Lecture 7,8,9&10

Chapter: THREE
THE ROLE-PLAYERS IN
CONSTRUCTION CONTRACTS
FORMS/TYPES OF CONSTRUCTION
CONTRACTS
PROJECT DELIVERY METHODS

Instructor: Berhane DESTA

1
 THE ROLE-PLAYERS IN
CONSTRUCTION CONTRACTS
• A construction contract, unlike ordinary contracts, is one that
involves not two but, multiple parties.
• The process of concluding a construction contract has many
complicated tiers as it takes a long period of time to conclude
and to perform.
• Accordingly, there are different parties to be involved in a
construction contract.
• A typical construction project involves at least five parties;
• The employer,
• The architect,
• The civil engineer,
• The quantity surveyor, and
• Main Contractors & Sub-contractors.
2
 cont…
• Finsen writes
– The parties to a building contract are,
• On the one hand, the person who wishes to have a building
built for himself, who is generally referred to in building
contracts as the employer, and,
• On the other hand, the builder who carries out the work,
generally referred to as the contractor.
• Architects, quantity surveyors, engineering consultants,
etc. are not parties to a contract in that they do not acquire
legal rights or obligations, but they are nevertheless
charged with many duties as agents of the employer and
have their own contracts with the client.

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 The Employer (Client)
• The employer is the person for whom the project
(construction) is being undertaken.
• This person may be variably referred to as 'client, project
owner, or developer'.
• Employers may be divided into two categories:
– Those who erect buildings for their own ownership and
use, whether they intend to inhabit and use the buildings
themselves or let them to others, and
– Those whose intention is to sell the buildings as soon as
they can, possibly even during the construction phase, so
that they can recoup their capital with a profit, and embark
on further building projects.
• The primary obligation of the employer is to pay the
contractor for the work carried out. 4
 The Architect
• The architect is the person who is employed by the employer so as to design the
project and oversee that the construction is being undertaken as per the contract.
He/she, thus, designs the plans and specifications for the construction.
• An architect is a person who designs buildings and superintends of their
erection.
• He is both an advisor, and an agent of his client.
• Only persons registered as an architect in terms of the Architects' Act 1970 may
hold themselves out as an architect.
• An architect is required to be familiar with all the statutory, or other legal
requirements, or limitations on the design of his client's building and to ensure
that his design complies with them (Finsen, 1999; Murdoch, 1996; Van
Deventer, 1993).
• Usually, the architect enters into a contract with the employer as an agent of the
employer.
• Accordingly, he/she has the duty to act fairly and professionally as the agent of
the employer.
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 The Civil Engineer
The civil Engineers have the following responsibilities.
Structural design of contemporary buildings, and
The design of mechanical and electrical installations of these
buildings.
Like the other members of the professional team, the engineer
who is normally signed an agreement with the employer of the
building, and
He is liable to his client for any negligence in the execution of his
professional duties.

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 Construction Engineers
• The following are among main responsibilities of Construction engineers.
• Analyzing reports. They must analyze maps, drawings, blueprints, aerial
photography and other topographical information.
• It is the construction engineer's job to make sure that everything is conducted
correctly.
• They have to see the safety of all the workers undertaking the construction
works.
• In addition to safety, they have to make sure that the site stays clean and
sanitary.
• Surveying the land while construction is in progress
• Construction engineers have to make sure that there are no impediments in the
way of the structure's planned location and must move any that might exist.
• They also must estimate costs and keep the project under budget.
• Construction engineers have to test soils and materials used for adequate
strength.
• Finally, construction engineers have to provide construction information
including repairs and cost changes to the managers of the construction work.

