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CV-457
Contract Management Contract
Management

CV-457
CONTRACT MANAGEMENT
Lecture-3b – (Week-3)

Engr. Rafia Nawaz

Lecturer Department of Civil Engineering
GIK Institute
Dr.-Ing Abdur Rehman Nasir
Assistant Professor ofEngineering
of Construction Engineering Sciences & Technology, Topi, Swabi KPK
and Management
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12.09.2019 NIT (SCEE), NUST H-12, Islamabad
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Topics to cover

o Non Traditional Project Delivery Method

o Design and Construct method

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Non Traditional Project Delivery

Method

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Non Traditional Project Delivery Method

Introduction

▪ The ‘non-traditional method’ means a method of project delivery that is

different from the traditional method.

▪ It implies a departure from the ‘traditional’ triangular contractual

relationship in favour of more effective management of each of the
individual stages of the project lifecycle and the project as a whole.

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Non Traditional Project Delivery Method

Introduction
▪ An important characteristic of non-traditional delivery methods is their
reliance on fast-tracking, which means overlapping of the design and
construction stages to speed up a project.
▪ In addition to facilitating faster work, fast-tracking also prevents the
formulation of a contract price as one lump sum.

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Non Traditional Project Delivery Method

The non-traditional methods of project delivery may be grouped as:

➢ Design and Construct or D&B method

➢ Managed methods: namely Construction Management and Project
Management
➢ In-house development method
➢ Concessional or PFI (Private Funding Initiatives) methods.

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Design and Construct

method

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Design and Construct method

▪ It gives the contractor the responsibility for both the design and
construction.
▪ The contractor may be a company with the capacity to design and construct
or a joint venture comprising a construction contractor and a design firm.
▪ Alternatively, the contractor may subcontract the design to design
consultants.

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Design and Construct method

The Design and Construct Method of Project Delivery

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Design and Construct method

The Design and Construct Method of Project Delivery

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Design and Construct method

▪ A typical organization structure of the D&C method shows a simple
hierarchical management structure with contractual links formed between
project team members and the lines of communication.

▪ The principal’s position at the head of the structure makes the principal a de
facto project manager. If required, the principal may engage services of a
specialist consultant (referred to in some conditions of contract as
superintendent) to act as the principal’s agent in much the same manner as
the superintendent’s role defined under the traditional method.

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Design and Construct method

▪ This approach may, however, extend the lines of communication and isolate
the principal from the day-to-day affairs of the project.

▪ Considering that D&C projects are expected to be fast-tracked, direct

involvement of the principal in the project is essential.

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Design and Construct

method Contract b/w Client
and Contractor

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D&C – Contract b/w Client and Contractor

▪ The principal forms a contract with the contractor to design and

construct the facility.
▪ The principal intends the contractor to be a single-point responsibility
for delivering the project.

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D&C – Contract b/w Client and Contractor

▪ It may appear that the contractor carries the entire project risk. However,
the contractor’s risk under D&C is probably not as high as under the
traditional method of delivery where the contractor is paid a lump sum.
▪ The risk is further reduced if the contract includes a provision for cost
rise and fall.

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D&C – Contract b/w Client and Contractor

▪ The principal’s risk in the D&C method of delivery is not as low as it might
seem. This is mainly because the principal becomes a de facto project
manager.
▪ In the absence of an independent management consultant in the typical
organizational structure of the D&C, the principal is the sole provider of
information to the contractor.
▪ The crucial element of information transfer is a project brief for which the
principal is fully responsible. Errors, ambiguities, or changes to the brief made
by the principal will seriously increase the principal’s financial risk.

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D&C – Contract b/w Client and Contractor

▪ Another risk the principal may face under the D&C contract is related to
prior approval of the contractor’s design drawings, specifications, or
samples.

