1surveyors Construction Handbook Developing An Appropriate Building Procurement Strategy

The Surveyors' Construction Handbook is out of print and is on isurv for information purposes only
PART 3, SECTION 1
PART THREE: CONSTRUCTION PLANNING AND

PROCUREMENT
SECTION 1: DEVELOPING AN APPROPRIATE

BUILDING PROCUREMENT STRATEGY
Introduction
This section is intended to provide both clients and their advisers with
procedures which will assist them in the selection of an appropriate
procurement strategy for a building project.
The strategy developed for the purpose of project procurement should result
from an objective assessment of client needs and project characteristics, since
it is considered that there will be no single procurement strategy suitable for
all projects and all clients. Choice of an inappropriate strategy can, however,
result in a failure to meet client objectives, disappointment and potential
litigation.
The selection process should, therefore, provide a best-fit solution based on

good judgement and which is acceptable in terms of the identified criteria and
the acceptable distribution of risk.
The selection of an appropriate procurement strategy is identified as a key

decision in terms of achieving client objectives. Conversely, an inappropriate
choice can be a key factor in performance failure, resulting in cost and time
overruns and poor building performance. This section looks at the client’s
role (3.1.1), the development of procurement strategies (3.1.2), the selection
of the most appropriate procurement route (3.1.3), and the implementation
process (3.1.4).
3.1.1 informs clients as to their involvement as it relates to key stages in the

process. It also stresses the importance of appropriate professional advice.
In 3.1.2–3, the key issues are addressed together with the characteristics of a
variety of procurement strategies: the aim is to match client needs, the
particular project’s criteria and the chosen strategy.
The implementation of strategies is considered in 3.1.4 where reference is also

made to standard contracts for the designer, consultant or constructor
appointment.
Appendix A outlines procurement options.
The Surveyors’ Construction Handbook Part 3, Section 1 (01/03) Effective from 1/3/03 Page 1
PART 3, SECTION 1
EFFECT OF CLIENT TYPE ON SATISFACTION CRITERIA
The type of client will affect the criteria which must be met if the client is to
be satisfied with the project.
Owner-occupiers are usually primarily concerned with building performance

in terms of functionality and costs in use. They may also be concerned with
image and building style. In this sense, value for money is a key criterion.
Developers, on the other hand, may be driven by market conditions which

enable the project to be let or sold at maximum advantage. They may be
predominantly concerned with speed rather than performance.
This is not to say that owner-occupiers are unconcerned about time. Indeed,
certainty of completion date may be a key issue. Nor is it fair to suggest that
developers are unconcerned about building performance or cost. There are
market conditions where both of these issues may become important.
Attempts to categorise clients in various ways may be helpful in the early

stages of developing procurement strategy. However, each client is unique
and will be more or less experienced in the process of building procurement
depending on company size and stage of development.
It is important to consider those factors which will affect client satisfaction as

well as the level of knowledge and experience of the client in the process of
building procurement. These factors should have a major influence on
procurement strategy and whether the client should take an active role in the
procurement process.
This Section addresses these issues and provides, through the form of a
checklist, a process to aid selection.
SCOPE
The section and the processes included should be used as a prompt and a focus
for the issues to be addressed during the development of procurement strategy.
It is not intended that the section will be used as a substitute for judgement.
3.1.1 The Client’s Role

(It is recommended that this be read in conjunction with Part 1, Section 1)
G 3.1.1.1 INTRODUCTION
G 3.1.1.1 This subsection explains the client’s responsibilities through the life of a
project. Although it is written for building projects, much of the advice is
applicable to other types of project. In carrying out their role, clients,
depending on their knowledge and expertise, will need help from their
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PART 3, SECTION 1
consultants, project managers and other advisers, whose roles are also
explained in this section. It is advisable, wherever possible, that clients obtain
advice from an objective and independent adviser who will then not be
involved as a consultant on the project.
This subsection aims to assist both current and future clients in setting policy
and formulating strategy. It outlines their task and explains how it should be
carried out. It has been written with the lay client in mind, but will also assist
experienced clients and their advisers.
The success of any project will depend on the motivation given by the client.
Experienced clients may take a leading role in the procurement process; less
experienced clients will need to seek advice or to appoint an adviser to assist
them. Where projects are of a large or complex nature it may be advisable to
consider the appointment of a project manager, who will manage the whole
project on behalf of the client.
G 3.1.1.2 A building project represents a discrete piece of work with clear start and
finish dates, providing specified benefits at accepted cost. It is unlike any
other manufactured product because it has:
• a unique demand – the client’s specific need for accommodation (but

future adaptability and possible disposal must not be ignored);
• a unique location – the site available for the building;
• unique constraints – the cost and time parameters for the project; and
• a unique end product – the finished building.
G 3.1.1.3 It has three other particular characteristics:
• the final product, although itself unique, is built up of many standard parts
assembled in accordance with a series of standard rules and practices;
• its construction involves major expenditure over a comparatively short
period of time; and
• the construction of a new building requires a large team of individuals and
firms with particular expertise to work together to complete the project
satisfactorily. This team will normally only be formed for this unique
project and then be disassembled. It is unlikely that the same team will
work together again, and if it does, the project is likely to be different.
Each project is, therefore, a prototype and involves a learning curve.
Project testing is rare.
G 3.1.1.4 (a) Effective management is vital in any construction project. The client’s
prime role is to define the project and to establish a structure for the
management of the project to make sure that it works.
(b) A crucial part of any effective management structure is effective

communication. To perform effectively all parties should have timely access
to all information relevant to their tasks and the project’s objectives and status.
PART 3, SECTION 1
(c) The client can have substantial influence on the design of the project in
respect of both functional efficiency and of overall appearance, and, therefore,
has to take particular care to:
• develop a business case for the project identifying primary needs and
analysing costs and benefits
• understand fully the purpose of the building; ensure that the
requirements of the users are accommodated; and communicate those
requirements to the designers;
• appoint architects and engineers with the proven ability of designing
buildings which satisfy users’ requirements and harmonise with and
contribute to the quality of the built environment. The selection of the
right people is emphasised as a key to success.
(d) This subsection sets out the role and responsibilities of the client through
all stages of the project.
(e) The diagram on the next page indicates the primary activities in the
procurement process and when activities are performed. As can be seen the
client’s role is significant with a wide range of activities to perform and
implement before both the design and the construction processes. In the
performance of these activities clients can expect to be supported and advised
by their advisers or (if appointed) the project manager.
G 3.1.1.5 PRIMARY ACTIVITIES IN THE PROCUREMENT PROCESS
Pre-design phase Pre-construction phase Construction Post-construction
Client’s role Appoint adviser (3.1.1.6) Procurement strategy (3.1.1.13) Design overview (3.1.4.12) Commissioning (3.1.1.17)
Develop the business case for the Design overview* (3.1.4.12) Cost control overview (3.1.4.13) Occupation and takeover
project* (3.1.1.9) Cost control overview* (3.1.4.13) Time control overview (3.1.4.14) (3.1.1.18)
Define client’s responsibilities Whole-life costs (3.1.4.15) Quality control overview (3.1.4.18)
(3.1.1.7) Value engineering (3.1.4.17) Change control overview
Project definition (3.1.1.10) Time control overview* (3.1.4.14) (3.1.4.19)
The Surveyors’ Construction Handbook

Project briefing (3.1.1.12) Quality control overview*
Appointment of PM (if appropriate) (3.1.4.18)
(3.1.4.7) Appointment of constructors
Appointment of design and cost (3.1.4.9)
consultants (3.1.4.8) Confirming the business case
Procurement strategy* (3.1.1.13) (3.1.1.9)
Value management (3.1.4.16)
Procurement Procurement strategy

strategy development (3.1.2)
Part 3, Section 1 (01/03)

Implementation Resources (3.1.4.3–5) (Client) Contractual arrangements Systems and controls (3.1.4.11)
Organisational structure (3.1.4.6) (3.1.4.10)
Contractual arrangements* Systems and controls (3.1.4.11)
(3.1.4.10)
Systems and controls* (3.1.4.11)
Implementation policy (3.1.4.2)
Diagram to indicate the activities in the Procurement Process

* Indicates the activity will continue into the next phase
Effective from 1/3/03

( ) Indicates the subsection of this document referring to the activity
PART 3, SECTION 1
Page 5
PART 3, SECTION 1
G 3.1.1.6 INDEPENDENT CLIENT ADVICE
(a) With the potential for the involvement of many consultants and/or
constructors in a project, and the range of contracts associated with their
employment, all but the most experienced client may need advice. The advice
offered should be informed and unbiased and it should be based upon a logical
analysis of the needs of the client, the type and character of the project and the
range of appropriate strategies available.
(b) This advice can be offered by a member of the client’s design team or can
be a separate function. It may be more difficult for a design team member to
remain impartial in carrying out this process and it is recommended that any
expertise retained should be retained solely for this purpose. This function
may encompass:
• Assistance in preparing the business case (the business case)

underpinning the project
• Identifying the needs and requirements of the (briefing)
client
• Defining the project (project definition)
• Matching needs and project characteristics (procurement strategy)
with appropriate procurement strategy
• Facilitating the associated selection and (implementation)
contractual processes and policies
(c) The decision as to which procurement strategy to select should be based

upon information from the client and information about the project.
(d) A best practice guide is available to assist in this process1.
(e) Possible sources for independent client advice include a suitably

qualified and experienced construction professional such as a chartered
surveyor.
G 3.1.1.7 CLIENT’S RESPONSIBILITIES
(a) The client should set policy and outline strategy including:
• setting and prioritising the project objectives;
• clarifying client attitude to project risk;
• establishing procurement strategy;
• arbitrating between conflicting demands; and
• evaluating the completed project against the objectives.
1
Construction Industry Board, Briefing the Team, Thomas Telford Publishing, London, 1997.
PART 3, SECTION 1
(b) The client also has a threefold management function:

• to provide financial resources and land for the project;
• to manage the client input; to co-ordinate functional and administrative
needs; to make decisions when needed; to resolve conflicts; to act as the
formal point of contract for the project; and
• to supply the technical expertise, to assess, procure, monitor and
control the external resources need to implement the project
(throughout the procurement process).
(c) In particular the client should be satisfied, as far as possible, that:

• the project brief is clearly defined as far as possible and linked back to
the client’s business case for the project;
• the project brief is comprehensive and clear and has the full support of
the users;
• any constraints demanded by the project funder(s) are known and their
impact understood;
• the critical assumptions made in preparing the initial estimates and
programmes are valid, realistic and achievable;
• advisers have developed cost estimates which are comprehensive and
include all capital and resources costs;
• allowances made in the feasibility and viability assessments to cover
possible risks are sufficient (contingency allowance);
• an adequate risk analysis has been completed;
• substantial sensitivity analysis and ‘what if’ studies have been carried
out to assess the effect of possible changed criteria on the viability of
the project;
• plans are in place for adequate project management including systems
for cost, time and change control, and that health and safety has been
adequately addressed;
• land will be purchased and available for the commencement of the
work.
(d) The client should also co-ordinate and resolve conflicts between all
interested sections of the client organisation including:
• user groups – who will work in the building;
• specialist groups – responsible for technical systems within the
building, e.g. communications, computers;
• facilities management – who will manage the completed building
including maintenance and security;
• finance and accounts – who will plan and control expenditure and pay
bills as they arise;
• legal advisers – who will advise on and monitor the client’s formal
relationships with outside parties.
PART 3, SECTION 1
(e) The client is responsible for ensuring that all necessary decisions are made
on time. Timely decisions are necessary to avoid delays and increased costs;
the decision-making process requires as much planning and management as
any other activity. This will include:
• scheduling the key decisions to be made;
• identifying the decision makers and their required procedures;
• ascertaining the time required for making decisions;
• establishing a formal programme for decisions;
• pre-warning decision makers of forthcoming submissions – making
sure ‘items are on the agenda’;
• preparing on time fully detailed submissions and/or presentations in
full compliance with procedural requirements;
• following up submissions throughout the decision making process; and
• promptly communicating decisions made to the parties affected by
them.
G 3.1.1.8 KEY CLIENT ACTIVITIES
Notwithstanding overall responsibility for the whole of the project, the client
will have an active personal involvement in the key activities explained in the
following subsections.
G 3.1.1.9 DEVELOPING THE BUSINESS CASE FOR THE PROJECT
(a) The client’s purpose in initiating a building project may be driven by the
need for the project as a functional unit or long-term investment.
(b) The client will need to review project feasibility in terms of time and cost
against benefits which will stem from the proposed project. In doing so he/she
will have to consider the returns expected, the value (in use) of the projected
asset against projected land costs, construction costs, cost of fees, fitting out
and commissioning costs, operating and maintenance costs and the
opportunity cost of money.
(c) The importance of each of these issues will be relative to the objectives of
the client and to the extent to which the client is able to cope with risk.
(d) Further influences in the case of a development project may include likely
annual rental, period between rent reviews, and growth of rental value. In
terms of the project development, total development time and taxation issues
may also be influential on the decision process.
(e) It is important that the client seeks advice in terms of investment appraisal
of the planned project and that any appraisal considers ‘what if’ questions to
ensure that the impact of changes of key components in the appraisal are
clearly understood. A chartered surveyor will be able to assist the client in
these matters.
PART 3, SECTION 1
G 3.1.1.10 PROJECT DEFINITION
The importance of a clear project definition to the successful completion of the

