Professional Documents
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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
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.
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.
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.