Assignment -1

Construction industry practice

Construction delivery methods:

There are different types of construction delivery methods. These are as flows:

1. Lump-sum method

2. Cost plus method

3. Design build method

4. Construction management methods

5. P3 (Public private partnership)

1. Lump-sum method:

It is also known as traditional method. In these methods the owner always hires a
consultant to work on-behalf of him. Normally the architects are one who was hired
for this purpose. Then they are responsibility is to go through all process that means
design, preparing proposals, administering and certification of work performed.
They have to prepare for the tendering process and normally general contractor
was hired on the lowest offered price. There are some advantages and
disadvantages of this method are given below.

OWNER

CONSULTAN CONTRACTO
T R

SUB SUB SUB SUB

Advantages:

1. Here the owner can get benefits from the experiences and expertise of the
consultants

2. The owner already knows the price of the project before it goes for
construction.

3. The risk of project over cost does not affect the owner because according to
agreement this goes to contractors

4. As in this method the price is fixed the contractor can make profit by keeping
his cost low. That can be achieved if the documents are very detailed and
clearly defined.

5. The owner reduces his risk by making a single contract for design and
construction phase of the project. Also he has a single source to
communicate that is consultants.

Disadvantages

1. There is a risk for contractor if he failed to meet the budget of the project he
will lose the money.

2. As the design and build are two separate part of the project it could be slow
the process

3. As the consultants work on-behalf of the owner on jobsite and also they are in
the field to interpret their own design there may be more conflict between
two parties

2. Cost plus methods

In this method cost of project construction is calculated and then a price on

top of that is added which is considered as profit for the contractor. The cost
includes all the wages paid for labour and other personnel employed by the
contractor for the work, materials cost , cost of supplies and equipment used
for the work and the cost of any subcontracts entered into by the contractor.
So contractor has no risk of losing money for not meeting the budget which is
contrast to lump-sum contract. Contractor is getting a negotiated amount of
money as profit in addition to the project cost.

This is type of contract what normally used in government project.

 Advantages:

1. Cost plus contract normally used in a project where price is not a big
factor instead the longevity of the project is big factor

2. There is confirmed profit for the contractor which make them effective
and they are not worried about construction cost.

Disadvantages:

1. Need administrative supervision to make sure the contractor control the

cost.

2. There is uncertainty about the total project cost at the beginning of the
construction process.

3. Sometime this is not good for the contractor because there are not getting
enough profit like traditional method.

3.Design and Build method

This is a procedure to deliver a project where, in contrast to traditional method the

design and construction aspects are contracted by a single entity known as the
design-build contractor. In the traditional delivery system, the appointment of a
designer and the contractor are given separately for a project . The design-build
procurement route changes the traditional sequence of work. It answers the client's
wishes for a single-point of responsibility in an alleged attempt to reduce risks and
overall costs. It is now commonly used in many countries and forms of contracts are
widely available. In this method the owner normally call for competitive bids and
then keep one company for the both design and build purposes. This system is used
to minimize the project risks for the employer and to reduce the delivery schedule
by overlapping the design phase and construction phase of a project.
 OWNER
OWNER

DESIGN
BUILDER

CONSULTAN CONTRACTO
T R

SUB SUB SUB SUB

Advantages:

1. The owner has to deal only one company for the both job.

2. The design and build contractor are responsible any construction or design
defect.
 3. In this type of contract the owner already knows the price of the project
before staring the construction.

Disadvantages:

1. There is no necessity cost control monitoring .

2. In this methods construction cost is higher than any other method.

4.Construction management method

In this method an owner hired a contraction manager who has the

responsibilities of whole project . unlike all other method in this type the
owner hire a construction manager to oversee the project. The main role of
the construction manager is one of advisor and administrator. He normally
assists the owner with tendering and the selection of the various contractors
who will complete the work, the construction manager will also administer
the trade contracts . The construction manager also responsible for creating
the project schedule and may assist the owner in developing the project
budget. All over the owner relies on the technical knowledge of the
construction manager. Depending on the expertise and experience of the
owner, the construction manager sometimes perform many of these
functions with minimal oversight from the owner.

The organisational chart of the construction management system is as

follows:
CONSTRUCTION
OWNER MANAGER

CONSULTAN GENERAL
CONTRACTOR
T

SUB SUB SUB SUB

Advantages:

1. As the construction manager get involved with any project at the early
stage , owner can have the advice and a expertise knowledge to solve the
problems. At the end of the day it is obvious that there is a significant
amount of cost savings.

2. The project can be monitored very closely by the construction manager to

its completion level. This process sometimes termed as fast tracking
system.

3. This method is also give owner control on the projects budget and
scheduling.

Disadvantages:

1. Though the construction manager always monitoring the projects in its

different level on behalf of the owner still in case of the any problem of
subcontractor or any trades the liability applies to the owner.

2. In this method ultimately cost is a factor for recruiting the construction

manager.
5.P3 or Public private partnership.

Some of the project where an involvement of the government or public and private
sector companies in terms of providing the fund to the project, facility management
and also construct and design . There can be a public user group. These three
groups in a project that is the building contractor, banks and maintenance company
are work together to develop, build , maintain and operate the project. There is
certainty of payment as provincial government get involved in this type of project
which attract the investors. There is a term build operate transfer(BOT), or special
purpose vehicle (SPV) which is commonly used in this method. That means after a
certain time ownership of the project transferred to the government .

Some of the examples are the hospital , water supply system etc.

As in this method all project costs maintained in an integrated way there is way to
minimize its exposure to cost overruns, increased financing costs and delay costs.
By placing the burden for these risks on the private sector, the public sector
achieves its goal of completing large infrastructure project on time and within the
budget.

Depending on the P3 project model implemented, the responsibilities of the private

sector participants will often extend well beyond the construction phase of a project
into maintenance or operation of the facility. The extended duration of these
projects gives rise to additional risk for the developer participants. With respect to
construction risk, the contractor will be responsible for the usual risks associated
with any project. These obligations will include defects and deficiencies in
construction, scheduling issues, site health and safety, labour, materials and
construction equipment. However, since P3 projects are to projects of a significant
size (i.e., hundreds of millions of dollars), there is an increased

risk on the contractor to accurately price the scope of the work. A mistake in pricing
could have a serious impact on even the most robust contractor.