project and in ensuring appropriate performance of the project cannot be over
emphasised. The inexperienced client will need professional help from the
advisers or design team in the preparation of the definition. The project definition
is a comprehensive statement of the client’s objectives and parameters for the
project based on close consultation between the client and users covering:
• project description;
• function of building;
• equipment and special services/requirements;
• target programme; and
• site.
G 3.1.1.11 ESTABLISHING PRIMARY OBJECTIVES
(a) In establishing the primary objectives for the project it is necessary to

prioritise these objectives to ensure that when developing a procurement
strategy appropriate emphasis is given to the most important objectives.
(b) Since there can be a tension between the long-term objectives set for the
project in the business plan and the short-term objectives set for the project by
the project team, the identification of priorities is very important.
(c) One way to achieve this is to consider ‘what if’ scenarios to establish the
importance of key factors:
• what if the project does not meet its functional requirements?
• what if the project is delivered late?
• what if the cost of the project exceeds the budget?
(d) By carrying out an analysis in this way relative importance can be given to
each aspect by weighting that aspect against a total.
For example:
%
Function 50 Each of these can be subdivided to produce clarity, e.g.
Completion 20 cost can be divided into capital and running costs, time
Cost 30 into speed or reliability of delivery date and function into
100 layout, environmental quality and specification.
(e) This is the initial control document for the early planning of the project;
without it little constructive work can be done. If all the information required
for the project definition is not readily available, it is better to issue it in an
incomplete form and progressively update it.
G 3.1.1.12 BRIEFING
(a) Once the project definition has been completed the briefing process will be
carried out. This is when the design team and cost consultants are able to flesh out
PART 3, SECTION 1
the project prior to extensive design work. The process commences with concept
design building upon project definition and progresses through to a project brief
which should encompass the client’s aesthetic, spatial and service requirements.
(b) While it may be difficult for inexperienced construction clients to

visualise the descriptions outlined during the briefing process it is worth
spending time seeking consensus on its content to avoid waste in the later
design process.
(c) The Construction Industry Board (1997) have produced an excellent guide
called Briefing the Team which summarises the processes involved.1
(d) Following the development of the brief for the project the design process
will commence (see 3.1.4 – Implementation).
G 3.1.1.13 DEVELOPMENT OF PROCUREMENT STRATEGY
The client is responsible for selecting the procurement strategy most suited to
the project and deciding how it is to be administered. The client may need to
take consultant advice on which strategy is most appropriate considering the
prioritised objectives and attitude to risk. This is a three-stage process which
may be key to project success:
• selecting the strategy;

• implementing the strategy; and
• planning the administration of the contracts underpinning the
implementation of the strategy.
The processes of procurement strategy selection and implementation are dealt

with in 3.1.3 and 3.1.4.
G 3.1.1.14 (a) Strategies may include:

• traditional – design by consultants completed before lump sum tenders
are obtained;
• design and build – detailed design and construction by the contractor
for lump sum; design and construction may overlap. Where a concept
design is produced by the consultants before the contractor is
appointed, the strategy is called develop and construct;
• management contract – design by consultants; management
contractor appointed early and work package contracts let
progressively in the contractor’s name; design and construction
overlap;
• design and manage – outline design by the consultants; as
‘management contract’ but detailed design by the management
contractor; design and construction overlap; and
• construction management – design by consultants; construction
manager appointed early to produce and manage trade package contracts
made directly with the client; design and construction overlap.
PART 3, SECTION 1
G 3.1.1.15 (a) The extent of collaboration possible between those who design the project
and those responsible for delivery will vary with the strategy adopted.
(b) Selection strategies may include selection by competition for price; on the
basis of the quality of the bid as well as price alone; or by negotiation. In some
cases a high level of collaboration is possible enabling those responsible for
delivery to adopt a ‘Partnering’ approach to project delivery.
(c) Partnering is not so much a contract strategy as a way by which the project
team can be drawn together for their mutual benefit. Partnering is usually most
advantageous where the client has a range of projects to procure but can be
adopted for single projects.
(d) The principles associated with Partnering are based on inclusiveness and
depend upon a trust being established within the team. There is also a focus on
achieving the best outcome for the client as well as a satisfactory outcome for
each participant. The primary principles include developing mutual
objectives, simple approaches to dealing with disputes and a focus on
continuous improvement which can be measured.
(e) This approach represents a change in the culture traditionally adopted by

the UK construction industry which has previously been based on price-bid
approaches and will need to be carefully managed. However, evidence is
beginning to emerge of real all-round benefits being achieved particularly by
regular and experienced construction clients.
(f) The Construction Industry Board have published a most useful guide to
partnering1.
(g) The number and style of contract documents will depend on the contract
strategy selected.
G 3.1.1.16 (a) Where direct consultant appointments are made each will be subject to a
separate form of contract, but where a design and build strategy is selected,
designers may be appointed by the contractor. In the case of construction
management, the client will be required to enter into many individual trade
contracts.
(b) Contract implementation can be complex and may encompass the

additional appointment of consultant advisers or the novation of designers
from the client to the contractor. In addition, forms of warranty and collateral
contracts may be involved. The consultant advisers can assist the client in the
selection of appropriate contracts and the documentation associated with
them.
1
Construction Industry Board, Partnering in the Team, Thomas Telford Publishing, London, 1997.
PART 3, SECTION 1
(c) The responsibility for contract administration will depend upon the
procurement strategy selected, and may fall upon the design team, the project
manager, a contract administrator, or the client him/herself. The client should
seek advice to ensure that the administration process is appropriately planned
and delegated.
(d) Guidance on the appointment of consultants and contractors is included in

3.1.4 (Implementation).
G 3.1.1.17 COMMISSIONING
(a) Once the building work is complete the systems which will support comfort
must be commissioned to ensure they are working effectively and reliably.
(b) In relatively simple buildings the client can insist that this is a function
which the contractor must perform. Where buildings have sophisticated
systems controlling the internal environment or facilitating staff movement or
safety, commissioning can be established as an independent activity carried
out by specialists.
(c) However commissioning is facilitated, it must be achieved before any

building can function effectively.
G 3.1.1.18 OCCUPATION AND TAKE-OVER
(a) The client is responsible for addressing the issues of occupation, staffing
and subsequent operation and maintenance of the building. This activity is
separate from the design and construction process, although it will affect it,
and will have its own time, resource and cost implications which should be
incorporated into the overall project plan.
(b) For large projects, the client may wish to arrange for the nomination of a
member of the department to act as occupation manager to manage this
activity or may appoint a facilities manager. Occupation plans should be
established during the design stages of the project and should cover:
• the operation of the building on a regular on-going basis;
• the hand-over and acceptance of the building from the contractor(s);
• the progressive final fitting-out (if any) and physical occupation of the
building with minimum disruption to the client’s operations.
3.1.2 Procurement Strategy

G 3.1.2.1 Designing and constructing a new building is rarely straightforward. It is
subject to a series of risks and uncertainties and involves a number of
organisations especially assembled for the project. The way in which the
client and the various designers, contractors and suppliers work together as a
team is determined by the procurement strategy and forms of contract entered
PART 3, SECTION 1
into between the project participants and the client. The procurement strategy
should be consistent with the objectives of the project and should enable the
risks to be controlled to achieve a successful outcome.
G 3.1.2.2 Procurement strategy is the outcome of a series of decisions which are made
during the early stages of a project. It is one of the most important decisions
facing the client. The chosen strategy influences the allocation of risk, the
design strategy and the method of employment of consultants and
contractors. Risks are also allocated by means of the associated contracts.
Procurement strategy has a major impact on the timescale and ultimate cost
of the project.
G 3.1.2.3 Generally, clients can choose from several different strategies. A successful
strategy is one which leads to a completed building which meets the client’s
objectives. The preferred aim is for contributing parties to work together for a
quality result rather than competing against each other.
G 3.1.2.4 Where the development of design does not maintain the pace anticipated, or
the programme is otherwise affected by unexpected occurrences, the selected
strategy must be reviewed. It is most important that the strategy is
reconsidered at key times in the progress of the project such as when planning
approval is given, before contract strategy is decided and before construction
contracts are let.
G 3.1.2.5 DEFINITION OF TERMS
Different procurement strategies provide different ways of allocating risk and

responsibility to the organisation contributing to the project. They can either
integrate the design and construction processes or segregate them.
Approaches to the selection of processes enabling collaboration are referred to
in 3.1.4 (Implementation).
The main types of procurement strategy are summarised below (they are
covered in more detail in Appendix A).
• traditional: design by consultants is completed before contractors tender

for, then carry out, construction;
• construction management: design by the client’s consultants and
construction overlap. A fee-earning construction manager defines and
manages the work packages. All contracts are between the client and the
trade contractors. The final cost of the project may only be accurately
forecast when all packages have been let;
• management contracting: design by the client’s consultant and
construction overlap. A management contractor is appointed early to let
elements of work progressively by trade or package contracts (called
‘works packages’). The contracts are between the management contractor
and the works contractors. As with construction management, the final
cost can only be accurately forecast when the last package has been let;
PART 3, SECTION 1
• design and manage: similar to the management contract, with the

contractor also being responsible either for detailed design or for
managing the detailed design process; and
• design and build: detailed design and construction are both undertaken by
a single contractor is return for a lump sum price. Where a concept design
is prepared before the contractor is appointed, the strategy is called
develop and construct.
G 3.1.2.6 On some projects it may be necessary to use more than one strategy to meet
the project’s objectives. For example, a traditional approach may be used for
completing the building structurally with main services installed. This is
known as a shell and core contract. A separate strategy, for example,
construction management, may be used to fit out the building with ceilings,
raised floors, carpets, partitions and electrical fittings. The use of two
strategies allows the client more time to finalise the user’s detailed
requirements, without delaying the start of construction.
G 3.1.2.7 When the choice of procurement strategy has been made, the resultant
contract strategy and forms of contract should be chosen (i.e. the terms and
conditions of the contract). To avoid the need for fresh legal drafting each
time, various standard forms of contract are available, both for the
appointment of consultants and contractors. Construction professionals re
usually experienced in understanding these contracts and can advise on the
implications of their adoption. The range of contracts available is referred to
in 3.1.4 (Implementation).
G 3.1.2.8 PROJECT OBJECTIVES
(a) Construction (and refurbishment) projects are often complex with potential
for cost and time overruns or the finished building performing less well than
planned. To minimise such risks the client should select the procurement
strategy which matches the objectives of the project. These must be clearly
established and prioritised before any design or other work begins (see
3.1.1.10–11 – Project Definition, Establishing Primary Objectives).
(b) The client must decide the relative importance of the three main types of
criteria – time, cost and performance:
• time: earlier completion can be achieved if construction is started
before design is finished. The greater the overlap between the two, the
less time will be required to complete the project;
• cost: with the exception of simple ‘standard’ buildings and certain
‘design and build’ strategies, a final construction contract sum cannot
be established until the design is complete. Any overlap between design
and construction means that construction starts before the cost is fixed.
This increases the importance of accurate cost forecasting and the risk
to the client; and
PART 3, SECTION 1
• performance (design): the quality and performance characteristics

required from the completed building determine both the project time
and cost. Some strategies reduce the client’s ability to control and make
changes to the detailed building specification after the contracts have
been let.
(c) Performance includes the function of the building, its quality and
appearance and other factors such as durability, cost in use and flexibility. The
relative importance of each objective must be given careful consideration
because decisions throughout the project will be based on balances between
the other objectives (see Figure 1).
In any project these three criteria will be interdependent and decisions

affecting one will affect one or both of the other criteria. The appropriate
procurement strategy will recognise this interrelationship and reflect the
client’s objectives and the characteristics of the project. It is uncommon for a
project simply to emphasise one criterion alone and most projects would
emphasise time and cost, time and performance or cost and performance. The
project strategies most commonly adopted reflect this characteristic.
The strategy should also reflect the client’s technical ability and resources and
the amount of control over the process which he/she wishes to exert directly
or through the project manager (if appointed).
FIGURE 1
THE RELATIONSHIP BE TWEEN P RIMARY CRITERIA
Time aspects (speed to completion,

programme certainty)
As the emphasis on one

or two of these criteria increases
the other(s) will be affected
Cost Issues Performance Issues