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 The Quantity Surveyor
…..
The quantity surveyor is a person who calculates the quantity of
labor and materials that are required to erect the building and
compiles this information in a document known as a bill of
quantities,
This Bill of quantities is used by tenderers as a basis for estimating
the cost of the project and formulating their tenders.
As an agent of the client, the quantity surveyor Prepares
preliminary estimates of cost, Advises on the value of interim
payment certificates, Evaluates claims for extras and determines the
proper value of the final account.
In recent years the quantity surveyors have been able to advise a
client on a project’s future running and maintenance costs and the
income it may be expected to generate by way of rentals.
During the course of the contract, quantity surveyor Predicts the
employer's cash flow in respect of monthly payments to the
contractor, Continuously informs the employer about on variations 8
 Sub-Contractors
– Subcontractors are persons employed by the primary contractor so as
to undertake part of the construction work.
– The contractor has to first secure the consent of the employer before
he/she can hire any sub-contractors.
– Essentially the typical standard form for subcontracting is designed
to achieve a mirror image of the main contractual provisions.
– As the trend towards subcontracting developed, employers saw the
opportunity of getting the best of both worlds, and
– The nominated subcontract was introduced which enabled the
employer to have the benefit of a principal contractor to control the
entire building operation while yet being able themselves to choose
specific subcontractors to undertake specific work.
– Although the construction contract is made between the employer
and the contractor, subcontractors are the ones that do most of the
work.
– As a general rule, the contractor is the one liable for the work carried
out by the sub contractor. 9
 In general……
The stakeholders in a given construction project are many &
diverse.
 The following are some:
 The general public;
 The dwellers in the specific project area;
 The Owner of the Construction Project, known as the
Employer;
 Financing & development institutions: international
and/or local;
 Regulatory institutions: of the relevant national, regional
& local government;
 The Contractor: international and/or local;
 Sub-contractors: international and/or local Sub-
contractors; ( nominated or preferred (domestic) sub-
contractors)
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 Cont…..
 All consultants: including the Engineer, who studies, designs
and/or supervises the Construction Project;
 Sub-Consultants: international and/or local;
 Suppliers: which supply construction materials & other
inputs to the Construction Project;
 The construction project workers;
 Service providers; like transport services by carriers by sea,
air & land, and others;
 Professional Associations: Contractors, Consultants,
Engineers, Architects & others; and
 Others, if any;

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 Types of Construction Contracts and Risk Allocation
•Before signing on a construction contract, it is essential to know the types and
choices of the contracts we have so as to protect ourselves.
•In any construction contract, the cost of the project consists of the costs of labor,
costs of materials as well as the builder’s profit and overhead costs.
•The different forms/types of construction contracts vary primarily with regard to
method of pricing & payment/Factors Influencing the Choice of the Type of
Contract
–The appropriateness for providing an adequate incentive for efficient
performance by the contractor
–The ability to introduce changes
–The allocation of risks
•Who takes the risks involved,
•Which party has to pay for the cost over runs and
•Who keeps the savings if the project costs are less than that of the estimate one.
–The start and completion date of the project

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 cont……
• Accordingly, there are three but not limited to forms of
Construction Contracts
– Lump Sum Contracts
– Re-measurement (Unit Cost) Contracts
– Cost-reimbursable (Cost Plus) Contracts
• Cost Plus Fixed fee
• Cost Plus Percentage Fee
• Cost Plus Incentives/Benefit Sharing
– Schedule of Rates Contract
– Guaranteed Maximum Price contract
– Labor Contract
– Hybrid Contract
– Special Contract
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 1. Lump Sum Contracts

A lump sum, sometimes called Drawings and Specifications

Contract or stipulated sum contract is the most basic form of
construction contract.
Keating defines a lump sum contract as a contract to complete the
work for a lump sum, i.e. whereby the contractor promises to build
X project for Y dollars.
1. The contractor agrees to perform a stipulated job of work in
exchange for a fixed sum of money. In other words a single
tendered price is given for the completion of a specified work to
the satisfaction of the client by a certain date.
2. Payment may be staged at intervals of time on the completion of
milestones.
3. Useful for construction works: that can be accurately and
completely described at the time of bidding such as residential
and building construction,
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 Cont…..
 Difficult to make adjustments.
A lump sum contract is more suitable for works for which contractors
have prior construction experience.
 Not suitable for unpredictable conditions.
In this type of contract, the supplier (contractor) agrees to provide
specified services for a specific price.
The receiver (employer) agrees to pay the price upon the completion
of the work, or according to a negotiated payment schedule.
Lump sum contracts require complete plans and specifications setting
forth detailed directions to enable the contractor carry them out.
In developing a lump sum bid, the builder estimates the costs of labor
and materials and adds to it a standard amount for overhead and the
desired amount of profit.
Most builders estimate profit and overhead to total about 12-16
percent of the project cost.
This amount may be increased based on the builder's assessment of
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risks.
 Cont…..

