Construction Project

Delivery Methods
Submitted to- Submitted by-
Dr. Sumit Khandelwal Nitin Kumar
Assit. Prof. MNIT Jaipur 2013UCE1333
Batch- C2
Introduction

A construction project delivery method is a

system used by an agency or owner for
organizing and financing design, construction,
operations, and maintenance services for a
structure or facility by entering into legal
agreements with one or more entities or
parties.

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Types

Some construction project delivery methods are:

1. Design Bid Build (DBB)
2. Build Operate Transfer (BOT)
3. Build Own Operate Transfer (BOOT)
4. Design Build Finance Operate (DBFO)
5. Design Build Operate and Transfer (DBOT)
6. Build Lease Transfer (BLT)
7. Design Construct Manage Finance (DCMF)

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1. Design Bid Build (DBB)

 Traditional & most common approach

 Agency or owner contracts with separate entities for the
design and construction of a project.
 the architect is selected under a contract that is based on a
negotiated professional fee.
 The construction firm is most often selected based on the
lowest bid, and there may be many subcontractors under his
contract/direction.

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Advantages Of DBB

▪ The design team is impartial and looks out for the interests of the
owner.
▪ The design team prepares documents on which all general
contractors place bids. With this in mind, the "cheaper is better"
argument is rendered invalid since the bids are based on complete
documents.
▪ Ensures fairness to potential bidders and improves decision making
by the owner by providing a range of potential options.
▪ Assists the owner in establishing reasonable prices for the project.
▪ Uses competition both in the selection of the architect and the
contractor to improve the efficiency and quality for owners.
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Disadvantages Of DBB

▪ In lean times, the desire for work usually forces the low bidder of each trade to be
selected. This usually results in increased risk (for the general contractor) but can also
compromise the quality of construction. In the extreme, it can lead to serious disputes
involving quality of the final product, or bankruptcy of a contractor.
▪ As the general contractor is brought to the team post design, there is little opportunity
for input on effective alternates being presented.
▪ Pressures may be exerted on the design and construction teams due to competing
interests (e.g., economy versus acceptable quality), which may lead to disputes
between the architect and the general contractor, and associated delays in
construction.
▪ Failure of the design team to be current with construction costs, and any potential cost
increases during the design phase could cause project delays.
▪ Redesign expense can be disputed should the architect’s contract not specifically
address the issue of revisions required to reduce costs. 6
2. Build Operate Transfer (BOT)

▪ A type of arrangement in which the private sector builds an

infrastructure project, operates it and eventually transfers ownership
of the project to the government or a joint venture partner.
▪ In many instances, the government or a joint venture partner
becomes the firm's only customer and promises to purchase at least
a predetermined amount of the project's output. This ensures that
the firm recoups its initial investment in a reasonable time span.

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Advantages Of BOT

▪ The private firms are more efficient, hence project or service can
be an delivered at lower cost .
▪ BOT projects create business opportunities for the local private
sector, create employment avenues as well as attract substantial
foreign direct investment .
▪ BOT projects help in facilitating transfer of technology by
introducing international contractors in the host countries .

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Disadvantages Of BOT

▪ BOT is not a easy method and requires high capability of

promoters .
▪ The success of BOT project depends upon successful raising of
necessary finance.
▪ Transaction costs are high, they amount to 5-10% of total project
cost .
▪ BOT projects are successful only when substantial revenues are
generated during the operation phase .

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3. Build Own Operate Transfer (BOOT)

▪ Financing arrangement in which a developer designs and builds a

complete project or facility (such as an airport, power plant, seaport)
at little or no cost to the government or a joint venture partner, owns
and operates the facility as a business for a specified period (usually
10 to 30 years) after which transfers it to the government or partner
at a previously agreed-upon or market-price.

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Advantages of BOOT

▪ Encourage private investment

▪ Inject new foreign capital to the country
▪ Transfer of technology and know-how
▪ Completing project within time frame and planned budget
▪ Providing additional financial source for other priority projects
▪ Releasing the burden on public budget for infrastructure
development[
▪ BOOT operators are experienced with management and operation of
infrastructure assets and bring these skills to the scheme.

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Disadvantages Of BOOT

▪ The project requirements (including interfaces) must be well defined

to enable contractors to effectively price the works and the
structured finance - comprehensive data is required to allow whole of
life risks to be priced and managed.
▪ There must be capability, capacity and appetite in the market to
undertake a project of the required size and complexity.
▪ It requires a lengthy tendering and evaluation process, including
achieving contractual and financial closure.

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4. Design Build Finance Operate (DBFO)

▪ Very similar to BOOT except that there is no actual ownership

transfer.
▪ A single contractor ( with design, construction and facilities
management expertise as well as funding capability) is appointed
to design and build the project and then to operate it for a period of
time.
▪ The contractor finances the project and leases it to the client for an
agreed period (perhaps 30 years) after which the development
reverts to the client.

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Advantages of DBFO

▪ Attracts private sector finance.

▪ Delivers more predictable and consistent cost profile.
▪ Greater potential for accelerated construction programme.
▪ Increased risk transfer provide greater incentive for private section
contractor to adopt a whole life costing approach to design.

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Disadvantages of DBFO

▪ Possible conflict between planning and environmental

considerations.
▪ Contracts can be more complex and tendering process can take
longer than for BOT.
▪ Funding gurantees may be required.
▪ Contracts management and performance monitoring system
required .

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5. Design Build Operate and Transfer (DBOT)

▪ DBOT is a more flexible approach designed to eliminate the

large elements of risk connected with outsourcing projects
and provide a more convenient offering for companies seeking
to outsource their customer-facing functions.
▪ Customized to the needs of the client, the DBOT model gives
companies a greater degree of control over their outsourcing
partnership.

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Advantages of DBOT

▪ The DBOT model can supply companies with great customer contact
facilities and technology without heavy capital expenditure.
▪ Merchants offers a set-up fee repayment over the life of the contract,
limiting the initial financial outlay.
▪ Organizations can also select their own timeframe for transferring
the contact centre across to their management to suit their needs.

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Continued..

▪ Outsourcing the design, building and implementation of a contact

centre helps to minimize the financial and commercial risk of setting
up a n
▪ By bringing valuable expertise and skills to a company, a third party
can ultimately help companies to expand their operations with the
minimum of risk to their business. Ex. customer contact facility.

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6. Build Lease Transfer (BLT)

▪ Financing arrangement in which a developer designs, finances and builds a

facility on leased public or joint venture partner’s land.
▪ The private partner recovers its investment through payments made by
the government or joint venture partner.
▪ Ownership of the facility is transferred to the government or JVP upon
completion of construction, and the concessionaire is granted the right to
operate the facility and receive government or JVP’s payments (lease
payment plus operational cost) based on its operational performance for a
specified period of time

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7. Design Construct Manage Finance (DCMF)

▪ A private entity is built to design, construct, manage, and finance a

facility, based on the specifications of the government.
▪ Project cash flows result from the government’s payment for the rent
of the facility.
▪ In the case of the hospitals/prisons, the government has the
ownership over the facility and has the price and quality control. The
same financial model could be applied on other projects such as
prisons.

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Advantages

▪ The advantages of this contract are that there is an existing contract

mechanism in place, the task is related to the overall goals of the
contract, and the contract team has extensive contacts in the
community that would support this work.
▪ This model could be interpreted as a mean to avoid new
indebtedness of public finance.

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Disadvantages

▪ The disadvantage of this contract is that it might need to include a

survey, which would require Office of Management and Budget
approval. Additionally, the information collected would need to be
maintained after the task and contract ended.

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THANK YOU!!

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