(level of price, certainty of price) (quality, functionality, design)
PART 3, SECTION 1
G 3.1.2.9 RISK AND RESPONSIBILITY
(a) There is a finite amount of risk and responsibility associated with any
project and this should be an influencing factor on the selection of the
procurement strategy. The uncertainties of time, cost and performance are the
three main risks that are present in every project. Risks are usually considered
as uncertain future events, which may have significant effects, e.g. extra cost,
delay or damage to the performance of the finished project. Having set the
priorities for the project’s objectives, the client should consider the effect of
those objectives not being met and the resulting risks to which he/she could be
exposed.
Although the project is subject to a wide variety of risks, it is important to note

that only a few have a major effect. This is a powerful argument for
concentrating attention during cost estimating and management
decision-making on the few largest sources of uncertainty and risk and for
developing strategies for managing out risk and for setting up contracts in
such a way that the allocation of the major risks is clear.
(b) The risks which are considered to have potentially the greatest impact on
construction projects include:
• a project which will not function in accordance with the client’s
needs;
• a project which is of inadequate quality;
• a project which is completed later than required deadlines; and
• a project which costs more than the client’s budget or ability to pay.
In each case, the strategy can be to transfer the whole risk to another through
the medium of contract. This is possible but will attract high price premiums
or will expose the transferee to risks which they may not be able to ‘own’ or
insure and therefore the party transferring the risk will remain exposed.
Risk may alternatively be retained in part by the client, or reduced by adequate

pre-design or pre-price investigation.
(c) As has been already suggested, an adequate brief will reduce risk and
ensure functionality and quality standards. Equally, adequacy of programme
will reduce the risk of overrun and adequacy of cost estimates should ensure a
resultant cost which is within budget. Both construction time and construction
cost estimates depend upon sufficient design development, which itself will
depend upon an adequate brief and parallel investigation of ground conditions
and the particular requirements of statutory controls. In ensuring that the brief
is adequate, and that design is appropriately developed, the client can
successfully reduce some risk in a way that will not result in high price
premiums.
(d) Ideally, risk and responsibility should go together, so that the party
responsible for performing a task is accountable. Each risk should be allocated
PART 3, SECTION 1
to the party with the greatest ability to own the risk and to manage its effects.
If, for example, the client considers it critical that the price for the building is
fixed before construction commences, the risk of meeting that objective could
be passed to contractors, making them contractually responsible for
completion to an agreed design and specification for a lump sum price.
G 3.1.2.10 PASSING ON RISK
(a) Responsibility for risk and the ability to control a project interact. The
more the client chooses to allocate risk to other parties, the less control the
client has over the way in which the project is executed. In the example above,
if the contractor has to meet the agreed specification within the budget and
time, the client has little influence over the way in which these objectives are
met. In practice, risk allocation is determined by the chosen strategy and
allocated by means of contracts between the client and those responsible for
managing, designing or constructing the project. The way in which risk and
responsibility are allocated by different contract strategies is indicated below
and shown in Appendix A.
(b) In all cases where risks are transferred in contractual terms, it is necessary
to ensure the ability of the transferee to own the risk. In the case of design
failure, for example, this is usually passed to the design team including the
architect and engineering consultants. Because of the nature of their
professions they should have insurances of sufficient capacity to meet the
maximum possible cost of correcting the design failure. The client should
ensure that such insurances are in place, adequate and paid for; where a project
manager or consultant adviser has been appointed, this is a role that may be
performed by him/her.
(c) Some design work may be carried out by subcontractors who may or may
not continue to pay design liability insurance premiums and usually will have
limited liability status. Liability for their design work is commonly passed by
warranties but these are less secure.
Equally, where time risks are passed to contractors their attempts to transfer
them to small subcontractors may fail where the capacity to own or accept the
risk is limited.
In situations such as these it may be possible to pass risks contractually but the
lack of security associated with the transfer may result in the risk being borne
by the party attempting to pass it. It is difficult to allocate blame in team
situations. The client should be aware of this weakness in terms of risk
allocation.
(d) While the transfer of risk provides an incentive for the receiving party to
minimise its impact, the client should avoid transferring risks when the
receiving party has no control over them or no capacity to absorb them.
Generally, the more the risk of cost and time slippage is allocated to other
PART 3, SECTION 1
parties, the higher the tendered cost. In pricing the project, tenderers may
over-estimate the size of the risk or add a high safety margin to an accurate
estimate and thereby increase the project’s costs unnecessarily.
G 3.1.2.11 RISK AND PROCUREMENT STRATEGY
(a) Risks are inherent in the data used by the client in the preparation of the
brief, they are inherent in the characteristics of the project, and they are
inherent in the procurement strategy which is selected.
The identification of primary risks and an analysis of the client’s ability to be

a risk taker, or need to be risk averse, should affect procurement strategy.
With this information in mind steps should be taken:
• to inform the client of the extent of the risks involved; and

• to prepare a strategy for managing risk.
Since the latter will have a cost the client should also be advised of the
expense of managing risk.
(b) Appendix A refers to the characteristics of each procurement strategy and

indicates the levels of risk associated with time, cost and performance in each
case on the assumption that the procurement strategy is properly utilised and
in no way abused. (Thus, for example, in relation to the traditional system it
has been assumed that design completion is achieved before measurement and
documentation is carried out.)
These primary risks are summarised (by simple examples in Figure 2) by

procurement method in the categories time, cost and performance.
Where design is by the client’s consultant, design risk is placed by the

appointment agreement. Where design is by the contractor, design risk is
placed by the building contract agreement.
Where lump sum price is fixed by the contract the responsibility rests with the
contractor. Where a contract sets standards of specification, meeting these
standards is the contractor’s responsibility (risk).
Thus by contractual agreement primary risks can be distributed between

client, designer and constructor. It is impossible to dispose of all risk inherent
in construction projects and some will inevitably remain with the client. For
example, the risks listed here tend to be client risks and although they may be
of varying likelihood they should be understood.
PART 3, SECTION 1
FIGURE 2
S U M M A R I S I N G T H E P R I M A RY R I S K S , B Y E X A M P L E
Time Cost Performance
Traditional Fixed but extension Fixed but subject to Designed by client’s

of time possible due change where consultant. Quality
to client and design changes are set by contract
designer initiated made, where inflation documents
changes occurs or where
contractor is alleged
to have grounds for
contractual claims
Design and Build As traditional As traditional Design by contractor

Contractor but with varying
levels of input by
client – quality set in
same way
Separate Time not fixed by Cost not fixed before As traditional

management contract commencement
function
(c) This short list segregates residual risk by procurement method. The extent
to which risk remains with the client can be established by a detailed analysis
of contractual agreements.
• Traditional
– building suitability
– risk of contractor insolvency
– risk of delay by consultant or the causes allowed by contract
• Design and Build
– building suitability
– design functionality and usability
– design insurance if contractor moves away from this type of business,
goes out of business or fails to pay premium
• Management Contracting/Construction Management
– as traditional procurement plus:
risk of cost overrun
risk of time overrun
G 3.1.2.12 SUMMARY (RISK)
Risk can be reduced, retained, transferred or distributed. To transfer risk

successfully the risk taker should have the capacity to take the full extent of the
risk or the risk placer will have failed. Where there are so many relatively small
firms, as in the UK construction industry, this can be problematic because many
contracts place risks with risk takers without sufficient capacity. They may be
limited liability companies or may be unable or unwilling to insure.
PART 3, SECTION 1
Thus, for example, attempting to enforce large scale liquidated damages for
late completion on a small-sized domestic subcontractor may fail for lack of
financial capacity within the small company.
Procurement strategy should therefore reflect the ability to place risk, and
where possible risk should be managed out.
G 3.1.2.13 PROCUREMENT STRATEGY AND THE PROJECT CYCLE
The development of procurement strategy follows the stages in the life of a

project. Initially, a preliminary strategy is determined. It is based on a broad
definition of objectives and is an essential step in establishing the way forward
for the project. It encourages the client to consider strategy early. The
preliminary procurement strategy is usually developed with help from the
client’s adviser and possibly other consultants.
Procurement strategy development has three components:
• analysis – assessing and setting the priorities of the project objectives and
requirements;
• choice – considering possible options, evaluating them and selecting the
most appropriate; and
• implementation – putting the chosen strategy into effect.
During strategy preparation, it may be necessary to seek specialist advice from

other consultants, for example, in relation to expected costs for the project.
The adviser should advise the client on this. Specialist advice should be
sought when developing the strategy for novel or especially difficult projects.
Until construction contracts are let, the client, with help from his adviser, must
systematically ensure that the strategy is on course to meet the project’s
established objectives. This is important because objectives sometimes
change.
G 3.1.2.14 IMPORTANT CONSIDERATIONS
The factors listed below should be considered in analysing project objectives,

requirements and their relative priorities (each is then considered in detail)
and may have an effect on the choice of procurement strategy:
• factors outside the control of the project team;

• client resources;
• project characteristics;
• ability to make changes;
• risk management;
• cost issues;
• timing; and
• quality and performance.
PART 3, SECTION 1
Inevitably, some of these requirements will be in conflict and priorities need

to be decided. The choice of strategy should ensure that control is maintained
over those factors which are of most importance to the client. The way in
which this choice can be made is covered below and in 3.1.4.
(a) Factors outside the control of the project team
Consideration should be given to economic, technological, social, political and

legal factors which influence the client and the project team or are likely to do
so during the lifetime of the project. These may include forecast and actual:
• interest rates;
• inflation;
• changes in output of construction industry affecting tender price levels and
the availability of skilled labour; and
• legislation, particularly legislation affecting the design and construction of
projects. In many cases the client will have responsibility for legal
compliance, particularly in relation to health and safety matters and should
seek the advice of his/her advisers (including the design team) on such
issues as a matter of importance.
(b) Client resources
The client’s knowledge and experience of the company’s organisation and the
environment in which it operates are vital in assessing the appropriate
procurement strategy. Project objectives are influenced by the nature and
culture of the company, external influences and the expectations of
individuals affected by the project. The extent to which the client is prepared
to take a full and active role is a major consideration.
(c) Project characteristics
The size, complexity and location of the project should be carefully

considered and particular attention given to projects with novel elements. For
example, if the building is especially large or complex there may be a bigger
risk of cost or time overrun. Novel projects present special risks. The novelty
potential factor means that estimates of time, cost and performance are all
subject to greater error with an increased probability of one or more of the
project’s objectives failing.
(d) Ability to make changes
It is preferable to identify the total needs of the project during the early stages
but this is not always possible. Rapidly changing technology often means late
changes. Changes in the scope of the project very often result in increased
costs, especially if they arise during construction. Changes introduced after the
design is well advanced or construction has commenced often have a
disproportionate effect on the project, in terms of cost, delay and disruption,
compared with the change itself. The design process goes through a progressive
PART 3, SECTION 1
series of ‘freezes’ as it develops but the client should set a final design freeze
date after which no significant changes to requirements or design are allowed.
Some procurement strategies such as construction management are better than

others at handling the introduction of changes later in the project without
having to pay some form of specific premium.
(e) Cost issues
Price certainty – influences the project timing and the procurement strategy
which should be used. Generally, design should be complete if price certainty
is required before construction commences.
Cost of changes – if cost certainty is to be maintained during the course of

construction changes should be avoided. Changes often have cost and time
implications on the project well in excess of the change itself. It is therefore
important for the client to fix a date after which no significant changes should
be introduced.
(f) Timing
The programme of the project is influenced by many of the above factors. A

particularly large and/or complex project is likely to require more time for
design, specification and construction than would be required for a simple
small building.
It is of vital importance to allow for adequate design time in terms of the total
project. If design is required to be complete before construction commences
(where perhaps cost certainty is required) this is particularly the case.
In the process of the appointment of the design team assurances should be

