex designs- they want an innovative and eye catching new property to be a flagship of their enterprise. The client can supplement the expertise of the project management staff and have full control of the design as well as the construction process. This approach is also appropriate because it is the most cost effective because the client involves the management contractor early to assist assure that the design is affordable and constructible. The client also controls the levels of services it buys. This contract method is also significantly faster than the rest of the contracts because the management contractor starts construction on each of the components of the project as soon as a particular design is complete and the client has acquired bids for that work. Reference List Alberta Infrastructure 2001, Construction Management, Viewed 27 February 2012, http://www.infrastructure.alberta.ca/Content/docType486/Production/ConstMgmt.pdf Chapell, D 2007, The JCT Design and Build Contract 2005, 3ed, Wiley-Blackwell. NEC 2010, What is the NEC, viewed February 27, 2012, http://www.neccontract.com/about/index.asp Project Management versus Construction Management, viewed 27 February 2012, http://www.structuretec.com/pdfs/StructureTec-ProjectvsConstruction.pdf Shapiro, B & Shapiro, H 2007, Design/Build and Turnkey Contracts – Pros and Cons, viewed 27 February 2012, http://www.shk.ca/docs/Design_BuildTurnkeyContractsProsandCons.pdf Read More