• If the actual costs of labor and materials are higher than the
builder's estimate, the profit is reduced. If the actual costs are lower,
the builder gets more profit.
• Either way, the cost to the owner is the same.
• In practice, however, costs that exceed the estimates may lead to
disputes over the scope of work or attempts to substitute less
expensive materials for those specified.

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 Cont…..
Advantages of Lump Sum Contract
The final price is known, by the owner, before the work commences.
The contractor has more incentive to reduce his cost to increase the
profit.
The contractor hopes to complete the job as quickly as possible, to
minimize overhead, to maximize profit and to move to the next Job.
Low risk on the owner, Higher risk to the contractor
Cost known at outset
Contractor will assign best personnel
Contractor selection is easy.

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 Cont…..

Disadvantages of Lump Sum Contract

Changes is difficult and costly.
Contractor is free to use the lowest cost of material equipment,
methods.
The contractor carries much of the risks.
The tendered price may include high risk contingency.
Competent contractors may decide not to bid to avoid a high-risk
lump sum contract.
A great deal of work should be done by the contractors prior to
preparing the estimate. It is wasteful of a skilled estimator’s time.
Changes in drawings and specifications can be very expensive and
source of trouble. In other words the contract has very limited
flexibility for design changes.
The contractor carries much of the risks. The tendered price may
include high risk contingency.
Competent contractors may decide not to bid to avoid a high-risk
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lump sum contract.
 2. Re-Measurement/Unit Price Contracts

• Re-measurement contracts, in contrast to the lump sum contracts, are

contracts in which the price to be paid for the whole work is to be
ascertained by measurement in detail of the various parts of the work
and the valuation thereof by reference to a schedule of prices
included in the contract.
Also called Schedule contract
Used for work where it is not possible to calculate the exact quantity
of materials that will be required.
Unit‐price contracts are commonly used for heavy/highway work.
Items whose actual quantity varies from the estimated quantity by
more than 15 or 20%, either above or below the estimated quantity,
are sometimes subject to renegotiation of the unit price.
• Re-measurement contracts imply that price is agreed for each piece
of work and the quantities are counted or measured either as the
work proceeds, or at the end of the completion of a particular item.
Profit rate is included in the rate settled, or separately as a
percentage agreed upon
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 Advantages of Re-Measurement/Unit Price
Contracts
Easy for contract selection.
Early start is possible.
 Saves the heavy cost of preparing many bills of quantities by the
contractors.
 Fair basis for competition.
 In comparing with lump-sum contract, changes in contract
documents can be made easily by the owner.
 Lower risk for contractor.
Useful on projects where the nature of the work is well defined, but
the
. quantities of work cannot be accurately determined in advance
of construction. Suitable for highways, dams, airports…

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 Disadvantages of Re-Measurement/Unit Price Contracts
• Final cost not known from the beginning (BOQ only is estimated)
• Staff needed to measure the finished quantities and report on the
units not completed.
• Unit price sometime tend to draw unbalanced bid. (For Unit-Price
Contracts, a balanced bid is one in which each bid is priced to
carry its share of the cost of the work and also its share of the
contractor’s profit.
Contractors raise prices on certain items and make corresponding
reductions of the prices on other items ,without changing the
total amount of the bid)

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 3. Schedule of rates contract
A Schedule of the work items without quantities is prepared by the
owner and /or A/E to be rated by the contractor.
The descriptions of items and the units of measurement are similar
to those used in a normal B.O.Q., but no quantities are given.
 It is common for separate rates to be quoted for labor, plant, and
materials.
 Used for repair and maintenance works or under conditions of
urgency.
Advantages:
Work can be commenced earlier than if a full B.O.Q has been
prepared.
Disadvantage :
No indication of the final price of the works.
Very difficult to determine which contractor submitted the most
advantageous offer.
May cause financial problems to the public owners 22
 4. Cost-Reimbursable (Cost Plus) Contracts.