obtained about resource levels and the ability to meet key dates or
programmes. It is not usual to impose contractual dates upon designers,
although their progress is probably the key to the overall completion date.
Decisions to progress with a project may be influenced by the gaining of

planning approval, by the successful operation of compulsory purchase order,
by land purchase or by some other non-specific but critical factor (such as
obtaining funding approval). Depending on whether these factors occur earlier
or later, they may be an influence upon the planned or desired time available
for design.
Procurement strategies such as management contracting, construction

management, and design and build provide an overlap between the design and
construction stages, so construction can start earlier than sequential strategies
and offer the potential for earlier completion.
It may be necessary to review planned procurement strategy in the light of

design progress at the point where restraints to constructions are removed,
bearing in mind the stage of design and the consequence in terms of risk.
PART 3, SECTION 1
F IGURE 3
CON STRUCT ION T IME S
The following times are based upon historical data and are only a guide. Projects of
relatively simple design may be constructed more quickly and more complex
designs may take longer.
New purpose built Retail facilities New speculative Retail facilities

cost (£millions) weeks cost (£millions) weeks
30 90 30 100
25 80 25 95
20 75 20 90
15 70 15 85
10 65 10 80
5 55 5 70
New purpose built Office facilities New speculative Office facilities

cost (£millions) weeks cost (£millions) weeks
30 120 30 135
25 110 25 130
20 100 20 120
15 90 15 110
10 85 10 100
5 70 5 85
(g) Construction times
Total construction time is a consequence of design. Insufficient time

allowance can result in apparent delay when in fact the targets were
unachievable. Design is a time-consuming process and often will take as long
as construction itself (sometimes longer). More complex structures will take
longer given the same cost or size, and may require more resources. Although
it is possible to work on site for extensive hours or to increase resources, it is
not always possible to achieve directly resulting productivity. The law of
diminishing returns will have an influence because of the limited space and
the nature of traditional construction methods (such as concreting and
bricklaying).
Indications of construction times are shown in Figure 3. These are only a

general guide and should not be relied on without careful review. The data on
which these are based was available only for commercial and industrial
projects. This data was used to confirm, enhance and update that published by
NEDO (1988), Faster Building for Commerce and the construction costs have
been updated by index to the year 2002. If possible (as in the case of
PART 3, SECTION 1
management contracting and construction management) those who will be

involved in the construction process should also be involved in the planning
process, as they are more likely to be aware of the logistical consequences of
particular designs. Other projects are likely, in most cases, to be more
complex and may therefore take longer.
(h) Design times
There is no reliable data available to indicate the time to be allowed for design.
As a general rule it will take between two thirds of construction time to one
and a half times construction time to design a building. The impact that this
will have on the overall programme will depend upon the choice of
procurement strategy and whether any overlap of design and construction is
allowed.
(i) Performance
The required performance of the project measured both in terms of its

response to the needs of the client and the quality of individual elements must
be clearly identified. If performance is over-specified, a premium will be paid
for exceeding actual requirements, thereby affecting the cost objective.
Over-specification will also lead to time overruns. Conversely, failure to
recognise the true performance objective leads to an unsatisfactory product.
If quality and performance are particularly important the client will probably
want to keep direct control over the development of the design. This can be
achieved by employing the design team directly.
G 3.1.2.15 PROCUREMENT OPTIONS
When all the factors influencing the project have been identified and the
project requirements analysed, the final strategy for the project must be
developed.
It is likely that there will be more than one way to achieve the requirements of
the project. It is important to consider carefully each option, as each will
address the various influencing factors to a different extent. In developing
strategies, a potential danger is that only the most obvious course of action
may be considered – this is not necessarily the best in the longer term.
G 3.1.2.16 Common strategies differ from each other in relation to:
• the financial risk that the client is exposed to;

• the degree of control that the client has over the design and construction
processes;
• the information required at the time construction contracts are let;
• the extent of involvement of the contractor in the design stage when the
contractor may be able to influence the ‘buildability’ of the project;
PART 3, SECTION 1
• the organisational arrangements which distribute responsibility and

accountability; and
• the sequential nature of the process.
G 3.1.2.17 In Appendix A each of the most commonly used procurement strategies is

described and is also illustrated by diagram. Each diagram has a consistent
format to indicate:
• the contractual relationships (showing administrative responsibility in

most cases);
• the advantages and disadvantages;
• the sequential nature of the process; and
• the dominant risks categorised broadly (as high, medium or low).
3.1.3 Selection of Most Appropriate Procurement Strategy

G 3.1.3.1 The ultimate responsibility for selection of appropriate procurement strategy
will rest with the client, based upon advice from the project team and principal
adviser.
The selected strategy should be:
• suitable in the light of the client’s needs, the project type and the client’s
exposure to risk; and
• feasible in the light of the client’s expertise, internal management
structure, resource and funding facility.
Professional judgement is a reliable way of selecting an appropriate

procurement strategy although some procurement strategies can be
inappropriately adopted because of individual preference.
A procurement selection checklist is provided here to assist the client and

advisers in the identification of an appropriate strategy.
G 3.1.3.2 PROCUREMENT SELECTION CHECKLIST
This process has been designed to establish a range of information about client
needs and about the particular project being considered, and to develop this
information in parallel with the characteristics of procurement strategies and
associated risk.
It is intended to inform judgement, not to replace judgement.
The relative importance of time, cost and performance (design) forms a key
criterion in the selection mechanism as does inherent risk and its
apportionment.
PART 3, SECTION 1
G 3.1.3.3 METHOD
Checklists 1, 2 and 3 should be carefully completed in consultation with the

client.
The resultant information should then be transferred to Checklist 4 which will

enable the information to be analysed and evaluated. The analysis can then be
compared with the characteristics of each procurement method, and the
associated risk so that an informed decision can finally be made.
CHECKLIST 1: TIME
The following should be considered:
1.1 Is completion needed by a specific date?

1.2 Is completion needed in the shortest possible time?
1.3 Is the client prepared to pay more for earlier completion?
2. Does the answer to question 1.1 suggest a faster than ‘normal’ total project
time in the judgement of the adviser?
3. How long is it in months from the date of completion of this protocol until
the desired ‘move in’ date?
4. Define the reason for the identified completion or ‘move in’ date:
4.1 end of lease
4.2 sale of premises
4.3 new business opportunities
4.4 unsuitability of present premises
4.5 company restructuring
4.6 other.
5.1 Is the need for completion by a specific date or within a specific time more
important than certainty of construction cost before work starts?
5.2 Is the need for completion by a specific date or within a specific time more
important than spending an extended time on design?
6. What is the approximate value, in sterling, to the client of the building or

facility in terms of contribution, rental or cost savings per month?
7. If the building is completed later than the specified or desired time will the
client:
7.1 stay in existing premises?
7.2 find temporary accommodation?
7.3 close down?
7.4 don’t know.
PART 3, SECTION 1
Upon the completion of this part, the following information should have been
established and should be transferred to Checklist 4:
1(a) specified completion time;

1(b) reason for completion time;
1(c) whether required completion time is relatively fast;
1(d) whether time is seen as the predominant client need;
1(e) the potential financial implication of earlier or later completion; and
1(f) what action the client may take if the dates are not achieved.
CHECKLIST 2: DESIGN/PERFORMANCE
1. Has the client clear ideas about building functionality and its desired
design?
2. Does the site (if selected) pose any particular problems for the designer in
respect of:
2.1 shape or topography?
2.2 access?
2.3 storage space?
3. Does the building type suggest relative design complexity?
4. Does the building type suggest emphasis upon functionality?
5. Does the building type suggest highly complex mechanical, electrical or

engineering installations?
6. Is it anticipated that extensive changes to design may be required during the

construction phase?
7. Does the client wish to particularly emphasise low running costs?
8. Does the client wish to particularly emphasise low maintenance costs?
9. Does the client wish to particularly emphasise product quality at a higher

potential cost?
Upon the completion of this part of the process, the following information
should have been established and should be transferred to Checklist 4:
2(a) whether the client has clear ideas about his/her needs;
2(b) whether the site poses complex design problems;
2(c) whether the building design is complex;
2(d) whether functionality is particularly important; and
2(e) whether the client has a long-term view about the cost of the building.
PART 3, SECTION 1
CHECKLIST 3: COST
1. What is the client’s maximum budget?
2. Can the budget be allocated as below?

2.1 land purchase and fees
2.2 construction, including fees
2.3 fittings and plant
2.4 contingencies
2.5 other (define).
3. Will the client need to have a fixed contract price for the construction
element of his budget or will a reasonably accurate budget be adequate?
Upon the completion of this part of the process, the following information
should have been established and should be transferred to Checklist 4:
3(a) total maximum spending capacity;

3(b) total construction spending capacity; and
3(c) need for pre-construction cost certainty.
CHECKLIST 4: ANALYSIS
• As an overview, is the project feasible in terms of time and viable in terms

of cost on the basis of the information in 1a, 2a, 2b, 2c, 3a, 3b, 3c?
If yes, proceed.
If no, advise client and seek other solutions.
• Is the reason given as to why it should be completed by the specified date
vital to the project’s success in terms of client needs, or can slippage be
coped with if cost is considered?
See 1b, 1d, 2a, 2b, 2c, 3c.
If vital, the project has to be carefully planned from a reasonably
advanced design. Design and construction should be planned. Where
design is completed, the completion date can be contractually fixed.
Where design cannot be completed, fast-track systems can achieve
relative speed by overlapping design and construction.
If relative speed is required can the client accept less cost certainty?
See 1c, 3c.
If yes, this may mean that fast-track approaches may be suitable.
If no, a method of achieving cost certainty relatively quickly may be
through negotiation.
• Does the information provided indicate that the project is complex in
terms of design or in terms of site-related problems?
See 2b, 2c, 2d.
If so, adequate time should be allowed for a design process to occur
which will provide the client with an acceptable design solution.
PART 3, SECTION 1
Some fast-track solutions will enable the design process to be extended

into the construction phase where pre-construction time is not
available. This will reduce cost certainty.
• Is the need to ensure that the project can be built within a budget a priority?
See 3c.
In this event, design should be complete before construction is
commenced or a sufficiently large contingency should be allowed.
The latter will not give cost certainty and may result in a less balanced
project in financial terms.
G 3.1.3.4 CHECKLIST SUMMARY
Having established whether the project is both feasible and viable, the
importance of time, cost and design has now been reviewed.
There is always an interrelationship between these three primary criteria and

procurement systems selected should reflect this.
Projects can probably be broadly categorised into those which will be

design-led and those which will be production-led. Design-led projects
usually reflect the characteristics of procurement systems where the client
appoints his/her own design team; whereas production-led projects enable the
constructor to take on some or all of the design function.
Design-led projects have the greater capacity for cost and time overrun,
whereas the potential capacity for design shortcomings may rest with
production-led systems.
System selection should consider whether the project is design or

production-led but should also consider the client’s need to manage and/or
distribute risk.
3.1.4 Implementation
G 3.1.4.1 Having selected a procurement strategy for a project, the strategy should be
successfully implemented. The client should implement the strategy but may
do this with the advice of consultants or a project manager. In many cases they
will carry out most or all of the necessary functions in achieving
implementation and the client’s role will be to formally approve their actions.
Notwithstanding the role of consultants or a project manager, the client should

ensure that he/she puts in place the necessary resources, organisational
structure, contractual arrangements, systems and controls necessary for a
successful project outcome.
PART 3, SECTION 1
G 3.1.4.2 IMPLEMENTATION POLICY
Implementation of procurement strategy is a key role for the team and

warrants sufficient thought and review. The policy developed to ensure
appropriate implementation should be clearly communicated to all the key
players. By ensuring that implementation policy is maintained, the client has
a greater chance of obtaining the right project at the right time at the right cost
with the minimum of conflict.
G 3.1.4.3 FINANCIAL RESOURCES
(a) In this section, the funding function has been assumed to be a matter for the
client. It is a vital function and by the time the procurement strategy is set,
sufficient funding should be available at appropriate times in the
pre-construction and construction process.
(b) Funding requirements are usually a consequence of contractual

agreements, whether they be agreements to purchase land, to design or to
construct. It is possible to take account of each contractual agreement and to
plan expenditure in the form of a cash flow. Useful advice in this context can
be provided by the project manager or the project cost consultant. Both of
these team members should be in place at an appropriate time to ensure that
funding arrangements are appropriate.
G 3.1.4.4 HUMAN RESOURCES
In terms of client organisation, the client should be prepared to allocate