▪ If the principal reserves the right of prior approval of the contractor’s

drawings, etc., refusal to approve, failure to disapprove, or delay in
approving may result in a variation, a claim for delay costs, a waiver, or
another claim by the contractor.

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D&C – Contract b/w Client and Contractor

▪ It is important that it is expressly stated in the D&C contract that the
principal is not required to inspect the contractor’s drawings or to notify
the contractor of any error or departure from the requirements of the
contract, and that failure of the principal to comment on the drawings or
any particular item in them must not be taken as a waiver of any
requirement of the contract.

▪ The principal must be careful not to indicate expressly or by implication from

conduct that a drawing is suitable for use.

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D&C – Contract b/w Client and Contractor

▪ A D&C contract can be tendered or negotiated. In both cases it may be
difficult to estimate the contract price accurately because of a lack of
documentation. The contractor would naturally include a contingency, which
could be either too high or too low.
▪ Neither scenario is favourable to the principal as the project cost would most
likely increase from either a direct or indirect impact of the risk contingency
(Smith et al. 1975).
▪ Because fast-tracking is an important feature of the D&C method, the use of
tendering to select a D&C contractor, which would substantially lengthen the
time-frame of the project, should be seriously questioned.

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D&C – Contract b/w Client and Contractor

▪ A more logical alternative is negotiation leading to agreement on a contract
price in the form of cost-plus with guaranteed maximum
▪ Perhaps the element most frequently overlooked in the D&C contract is
‘suitability for purpose’.
▪ It is important that the contract states the purpose of the works, and that the
contractor is responsible for the effectiveness of the design and its suitability
for its purpose.

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D&C – Contract b/w Client and Contractor

▪ A D&C contract should include a statement that the principal is or is not, as
the case may be, relying on the contractor’s knowledge, skill, and judgment
to produce a finished product that is fit for its intended purpose. The
‘suitability for purpose’ aspect of D&C contracts has often given rise to
litigation.

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Design and Construct method

Contract b/w Contractor and design consultant
(if any)

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D&C – Contract b/w Contractor and design consultant

▪ If the contractor’s in-house design capability is inadequate for the project,
the contractor would need to contract out design services to suitable design
consulting firms for a fee.
▪ Design consultants would be required to design and document the facility
strictly in accordance with the principal’s brief and the contractor’s
specification. The contractor would retain the responsibility for the overall
design co-ordination and integration.
▪ To capitalize on fast-tracking, the contractor would break up the
development of the design into carefully defined sequential packages. And
would then let these to subcontractors or even separate contractors.

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Design and Construct method Contract b/w

Contractor and Subcontractor

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D&C – Contract b/w Contractor and Subcontractor

▪ As is the case in the traditional method of project delivery, in the D&C
method the contractor’s role in the construction stage is that of a co-
ordinator and manager of construction activities performed by
subcontractors.
▪ Since the design work will most likely be packaged, the contractor will let
individual packages, usually on lump-sum prices, to selected subcontractors
or, in the case of larger packages, to separate contractors.

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Advantages
• Single point responsibility for design and construction
• Inherent buildability
• Contractors to come up with different design solutions
• Overall duration is shorter due to design and construction overlap

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Disadvantages
• Limited control over the design by the client (client's design intent can
be affected)
• Incomplete client brief affects the design
• Changes will be costly and have time implications

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Design and Construct method

Standard Conditions

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D&C – Standard Conditions

▪ The difference between the general conditions needed for a traditional and
a D&C contract is so slight that there is no real need to have a different set
of conditions.
▪ Design is work. It is work to be described in the specification, not in the
general conditions of contract. It fits into the definition of ‘work’ in all
commonly used forms of contract.

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D&C – Standard Conditions

▪ The most common cause of cost overruns in D&C contracts is variations.
▪ What is or is not a variation often causes arguments in D&C contracts.
▪ There is a risk that in approving a design suggestion from the contractor,
the principal may be taken to have approved of a variation.

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Design and Construct

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Thank You!

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