Used when it is impossible to predict their costs during the

negotiation, bid, and award process.
 a cost reimbursable contract the contractor's profit is set at a fixed
amount.
If actual costs are lower than that of the estimated, the owner keeps
the savings.
If actual costs are higher than that of the estimated, the owner must
pay the additional amount.
 The great advantage of a cost reimbursable contract is that, generally speaking,
the project will result in the building that was envisioned, even if costs run high.
 The contractor is less likely to cut corners, or argues, for less expensive materials
since his profit is not in jeopardy.
 By the same token, the contractor has little incentive to keep the owner's costs
down.
 Under this arrangement, the contractor is reimbursed for the actual cost of labor
and materials, plus charges fee (typically an agreed-upon lump or percentage of
the total costs) for overhead and profit.
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 Cont….
This type of contract is advantageous in the fact that, where the
employer wants to have open reign to select materials and
workmanship as the project proceeds, this arrangement can be
extremely flexible and accommodating.
This contract also typically requires the contractor to obtain
competitive bids from subcontractors, and translating (in theory) it
in to lower construction cost.
It is disadvantageous since this type of contracts are usually used
where the scope of work is uncertain, and the costs can quickly get
way out of control.
Even under the maximum price, poor control in materials selection
and on-the fly design modification can quickly consume budget,
leaving line items on the project starved for capital.
This, in turn, requires either a diminution in quality in certain
aspects of the project, and /or the total elimination of aspects of the
project, and /or the need for an additive change order to increase
project funding. 24
 Cont…..
1. Actual cost plus a negotiated reimbursement to cover overheads
and profit.
2. Different methods of reimbursement :
Cost + percentage
Cost + fixed fee
Cost + fixed fee + profit-sharing clause.
3. Higher risk to owner
4. Compromise : guaranteed maximum price (GMP) reduces risk to
owner while maintain advantage of cost plus contract.
5. By using this type of contract the contractor can start work
without a clearly defined project scope, since all costs will be
reimbursed and a profit guaranteed.

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 4.1. Cost + Percent of Cost
The contractor is reimbursed for all his costs with a fixed % age of
costs to cover his services.
Project/site overheads may be covered by the %age or computed as
one of the costs.
Advantages Disadvantages
Fee = percentage of the profitable for the No incentive to
total project cost contractor finish job
quickly
(Cost =
Owner does not
$500.000,Fee = know total
2%) price
Larger the cost
of the job, the
higher the fee
the owner pays

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 Cont…..
Advantages of Cost + Percent
1. Construction can start before design is completed.
2. If the contractor is efficient in the utilization of resources then the
cost to the client should represent a fair price for the work
undertaken.
Disadvantages of Cost + Percent
The project total cost is completely unknown before the project
start.
2. No incentive for the contractor to be efficient in his use of labors,
materials or equipments.
3. Minimum efficiency maximizes the profit.

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 4.2. Cost Plus Fixed Fee
Most common form of negotiated contracts
COST = expenses incurred by the contractor for the construction
of the facility
Includes: Labor, equipment, materials, and administrative
costs
 FEE = compensation for expertise
 Includes: profit

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 Cont……
• Cost + Fixed Fee
Advantages Disadvantages
Fee = percentage of the original
estimated total figure Fee amount is Expensive
Utilized on large multi-year fixed materials and
regardless construction
jobs
of price techniques
Ex: WW treatment plant fluctuation may
Facility (Cost = $20 million, be used to
Fee = 1%) expedite
$20 Million 1% fee = construction

$200,000 Million Provides

incentive to
complete
the project
quickly

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 4.3. Cost + Fixed Fee + Profit-Sharing Clause
–Rewards contractors who minimize Advantages Disadvantages
cost
–Percentage of cost under GMP is
considered profit
Provides Contractor must
and shared with the contractor incentive to absorb any
•Guaranteed Maximum Price (GMP) the amount over the GMP
•% of profit sharing is specified in contractor to
contract save money

Plans & specs. need to

detailed

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 Cont……
In this type of contract the contractor is reimbursed at cost with an
agreed-upon fee up to the GMP, which is essentially a cap;
beyond this point the contractor is responsible for covering any
additional costs within the original project scope
• An incentive clause, which specifies that the contractor will
receive additional profit for bringing the project in under the
GMP.