appropriate in-house personnel to the project or should be prepared to appoint
consultants for this purpose. In most cases, consultants are appointed to design
and cost a project, but a client will have his/her own staff member who will
provide liaison and a focus for decisions. Where this is not possible the
appointment of a project manager is desirable. Only one individual should
have the authority to instruct those carrying out the design or construction on
behalf of the client.
G 3.1.4.5 PHYSICAL RESOURCES
(a) Where physical resources such as land, plant and machinery have to be
provided by the client, it is self-evident that the client should ensure their
availability in a suitable form at the right time. Where alternative
accommodation is required, or where specific arrangements for decanting are
necessary, this is a matter for the client and/or the client’s organisation
although these are matters which can be handled by a project manager.
(b) Design and construction resources must also be appropriately selected and
in place at the right time.
(c) The criteria for the selection of the design team are outlined below and are
based upon the factors of capability, competence, staff and cost, with value for
money, rather than cost being the major influence in selection.
PART 3, SECTION 1
(d) The criteria for the selection of contractors are referred to below and are
broadly the same, but this tends to be a much more complex process and the
criteria are dependent upon the procurement strategy selected.
The basis for selection of constructors can be price competition, based upon a
fixed design and specification or can, in the case of design and build options,
be based upon competition for design solutions too. Selection can also be by
negotiation with one or two constructors, or can be based upon a two-stage
process. Suitable documentation for the selection process must be prepared
and the client should seek the advice of consultants or the project manager
who may also be required to manage the process.
(e) A number of Codes of Procedure for the selection process are available and
are referred to in sections 3.1.4.8 and 3.1.4.9.
G 3.1.4.6 ORGANISATIONAL STRUCTURE
(a) The client has a dual management role, part of which is to manage the
client input; to co-ordinate functional and administrative needs; to resolve
conflicts; as well as to act as the formal point of contact for the project.
(b) This will require the creation of an organisational structure for the life of
the project to enable communication to occur and to facilitate effective
decision-making.
(c) The organisational structure created may be headed by a key member of

the client organisation or may be headed by an imported project manager.
Whichever choice is made, the designated member must have sole authority
to communicate decisions to the project design and/or construction team.
Where more than one individual is empowered to instruct, or to require
changes, extreme confusion can take place.
(d) Building users, specialists, facilities managers, maintenance staff, finance

and accounts personnel, legal advisers and security personnel can all have
input to the project through the created organisational structure by invitation,
or right, and, as appropriate, can meet with designers or constructors to ensure
effective communication; but decisions are reserved to the in-house executive
or the project manager.
G 3.1.4.7 APPOINTMENT OF A PROJECT MANAGER (WHERE APPROPRIATE)
(a) Due to the complexity of modern building and the potentially large number
of parties involved in the process the client may wish to appoint a single
person to draw the process together and manage it to ensure that the overall
performance, time and cost requirements are achieved. The project manager
may be a member of the client organisation who is given sole, or predominant,
responsibility for the project. Project management practices also exist to
enable appointments to be made on a consultancy basis. In this case, selection
PART 3, SECTION 1
should be based upon resources, reputation and price, and duties should be
clearly identified.
(b) It should be emphasised that the role of the project manager should be to
act as part of the client organisation.
(c) The client’s role upon the appointment of a project manager should
include:
• explaining the project objectives and their priorities, defining the
project and outlining parameters associated with time, cost,
performance and risk;
• defining the criteria for control and management of the project;
• managing the project manager’s performance of delegated
responsibilities;
• monitoring the implementation by the project manager of control and
management systems;
• ensuring that the project manager receives decisions on time;
• assisting the project manager in the resolution of problems;
• receiving and reviewing detailed reports on the project from the project
manager;
• establishing with the project manager a common approach to major
issues which arise; and
• maintaining with the project manager at all times an overview of the
project status in relation to the established objectives.
(d) The client’s relationship with a project manager will be crucial to the
success of the project and will require careful development and nurturing
within the following guidelines:
• the client, though taking the project manager’s advice should lead, not
follow;
• no matter how much responsibility is delegated to the project manager,
the client will retain ultimate authority and therefore must have
adequate knowledge and information about the project to be able to
exercise the authority properly;
• the client should agree with the project manager the precise extent of
any delegated authority together with those decisions reserved for the
client;
• where a project manager has been appointed the client should not
formally communicate directly with consultants and contractors
employed on the project – such communications will always be routed
through the project manager, although the contracts will be direct with
the client;
• no matter what may be said in private, the client should publicly
support the project manager and avoid any actions which could
undermine that manager’s authority over the consultants and
contractors.
PART 3, SECTION 1
G 3.1.4.8 APPOINTMENT OF CONSULTANTS
(a) The process of selecting and appointing the design team and the cost
consultant is carried out by the client but he/she may seek the advice of his/her
adviser. The terms and conditions of these appointments are governed by the
procurement strategy adopted for the project. (The client is also required
under the Construction (Design and Management) Regulations 1994 to
appoint a competent planning supervisor to ensure that the design team have
met their responsibilities under these regulations and to advise the client and
the constructors how they can comply.)
(b) The following alternatives exist in selecting the design team:

• single appointment – either of a multi-discipline firm which can itself
provide the full range of architectural and engineering design services
required, or of a lead consultant, normally the architect on building
projects, who will subcontract design of other disciplines to
independent professional firms and be responsible for their work and its
co-ordination; or
• separate appointments – for each of the design disciplines required,
one firm being appointed design team leader with the responsibility for
co-ordinating the work carried out by the others.
The former has the benefit of administrative simplicity and of single source
responsibility for design. The latter offers the chance of selecting the best firm
in each discipline but makes communication more difficult. The final
selection will depend on the particular features of the project.
(c) The selection of the design team and the cost consultant (and other
consultants as appropriate) will require the client to make a balanced
judgement on the following factors:
• capability – the experience of the firm in projects of similar size and
function and the availability within the firm of sufficient uncommitted
resources for it to meet the demands of the project; the demands of the
project programme may be particularly important;
• competence – the performance of the firm on past projects, to be
ascertained by detailed, confidential references from past clients;
efficient performance by design consultants cannot be taken for
granted;
• staff – the personal capability and experience of the key staff whom the
firm proposes to employ on the project; and
• the cost – quoted by the firm, unless large differences exist between
offers from competing firms this should not be critical.
(d) Value for money, not lowest price, should be the aim in the selection of
design team members.
PART 3, SECTION 1
(e) Guidelines for the value assessment of competitive tenders in the

procurement of professional services are available1.
(f) Fees payable to professional consultants may be expressed in one of the

following ways:
• as a percentage of the construction cost of the project;
• as a lump sum;
• on a time charge basis; or
• a permutation of all three.
(g) Percentage fees based on the out-turn construction cost are not generally
recommended as they increase when cost overruns occur.
(h) Lump sum fees may be the most satisfactory form of remuneration
provided only that the scope, value and timescale of the project can be
established with reasonable accuracy before the appointments are made
and that the services to be provided by the consultants can be accurately
defined. Where lump sum fees are to be paid, the client will need to
establish systems for monitoring the consultants’ performance to ensure
that they provide the full, specified service and do not skimp their services
to save money.
(i) Where time charge fees are to be paid, the final amount of fees payable is
not fixed and there is a substantial risk that this amount may exceed initial
estimates.
G 3.1.4.9 APPOINTMENT OF CONSTRUCTORS
(a) The client is responsible under the Construction (Design and

Management) Regulations 1994 to be reasonably satisfied that the
constructors appointed are competent and have adequate resources.
(b) The timing of the need to appoint constructors (whether contractors or

trade contractors) will be dependent upon the procurement strategy which is
selected, but the client will have a formal role in this process. The client’s role
will include selecting those constructors with whom he will negotiate or who
will be invited to tender. In the case of the latter, it will be the client who
formally selects the constructor(s) to carry out the work and then contracts
with this company.
(c) Assistance with the selection, documentation for tender and advice in
relation to contract issues can be obtained by the client from professional
advisers and particularly the principal adviser. There are a number of codes of
procedure to assist in this process, of particular assistance is the Code of
Practice for the Selection of Main Contractors2 which has been approved by
the National Audit Office. In broad terms, the factors which affect the
1
Construction Industry Board, Selecting Consultants for the Team: balancing quality and price, Thomas Telford
Publishing, London, 1996.
2 Construction Industry Board, Code of Practice for the Selection of Main Contractors, Thomas Telford Publishing,
London, 1997.
PART 3, SECTION 1
selection of design and cost consultants shown above (capability, competence,

staffing and cost) will affect the choice of constructors, but the documents on
which selection is made (particularly for cost) can be extensive and very
complex.
(d) European Union legislation has an effect on the procurement of public

works and the supply of services in the public sector. Usually this relates to
projects over about ¤5 million and requires appropriate tender advertising and
selection. Clients from the public sector must be aware of the existence of and
the procedures demanded by such regulations.
(e) As with the selection of design and cost consultants, value for money,
rather than lowest price should be the aim in the selection of constructors.
Where clients regularly build, there may be a case for considering a special
arrangement with a construction firm as indicated in 3.1.1.15.
G 3.1.4.10 CONTRACTUAL ARRANGEMENTS
(a) Having selected an appropriate procurement strategy and methods of

consultant and constructor selection, this strategy should be implemented by a
range of contractual arrangements.
Many of these arrangements will be based upon standard forms of agreement

in common use in the construction industry. The distribution of major project
risks results from the wording of the contract selected. Most clients will need
specialist advice on contract selection. This is outside the remit of this
handbook.
G 3.1.4.11 SYSTEMS AND CONTROLS
(a) Once resources, organisational and contractual arrangements are in place,

the client should see that systems are put in place to ensure that the
procurement process can be implemented in fact.
(b) These systems should include:

• financial systems to ensure that payments are made in accordance with
contract agreements;
• decision systems to ensure that decisions made are communicated at
the appropriate time and with appropriate authority;
• design change systems to implement and monitor change as it becomes
necessary; and
• cost and time monitoring systems to inform the client of the current
position at any point in time.
This may mean delegating elements of the process to the project manager (if
appointed) or ensuring that existing company systems are specifically
adapted.
PART 3, SECTION 1
(c) Controls are also important to ensure that cost is controlled within budget,
pace is controlled within programme, quality is controlled within standards
set, and systems are properly employed.
(d) Cost control can be achieved by ensuring appropriate pre-construction cost

planning and an adequate system of regular cost reporting. These services can
be provided by the cost consultant.
(e) Pace can be monitored against a programme or time plan and can be
controlled by the imposition of contract completion dates. Programming can
be provided by a project manager or developed with the advice of the principal
adviser.
(f) Quality can be controlled through the provision of a sound contractual

specification. It may be appropriate to appoint a clerk of works to inspect the
works during progress and to ensure that work is satisfactory and matches the
specification.
(g) Controlling the client systems to ensure that they are appropriately applied
and not abused is a matter for the client’s management team – perhaps this is
the key management input from the client.
G 3.1.4.12 DESIGN OVERVIEW
(a) While responsibility for achieving a successful design solution to the

client’s requirements lies chiefly with the designer, the responsibility rests
with the client both for ensuring that his/her needs are met and for the impact
of such development on the local environment. The blame for a poor building
is likely to be ascribed to the client as well as to the designer. Equally, a
well-designed building reflects credit on those who commissioned it as well as
on the designers who conceived it.
(b) Design is an important factor in ensuring good working conditions for staff
and convenience for members of the public who need to visit the building. A
well-designed building is a good investment. Good design can contribute to
economy and efficiency – by efficient layout and economical use of space, by
energy efficiency (in heating, insulation, mechanical services, etc.) by low
maintenance costs, and by ensuring flexibility to meet changing requirements.
(c) No one person has all the design skills for any but the very simplest project
and therefore the collaboration of many designers will be necessary. This is
particularly the case in specialist buildings or buildings which have
sophisticated mechanical and/or electrical installations.
(d) The formulation of an accurate design brief and the development of design
in strict accordance with that brief are key processes for the client (or the
project manager) to oversee. In practical terms, the client will require:
PART 3, SECTION 1
• close collaboration between users and the design team in the

development of the design;
• formal checking that the developed design meets, but does not exceed,
the requirements of the design brief; and
• formal presentation of developed designs to the users and formal
sign-off by the client.
(e) It will also prove valuable for the client to indicate clearly his/her
intentions in respect of the programme and for the design team to respond in
terms of their strategy for meeting this programme. Methods for updating
progress should also be sought by the client.
(f) As the majority of users, and indeed the client, are likely to find the reading
and interpretation of design drawings a difficult task, it is important to ensure
that the design team present their proposals in a form that can be readily
understood. (Computer aided design [CAD] may enable three dimensional
presentation.) The setting of the design and not just the design in isolation
should be taken into account. The client should feel able to say ‘no’ and ‘try
again’ and to expect alternatives within the fee.
G 3.1.4.13 COST CONTROL OVERVIEW

(It is recommended that this be read in conjunction with Part 1, Section 1.)
(a) It is essential that the client understands the difference between:

• estimating – giving an informed opinion at a particular time of what
the final cost of the project is likely to be; and
• cost control – managing the consequences of the design and
construction processes so as to achieve value for money and ensure that
the final cost does not exceed the budget.
Estimates cannot be expected to be proved accurate unless they are based

upon reliable data and cost control is exercised.
(b) The techniques used to produce estimates vary according to the type and
level of data available when they are prepared. The general level of estimating
accuracy improves as the design of a project develops. Notwithstanding this
progressive improvement in accuracy, provided that cost control is being
exercised, the general level of accuracy of early estimates can be stated with
sufficient precision for them to be valid parameters for decision making and
for the management of the project.
(c) For estimates to be effective, the client should require that all estimates are
supported by:
• a risk analysis – an assessment of the potential risks, their probability
and the associated time and cost consequences if they should occur; and
• a sensitivity analysis – a statement of the comparative effects on the
total estimate of changes to principal data and assumptions on which
the estimate is based.
PART 3, SECTION 1
(d) The amount included in estimates to cover the uncertain cost of risks based
on the analyses described above is known as the contingency. It is important
that contingencies are sufficient to cover risks and are not eroded to facilitate
any lack of cost control.
(e) A primary concern may be the cost of running and maintaining the
building. The term ‘cost-in-use’ is used to describe how these costs can be
estimated, enabling the client to take these matters into account when
considering total project costs and building design. In some cases higher
initial costs will result in lower running or maintenance costs during the life of
the building.
(f) The earlier cost control procedures are instituted, the more effective they
will be. By way of simplistic illustration:
• cost varies with (but not in direct proportion to) size: once the size of a
building is fixed, so is the general level of cost;
• the selection of the most economical design for basic elements such as
foundations, structural frame, external cladding and roofing, is of far
greater cost significance than the types of finishings; and
• the overall cost of mechanical and electrical systems and the
effectiveness of the cost control procedures which can be applied to
them is largely governed by early decisions as to the type of system
selected.
(g) The methods used for cost control differ radically between the
pre-construction and construction stages of a project. Cost control during the
former depends partly on formulating an appropriate procurement strategy but
more on controlling the design process within that strategy; during the latter it
is a function of effective management and avoidance of change after
commitment.
(h) Pre-construction cost control, in simple terms, comprises:

• preparing a cost plan – an allocation of the control budget into cost
centres which match readily identifiable elements of expenditure, with
allowances for contingencies, reserves for changes in market prices and
the like; and
• cost checking each element as it is designed against its allowance in the
cost plan.
If the cost of an element as designed exceeds its allowance in the cost plan, the
excess can only be corrected by:
• redesigning the element to reduce its cost; or
• transferring money into that element from contingencies or from
another element yet to be designed.
PART 3, SECTION 1
If neither is done, the control budget will be exceeded.
(i) Successful cost control during the construction stage depends on:
• ensuring that all design work is completed and fully co-ordinated
before any commitment to construct is made (this applies in a
progressive way when design and construction overlap);
• administering the contract efficiently and promptly in strict accordance
with its terms and conditions; and
• minimising changes to the design, for any reason, after construction has
started.
(j) Regular cost reports can be produced throughout the construction stage
from which potential overspending can be identified before it occurs with the
intent that corrective action should be possible. The client should, however,
recognise that such corrective action is not always beneficial, since:
• cost savings can be made only by reductions in standards or by
omissions of part of the work remaining to be finalised, that is largely
in the visible finishings and fittings, with the resultant possibility that
the requirements of the brief will not be met; and
• late cost savings are inefficient as any amount saved will be reduced or
may be negated by the costs of disruption inherent in making the
changes needed to generate the savings.
(k) All estimates and cost control procedures should take account of inflation,
i.e. the increase in construction cost from the date when the estimate is
prepared to the date when the work will be carried out. It is essential for
effective cost control that:
• allowances should be made for inflation in all estimates and that the
assumptions on which such allowances were calculated be stated;
• these allowances for inflation should be clearly identified within the
estimates and not be allowed to be used to correct other overspending;
• the assumptions on which inflation allowances are calculated be
reviewed as each new estimate is prepared and the allowances
corrected in accordance with such reviews; and
• a clear policy and method for drawing down inflation reserves be
established and observed.
(l) The client should distinguish between inflation and the effect on
construction prices of market conditions at the time of tender. In simple terms,
contractors adjust their tender prices by reducing or increasing their target
profit margins in accordance with their need to obtain new work. It is unwise
to base early estimates on an assumption of favourable market conditions at
the time of tender as the construction industry is subject to wide,
comparatively swift, changes in workload in accordance with economic
conditions.
(m) Things will go wrong on the project. The unexpected will happen. Such
unforeseen happenings are covered in the cost control system by the
PART 3, SECTION 1
contingency. The client should develop a policy for management of

contingency funds to ensure that, at all times in the project, the remaining
contingencies match the remaining risks. The client may also establish and
control a client reserve, not disclosed to the consultants or the contractors, to
cover late changes in user requirements and unforeseeable third party
events.
G 3.1.4.14 TIME CONTROL OVERVIEW
(a) The overall programme of activities which will constitute the project
should be developed at a very early stage in the procurement cycle. This
programme will form the time framework within which the designers and the
constructors should complete their activities, and within which other key
stages, such as land purchase, funding and planning permission should be
completed.
(b) The programme of activities should be feasible and realistic. Insufficient

design time will have an effect upon client risk as will insufficient time
allowed for construction.
(c) The client should be aware of those tasks which are vital to completion on
time and those tasks where some flexibility may be available. Time for the
approval processes should be included as specific activities in the time plan
for the project. These are invariably vital as the need to obtain approval is
likely to be a prerequisite to further work on the project proceeding.
(d) The process of time control is in many ways analogous to that of cost
control. Thus a time control system can embrace:
• time budget – the overall project duration as fixed either by specific
constraints or by the selected procurement strategy; the period which,
once fixed, becomes a key parameter for management of the project;
• time plan – the division of total time into inter-linked time allowances
for readily identifiable activities with definable start and finish points;
the overall project programme; and
• time checking – monitoring closely actual time spent on each activity
against the allowance in the time plan; reporting divergence as soon as
it is observed.
(e) If the time taken for an activity exceeds its time allowance there are
essentially only two forms of corrective action available:
• the re-sequencing of later activities, which may involve abandoning
low priority restraints and/or phased transitions from earlier activities
to later activities logically following them; or
• shortening the time allowance for future activities by increasing the
resources to be made available for them.
PART 3, SECTION 1
If neither is done, the overall time budget will be exceeded and the project will
finish late.
(f) The client should recognise that time control is as important during the
design stages of the project as the construction stage. Designers should work
to a series of deadlines at which different elements of the design should be
agreed (i.e. frozen) if costs and the overall programme are to be kept under
control.
(g) The client should consider developing (with the help of the project
manager if appointed) a time contingency (reserve), with strict procedures for
allocating the reserve to specific events. This concept is essential on projects
which are subject to external time constraints, for example, where a building
has to be available for occupation before the lease on another building expires.
(h) The client should take account at all times of fundamental relationships
between time, quality and cost:
• any extension of the overall timescale for a project always generates
additional costs to either constructor or client; every project contains
time-related costs whether these are openly stated or not. Who carries
such additional costs depends on the detailed contractual arrangements
between the parties; it is likely that some of them will be borne by the
client; and
• making up lost time by re-sequencing later activities may be achievable
but often only at the risk of compromising quality or cost control.
G 3.1.4.15 WHOLE-LIFE COSTS
(a) In addition to considering project cost purely in terms of initial capital

costs the client may wish to consider costs over the projected life of the
building. Such considerations may review higher initial costs against lower
running costs or longer life to replacement or maintenance. This may be of
particular impact where shorter-life inherent assets, such as mechanical or
electrical equipment, or where planned maintenance or energy consumption,
are being considered.
(b) The techniques associated with whole-life costing are often complex and
predictive. The project manager or project cost consultant will be able to
advise the client of the availability of their application in each case.
G 3.1.4.16 VALUE MANAGEMENT
(a) Value management is usually reserved for relatively complex projects

where value for money is important and concerned with defining what ‘value’
means to the client in meeting a particular need. In general, any project seeks
to satisfy the differing requirements of several parties. Value management
provides a structured framework for the examination and discussion of these
requirements to reach a consensus before the project brief is finalised. It is
PART 3, SECTION 1
used to ensure that the need for and scope of any construction is thoroughly
analysed before any further commitment to proceed is made. The aim is to
establish a clear statement of a project’s objectives matched to their relative
values.
(b) Value management is usually carried out at the concept and feasibility
stages of a project. The aim is to ensure that:
• a project is commissioned in response to a careful analysis of balance
of needs;
• a wide range of options and alternatives to meet that need is considered;
and
• the project objectives are made explicit and are commonly understood
by all parties.
(c) The client may wish to appoint a professional adviser experienced in these
techniques and who will provide support in writing the objectives and
subsequent brief.
G 3.1.4.17 VALUE ENGINEERING
(a) This occurs later in the development of the project and is concerned with
how value is achieved rather than what the relative values are as defined in the
project brief and objectives.
(b) Value engineering studies are pre-planned, formal reviews of the design
philosophy and the detailed solutions at one or more stages of the design
development. They are sometimes carried out by firms or individuals not
connected with or employed on the project and are short exercises intended to
review the detailed design solutions against the objectives and to establish
whether they can be achieved in a more cost effective manner.
G 3.1.4.18 QUALITY CONTROL OVERVIEW
(a) The final quality of the project is governed, progressively, by:

• the project brief – a clear statement of the standards of quality
required; great care is needed to ensure that this standard is
unambiguous, such phrases as ‘the highest quality attainable within the
control budget’ should be avoided;
• the original design – the adequacy of the components selected for the
building; the interface between related components and systems; the
integration of mechanical and electrical systems into the overall design;
the completeness of design before construction starts;
• specification – the conversion of the quality standard demanded by the
project brief into precise requirements for both the supply and the
installation of materials, components and systems; the setting out of
criteria against which the standard of the finished work will be judged,
e.g. by reference to standards, codes of practice or the like;
PART 3, SECTION 1
• quality control – setting up control mechanisms to apply to the

execution of the work on site; the detailed, on-going supervision by the
contractor; the programmes for testing; the procedures for rectifying
any defective work; and
• inspection – the independent inspection and verification of the
contractor’s work by the design team; procedures for witnessing tests,
for commissioning plant and systems, for pre-completion inspection for
defects lists and defect rectification and for final hand over.
(b) The client may choose to appoint a clerk of works whose function is to act
as an inspector of work done to ensure quality, but who should recognise that
inspection and verification is the last line of defence. The key to quality
control on site is to specify clearly, and to monitor closely, the quality control
activities carried out by the contractor while work is being done.
(c) Many construction companies and firms of consultants within the building
industry have adopted, or are in the process of adopting, formal quality
assurance systems for their own work or services in accordance with ISO 9000
or equivalent standard.
G 3.1.4.19 CHANGE CONTROL OVERVIEW
(a) Clients should aim to make no changes once a particular design feature has
been decided because these are one of the more significant causes of cost and
time overruns in construction projects. The avoidance of change should be a
prime objective of the project strategy. If changes are unavoidable, they
should be dealt with as described in the paragraphs below.
(b) Client changes (as distinct from design development) are changes which
are made either by:
• the design team, with the approval of the client, to a design feature
which, it has been decided, should be frozen, or ‘improved’, or altered
to overcome design errors and inconsistencies; or
• the client after the design brief has been agreed. The most significant of
these are changes to the scope of the works.
(c) Client changes can be relatively minor, such as adding a few extra power
points, or can have major cost implications, such as the addition of an extra
storey.
(d) The cost of client changes depends on when they are made:
• before the construction contract has been let, the cost can be contained
to that of the changed feature itself, and perhaps some relatively small
resource cost; and
• after the construction contract has been let, the cost will be
disproportionate to the value of the change, it can disrupt the
contractor’s work and invariably gives rise to a higher cost than if the
change had been included in the contract as let. Many minor changes
PART 3, SECTION 1
can have a cumulative and serious effect. Disruption claims caused by

a large number of small changes are common.
(e) Some client changes are unavoidable. Examples of such changes are:
• compliance with changes in legislation;
• requirements of the health and safety or fire prevention authorities;
• those required by unforeseen ground conditions; and
• previously unforeseen users’ requirements.
(f) The contingency in the project budget should be sufficient to take account
of the likelihood of such changes based on risk assessments.
(g) Changes proposed prior to construction may either be unavoidable or

optional. If they are unavoidable, the client, if satisfied that they are, should
authorise a transfer from the contingency in the budget to cover them. If they
are optional they should be approved if it can be demonstrated that they offer
good value for money (or a saving) and that there are sufficient funds
available to pay for them.
(h) Changes proposed after the construction contract has been let can have
major time and cost implications and should be avoided if at all possible. If
they are not essential they should be deferred until the project is complete and
then reviewed to see if they are necessary and economically justified.
(i) The need for changes should be minimised by:

• ensuring, with the assistance of an experienced project team and
designers, that the project brief is as comprehensive as possible and the
users have ‘signed it off’;
• taking into account any proposed new legislation;
• having early discussions with outside authorities so as to anticipate
their requirements;
• undertaking adequate site investigation or condition surveys1 if
existing buildings are to be renovated;
• ensuring that designs are fully developed and co-ordinated before
construction contracts are committed; and
• imposing discipline on users to finalise and sign off their requirements
in strict accordance with the project programme.
(j) When changes do occur, the client should call for:

• the reasons for the change;
• the source of the change;
• the full cost and time consequence of the change;
• proposals for avoiding or mitigating time overrun; and
• source of funding of any cost overrun, e.g. contingencies, client cost
reserves, compensating savings elsewhere.
1
Stock Condition Surveys, RICS Guidance Note, RICS Books, Coventry, 1997.
PART 3, SECTION 1, APPENDIX A
Appendix A: Procurement Options

A1 TRADITIONAL (SEQUENTIAL)
(a) Under a traditional procurement strategy, design should be completed

before tenders are invited and before the main construction contract is let.
As a result, and assuming no changes are introduced, construction costs can be
determined with reasonable certainty before construction starts and a
completion date can be fixed. In most cases the price is established on the
basis of tender documentation, often including a bill of quantities which
describes the extent of work to be done.
(b) The contractor assumes responsibility and financial risks for the building
works as described whilst the client takes the responsibility and risk for design
team performance. Therefore, if the contractor’s works are delayed by the
failure of the design team to meet their obligations, the contractor may claim
against the client for additional costs and/or time to complete the project. In
turn, the client could possibly seek to recover these costs from the design team
members responsible, if negligence can be proven.
(c) Clients are able to influence the development of the design to meet their
requirements because they have direct contractual relationships with the
design team. When construction begins, they usually have a single contractual
relationship with a main contractor and are therefore able to influence (but not
control) the construction process through a single point of contact.
(d) The strategy is unfortunately open to a level of abuse if any attempt is

made to let the work before the design is complete. Such action may result in
many post-contract changes which could delay the progress of the works and
increase the costs. Where a traditional strategy is chosen because of its
particular advantages, the temptation to let the work begin before the design is
complete should be strongly resisted.
(e) It is possible to have an accelerated traditional procurement strategy where

some design overlaps construction. This can be achieved by letting a separate,
advance works contract, for example, by allowing ground works (site clearance,
piling and foundations) to proceed to construction whilst the design for the rest
of the building is completed, and the construction tendered separately. This
reduces the total time to complete the project at the risk of losing certainty of
cost before construction starts. More importantly, a substantial risk is created in
that the contractor who builds the superstructure will take no responsibility for
the foundation works carried out by another contractor.
(f) Another alternative is to let the work by a two-stage process or by

negotiation thus reducing the pre-construction time involved and enabling the
contractor to have some (limited) involvement in the design and planning
stage.
The Surveyors’ Construction Handbook Part 3, Section 1 Effective from 1/3/03 Page 1
Appendix A (01/03)
FIGURE A1
PROCUREMENT ARRANGE MENT – TRADITIONAL
CONTRACTUAL RELATIONSHIP
CLIENT
CONSULTANTS
(fee contracts)
MAIN CONTRACTOR ARCHITECT

(standard lump sum contract) (fee contract)
SUPPLIERS
(various contracts)
SUBCONTRACTORS
(standard lump sum)
administrative responsibility on behalf of the client
ADVANTAGES DISADVANTAGES
competitive fairness slow to start on site (no parallel working)
satisfactory public accountability open to abuse where design incomplete
procedures well known (resulting in less certainty)
changes reasonably easily arranged contractor not involved in design or planning
and valued (no buildability)
adversarial potential
SEQUENCE
brief design competition construction
Risk
Low cost risk due to lump sum contract
Medium time risk due to fixed contract date (but contractor has right to claim extensions)
Low quality/design risk where the majority of the work is designed by insured consultants
working directly for the client
(g) The organisational structure of a traditional strategy is shown in Figure A1.

Standard forms of contract are available.
(h) The main advantages of a traditional contract strategy are:

• competitive fairness;
• design-led, facilitating high level of quality in design;
• reasonable price certainty at contract award based upon market forces;
• the strategy is satisfactory in terms of public accountability;
• the procedure is well known; and
• changes are reasonably easy to arrange and value.
Page 2 Part 3, Section 1 Effective from 1/3/03 The Surveyors’ Construction Handbook
Appendix A (01/03)
(i) The main disadvantages are:

• the strategy is open to abuse, resulting in less certainty;
• the overall programme may be longer than for other strategies as there
is no parallel working;
• no ‘buildability’ input by contractor; and
• the strategy often results in adversarial relationships developing.
A2 MEASUREMENT CONTRACTS
Measurement contracts are used when the work required cannot be accurately
measured for the tender bill of quantities. The contract sum is only established
with certainty on completion of construction, when re-measurement of the
quantities of work actually carried out takes place and is then valued on an
agreed basis. Measurement contracts are sometimes referred to as
re-measurement contracts and are based upon the prices tendered by the
contractor. The most effective use of a measurement contract is where the
work has been substantially designed but final detail has not been completed.
Here, a tender based on drawings and a bill of approximate quantities will be
satisfactory. Measurement contracts allow a client to shorten the overall
programme for design, tendering and construction but usually with the result
of some lack of price certainty at contract stage because the approximate
quantities reflect the lack of information on exactly what is to be built at
tender stage. The scope of the work, the approximate price and a programme
should be clear at contract stage. Measurement contracts provide more risk
than lump sum contracts for the client but probably with programme
advantages. They are typically used with civil engineering works where there
can be significant uncertainty about ground conditions.
(b) The organisational structure of a measurement contract strategy is shown

in Figure A2. Standard forms of contract are available for this strategy.
(c) The main advantages of the measurement contract strategy include:

• pre-construction time-saving potential;
• competitive prices;
• average public accountability;
• the procedure is well known;
• the strategy enables changes to be made easily; and
• there is some parallel working possible.
(d) The main disadvantages of the strategy are:

• the strategy offers poor certainty of price;
• there is no contractor involvement in the planning or design stage; and
• there is a potential for adversarial relationships to develop.
Appendix A (01/03)
FIGURE A2
PROCUREMENT ARRANGE MENT – ME ASUREME NT
CONTRACTUAL ARRANGEMENT
CLIENT
CONSULTANTS
(fee contracts)
MAIN CONTRACTOR ARCHITECT

(standard measurement contract)
SUPPLIERS
(various contracts)
SUBCONTRACTORS
(standard contracts)
administrative responsibility on behalf of the client
pre-construction time saving potential low certainty of price potential
competitive prices no contractor involvement in planning
average public accountability or design
procedures well known potentially adversarial
easy to arrange changes
some parallel working
SEQUENCE
brief design
competition construction
Risk
Variable cost risk as the final figure will be uncertain until the design and often construction is complete
Medium time risk as the extent of work will vary and contractors can claim extensions to the period for construction
Medium quality/design risk in the sense that design may not be complete at the outset
A3 CONSTRUCTION MANAGEMENT
(a) Under a construction management strategy, the client does not allocate risk
and responsibility to a single main contractor. Instead, the client employs the
design team and a construction manager is engaged as a fee-earning
professional to programme and co-ordinate the design and construction
activities and to improve the buildability of the design. Construction work is
carried out by trade contractors through direct contracts with the client for
distinct trade or work packages. The construction manager supervises the
construction management process and co-ordinates the design team on behalf
of the client. The construction manager, who has no contractual links with the
Appendix A (01/03)
design team or the trade contractors, provides professional construction

management expertise without assuming financial risk, and is liable only for
negligence by failing to perform the role with reasonable skill and care, unless
some greater liability is incorporated into the contract.
(b) On appointment, the construction manager will take over any preliminary
schedule and costing information already prepared and draw up a detailed
programme of pre-construction activities. Key dates are normally inserted at
which client decisions will be required. In adopting the construction
management system, the client will be closely involved in each stage of design
and construction. The client should have administrative or project
management staff with the time and ability to assess the recommendations of
the construction manager and take the necessary action. The client needs to
maintain a strong presence through a project management team that is
technically and commercially astute. This strategy is not, therefore, suitable
for the inexpert or inexperienced client.
(c) With this contract strategy, design and construction can overlap. As this
speeds up the project, construction management is known as a ‘fast track’
strategy. Although the time for completion can be reduced, price certainty is
not achieved until the design and construction have advanced to the extent that
all the construction work (trade) packages have been let. Also, design
development of later packages can affect construction work already completed.
The construction manager should therefore have a good track record in cost
forecasting and cost management. A package is made up of work for which one
of the trade contractors is responsible, e.g. foundations, concrete, electrical
installation or decorating. These packages are tendered individually, for a lump
sum price, usually on the basis of drawings and specification.
(d) The Latham Review1 recognised that construction management has been
used predominantly for large and/or complex projects, but suggested that
there is no intrinsic reason for this. Indeed, it is particularly recommended for
projects where there is a high degree of design innovation, where the client
wants ‘hands on’ involvement.
(e) The organisational structure of a construction management strategy is

shown in Figure A3.
(f) The main advantages of a construction management strategy are:

• the strategy offers time-saving potential for overall project time due to
the overlapping of procedures;
• buildability potential is inherent;
• the breakdown of traditional adversarial barriers;
• parallel working is an inherent feature;
• clarity of roles, risks, and relationships for all participants;
1
Latham, M., Sir, Constructing the Team: Joint Review of Procurement and Contractual Arrangements in the United
Kingdom Construction Industry: Final Report, HMSO, London, 1994.
Appendix A (01/03)
FIGURE A3
PROCUREMENT ARR ANGEMENT – CON STRUC TION MAN AGEM EN T
CLIENT
Fee contracts
CONSULTANTS
including
Lump sum contracts CONSTRUCTION MANAGER
WORK or TRADE
CONTRACTORS
time saving potential for overall project time no cost certainty at outset
trade packages let competitively needs informed client, able to take an
buildability potential active part
breaks down traditional adversarial barriers needs a good quality brief
parallel working inherent relies on a good quality team
clarity of roles, risks and relationships for needs time and information control
all participants
late changes easily accommodated
SEQUENCE
brief design
construction
Risk
Medium cost risk since the actual cost is unknown until the last package is let
Medium time risk since no one organisation carries the risk for timed completion
Low quality/design risk because there is a close link between client, designers and constructors
• changes in design can be accommodated later than some other

strategies, without paying a premium, provided the relevant trade
packages have not been let and earlier awarded packages are not too
adversely affected; and
• the client has direct contracts with trade contractors and pays them
directly. (There is some evidence that this results in lower prices
because of improved cash flow certainty.)
Appendix A (01/03)
(g) The disadvantages are:

• price certainty is not achieved until the last trade packages have been let;
• an informed, proactive client is required in order to operate such a
strategy;
• the client must provide a good quality brief;
• the strategy relies upon the client having a good quality team; and
• time and information control is required.
A4 MANAGEMENT CONTRACTING
(a) With this contract strategy, a management contractor is engaged by the

client to manage the building process and is paid a fee. The management
contractor is responsible for all the construction works and has direct
contractual links with all the works contractors. The management contractor
therefore bears the responsibility for the construction works without actually
carrying out any of that work. The management contractor may provide some
of the common services on site, such as office accommodation, tower cranes,
hoists and security, which are shared by the works contractors. The client
employs the design team and therefore bears the risk of the design team
delaying construction for reasons other than negligence.
(b) Management contracting is a ‘fast track’ strategy. All design work will not
be complete before the first works contractors start work although the design
necessary for those packages must be complete. As design is completed
subsequent packages of work are tendered and let. Cost certainty is thus not
achieved until all works contractors have been appointed. A high level of cost
management is therefore required.
(c) With the agreement of the client, the management contractor selects works
contractors by competitive tender to undertake sections of the construction
work. The client reimburses the cost of these work packages to the
management contractor who, in turn, pays the works contractors. The
management contractor co-ordinates the release of information from the
design team to the works contractors.
(d) Where the management construction team is not of the highest quality, or
where this fee is inadequate, the management contractor can be less than
proactive and the system can become a reactive ‘postbox’ approach. It is
therefore vital to select the management contractor carefully and to ensure that
the fee is appropriate bearing in mind market conditions. Similarly, resistance
to works contractors’ claims can be affected by the same circumstances.
(e) The organisational structure of a management contract is shown in

Figure A4.
(f) The main advantages of a management contracting strategy are:

• time-saving potential for overall project time;
• buildability potential;
Appendix A (01/03)
FIGURE A4
PROCUREMENT ARR ANGEMEN T – MA NAGEMENT C ON TRAC TING
CLIENT
MAIN CONTRACTOR
(standard fee contract)
CONSULTANTS
(fee contracts)
WORKS CONTRACTORS
(standard lump sum contracts)
time saving potential for overall project time need for good quality brief
buildability potential poor certainty of price
breaks down traditional adversarial barriers relies on a good quality team
parallel working inherent may become no more than a ‘postbox’
late changes easily accommodated system in certain circumstances
work packages let competitively removes resistance to works contractors’
claims
SEQUENCE
brief design
construction
Risk
Medium cost risk since the actual cost is unknown until the last package is let
Medium time risk since total construction time is a consequence of package selection
Low quality/design risk because there is a close link between client, designers and constructors
• breaks down traditional adversarial barriers;

• parallel working is inherent;
• changes can be accommodated provided packages affected have not
been let and there is little or no impact on those already let; and
• works packages are let competitively.
(g) The disadvantages are:

• need for a good quality brief;
• poor certainty of price is offered;
Appendix A (01/03)
• relies on a good quality team;

• it may become no more than a ‘postbox’ system in certain
circumstances; and
• removes resistance to works contractors’ claims.
A5 DESIGN AND MANAGE
(a) A design and manage strategy is similar to management contracting. Under a

design and manage contract, the contractor is paid a fee to manage and assume
responsibility, not only for the works contractors, but also for the design team.
(b) The main advantages of a design and manage strategy are:

• early completion is possible because of overlapping activities;
• the client deals with one firm only;
• it can be applied to a complex building; and
• the contractor assumes the risk and responsibility for the integration of
the design with construction.
(c) The disadvantages are:

• price certainty is not achieved until the last work package has been let;
• the client loses direct control over the design quality; and
• the client has no direct contractual relationship with the works
contractors or the design team and it is therefore difficult for the client
to recover costs if they fail to meet their obligations.
A6 DESIGN AND BUILD
(a) Under a design and build strategy, a single contractor assumes the risk and
responsibility for designing and building the project, in return for a fixed-price
lump sum.
(b) A variant, known as ‘develop and construct’, describes the strategy when
the client appoints designers to prepare the concept design before the
contractor assumes responsibility for completing the detailed design and
constructing the works. Often this strategy is associated with a process where
the contractor takes over the client’s designer (architect) contract in a form of
‘contract switch’ or novation. The designer is then employed for the rest of the
contract by the contractor who is usually responsible for all of the design
including that done prior to the switch.
(c) Design and build is a fast-track strategy. Construction can start before all
the detailed design is completed, but at the contractor’s risk.
(d) As explained in 3.1.1, by transferring risk to the contractor, the client loses
some control over the project. Any client requirement which is not directly
specified in the tender documents will constitute a change or variation to the
contract. Changes are usually more expensive to introduce after the contract
has been let, compared with other types of strategy.
Appendix A (01/03)
(e) It is very important, therefore, that the brief and performance/quality

specifications for important requirements in the project are fully and
unambiguously defined before entering into this type of contract. If
requirements are not specific, the client should provide contractors with a
performance specification at tender stage.
(f) The contractor develops the design from the specification submitting
detailed proposals to the client to establish that they are in accordance with the
requirements of the specification. Clients are, therefore, in a strong position to
ensure that their interpretation of the specification takes preference over the
contractor’s.
(g) Specification is a dangerous area for inexperienced clients:

over-specification can cut out useful specialist experience; under-specification
can be exploited.
(h) The client will often employ a design team to carry out some preliminary
design and prepare the project brief and other tender documents. Sometimes
the successful contractor will assume responsibility for this design team and
use them to produce the detailed design. If a design and build strategy is
identified as a possibility at an early stage, then the basis of the appointment
of the design team should reflect this possibility. If it does not, the client may
have to pay a termination fee to the design team. The client may wish to retain
the independent services of a cost consultant throughout the contract for early
cost advice involvement in the bidding process and cost reporting during
construction.
(i) Consideration may need to be given to the inclusion of a special clause in

design, or design and build, type contracts to ensure that the responsibility
for design performance is properly shared. Such a clause should identify
specific obligations that are absolute, that do not require the designer to be
an expert in the client’s business and, as a consequence, are reasonably
insurable.
(j) Current forms of contract for design and build vary their treatment of design
liability.
(k) To be effective, the client’s requirements will need to be stated clearly and
accurately and delivered on time.
(l) The imposition on contractors of fitness for purpose in design is usually

expressly excluded in standard forms of contract and it is a matter of
judgement for clients and their professional advisers, even though tenderers in
recessionary markets are likely to agree to undertake such risks.
(m) Non-availability of insurance to cover a higher than normal risk should

be weighed against the financial ability of contractors to meet design
default claims. It will normally be preferable and represent better value for
Appendix A (01/03)
money to impose a lesser, yet insurable, liability, which will be the subject
of an insurance payout in the event of a design fault, rather than an
insurance fitness for purpose requirement on a contractor of limited
financial assets.
Most importantly the client should ensure that adequate design liability
insurance is in place and maintained for the period of liability.
(n) Increasingly, collateral warranties are being used to place additional

responsibility on designers or subcontractors. In addition, the client may take
out insurance to cover post-construction liability, but this will be at a cost.
This is a matter for specialist advice.
(o) A range of options is available as illustrated in Figure A5. These range

from a package deal or turnkey where the client has little involvement in the
design development or building procurement process (effectively, a
complete hands off approach), to develop and construct where the client
appoints designers to develop the brief to a level of sophistication which will
leave the design and build contractor to develop detail or specialist design
elements.
FIGURE A5
P ROCUREMENT ARRANGEMENT – DESIGN AND BUILD
Some options available, showing proportional involvement in the design proces by client and
contractor between package deal, and develop and construct.
Turnkey
Package deal
Design and build

(competitive)
Design and build
(negotiated)
Develop and construct
The range of options enables the procurement arrangement to be used for a wide range of
client types, and for clients to be involved to a greater or lesser extent.
Client involvement
Contractor involvement
Appendix A (01/03)
(p) The project organisation structure for design and build is shown in
Figure A6. Contractors may use their own firms’ resources for undertaking
the design (in-house design and build), or may more usually subcontract
these to one or more professional firms whilst retaining control.
(q) The main advantages of a design and build strategy are:

• the client has only to deal with one firm;
• inherent buildability is achievable;
FIGU RE A6
PROC UREMENT ARRA NGEMEN T – D ESIGN A ND BU ILD
CLIENT
DESIGN AND BUILD CONTRACTOR

(standard lump sum contract)
SUPPLIERS
(various contracts)
SUBCONTRACTORS
(standard lump sum contracts)
single point contact and responsibility client needs to contract before design
inherent buildability is complete
early firm price possible no design overview unless consultants appointed
reduced total project time difficult for clients to prepare adequate brief
bids difficult to compare
design liability limited by standard contract
client driven changes can be expensive
SEQUENCE
brief competition design
construction
Risk
Low cost risk since most contracts will be let on a lump sum basis
Low time risk since the contractor will usually fix the time and be committed to it
High design/quality risk where the contractor controls design there are risks related to
both design suitability and to the capacity of the design-build firm to own such risks
Appendix A (01/03)
• price certainty can be obtained before construction starts provided that

the client’s requirements are adequately specified and changes are not
introduced; and
• reduced total project time due to early completion is possible because
of overlapping activities.
(r) The disadvantages are:

• the client is required to contract before the detailed designs are
completed;
• there is no design overview unless separate consultants are appointed
by the client for this purpose;
• difficulties can be experienced by clients in preparing an adequate
brief;
• bids are difficult to compare since each design, programme and cost
will vary;
• design liability is limited by the standard contract; and
• client changes to project scope can be expensive.
Appendix A (01/03)

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The Surveyors' Construction Handbook is out of print and is on isurv for information purposes only

PART THREE: CONSTRUCTION PLANNING AND

SECTION 1: DEVELOPING AN APPROPRIATE

The selection process should, therefore, provide a best-fit solution based on

The selection of an appropriate procurement strategy is identified as a key

3.1.1 informs clients as to their involvement as it relates to key stages in the

The implementation of strategies is considered in 3.1.4 where reference is also

Appendix A outlines procurement options.

EFFECT OF CLIENT TYPE ON SATISFACTION CRITERIA

Owner-occupiers are usually primarily concerned with building performance

Developers, on the other hand, may be driven by market conditions which

Attempts to categorise clients in various ways may be helpful in the early

It is important to consider those factors which will affect client satisfaction as

3.1.1 The Client’s Role

• a unique demand – the client’s specific need for accommodation (but

G 3.1.1.3 It has three other particular characteristics:

(b) A crucial part of any effective management structure is effective

Pre-design phase Pre-construction phase Construction Post-construction

The Surveyors’ Construction Handbook

Procurement Procurement strategy

Part 3, Section 1 (01/03)

Diagram to indicate the activities in the Procurement Process

Effective from 1/3/03

G 3.1.1.6 INDEPENDENT CLIENT ADVICE

• Assistance in preparing the business case (the business case)

(c) The decision as to which procurement strategy to select should be based

(d) A best practice guide is available to assist in this process1.

(e) Possible sources for independent client advice include a suitably

G 3.1.1.7 CLIENT’S RESPONSIBILITIES

(b) The client also has a threefold management function:

(c) In particular the client should be satisfied, as far as possible, that:

G 3.1.1.8 KEY CLIENT ACTIVITIES

G 3.1.1.9 DEVELOPING THE BUSINESS CASE FOR THE PROJECT

G 3.1.1.10 PROJECT DEFINITION

The importance of a clear project definition to the successful completion of the

G 3.1.1.11 ESTABLISHING PRIMARY OBJECTIVES

(a) In establishing the primary objectives for the project it is necessary to

(b) While it may be difficult for inexperienced construction clients to

G 3.1.1.13 DEVELOPMENT OF PROCUREMENT STRATEGY

• selecting the strategy;

The processes of procurement strategy selection and implementation are dealt

G 3.1.1.14 (a) Strategies may include:

(e) This approach represents a change in the culture traditionally adopted by

(b) Contract implementation can be complex and may encompass the

(d) Guidance on the appointment of consultants and contractors is included in

(c) However commissioning is facilitated, it must be achieved before any

G 3.1.1.18 OCCUPATION AND TAKE-OVER

3.1.2 Procurement Strategy

G 3.1.2.5 DEFINITION OF TERMS

Different procurement strategies provide different ways of allocating risk and

• traditional: design by consultants is completed before contractors tender

• design and manage: similar to the management contract, with the

G 3.1.2.8 PROJECT OBJECTIVES

• performance (design): the quality and performance characteristics

In any project these three criteria will be interdependent and decisions

Time aspects (speed to completion,

As the emphasis on one

Cost Issues Performance Issues

G 3.1.2.9 RISK AND RESPONSIBILITY

Although the project is subject to a wide variety of risks, it is important to note

Risk may alternatively be retained in part by the client, or reduced by adequate

G 3.1.2.10 PASSING ON RISK