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 5. Guaranteed Maximum Price contract
• In a guaranteed maximum price (GMP) contract, the contractor
estimates the cost just like in a lump sum bid, but profit is limited to a
specified amount.
• In the event that actual costs are lower than the estimates, the owner
keeps the savings.
• In the event costs are higher, the contractor pays the difference and
profit is reduced.

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 Advantages of GMP Contract

 Greater price certainty for clients as the contractor normally

includes a sum for future design development and for risks.
 GMP promotes pre-agreement of changes as its philosophy
links neatly with a contractual requirement to pre-agree the
cost and time implications of any potential changes.
 GMP provides greater control over spending as the contractor
is bound to a maximum price.
 GMP aligns the contractor with client and consultants
encouraging team work with mutual trust and common goals.
 Less administration is required as changes are limited; there is
quick settlement of the final account.

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 Disadvantages GMP Contract
 The client might pay too much as the contractor takes on
greater risk and thus includes in the price an allowance for
design development and risk.
 Contractor’s with design and build experience may have
useful knowledge.
 There is no standard form of contract for GMP so there is a
greater possibility of errors and misunderstandings of
liabilities between the parties that may result in conflict.
 Scope changes tend to cost more, it is accepted that scope
changes to design and build are more likely to be more
expensive than with a traditional contract, the same can also
be said for GMP contracts.

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 Cont….
 Labor Contract: When the Project owner is responsible for the
provision of major resources such as materials and Equipments
other than labor, small tools and equipments and their
management, it is called a labor contract.
 Hybrid Contract: A contract that combines two or more contract
types is called Hybrid Contract. This type of contract is designed
to meet the special requirement of certain classes of works to suit
their particular needs.
 Special Contract: As the name implies, in certain circumstances
such as use of specializations, urgency, supplementary nature and
continuity of services or works; remoteness and smallness of
projects, etc requires special arrangements. These include:
– Packaged Contract
– Continuing / Supplementary Contract
– Running Contract, and
– Sub Contract 35
 Project Delivery Systems
Definition
 Contract or Project Delivery System is the way Project Owners
together with Project Regulators and Financiers determine the
assignment of responsibilities to Project Stakeholders along the
Construction Process.
 It is often determined during the Basic Planning phase of the
Construction Project.
Types of Project Delivery Systems
 Project delivery systems are basically classified in to two broad
areas:
 I)Force Account;and
 II) Outsourced.

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 I) Force Account

When the project owners engage themselves to undertake the

project, it is called a force account delivery system.
projects are small and places are remote such that reaching them is
difficult
It provides a comparative advantage in Cost, Time and Quality
issues.
When there is a lack of capacity from the private sector to
undertake very large and technologically new projects.
When projects are unattractive to bidders.

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 Cont….
II) Outsourcing
• Most of the project delivery methods/systems are found under the
category
of outsourcing.
• The following are some of them.
A. Design-Bid-Build (D-B-B);
B. Design-Build (D-B);
C. Construction Management (CM At Free & At Risk);
D. Design-Build- Operate (D-B-O);
E. Design-Build-Operate-Maintain (D-B-O-M);
F. Design-Build-Finance-Operate (D-B-F-O);
G. Full Delivery or Program Management;
H. Build-Own-Operate (B-O-O);
I. Build Own Operate Transfer(B-O-O-T); 38
 Cont….
A) Design-Bid-Build
• This is the most practiced type of delivery system in the Construction Industry of
Ethiopia since the 1987.
• After project owners did prepare the Basic Planning that identifies construction project
programs, they call upon the participation of Design and/or Supervision Consultants
either by tender or by negotiated contracts.
• This consultant will carry out the design together with the necessary tender documents
which will be the bases for tendering to select contractors.
• Contractors are responsible to construct works with due care and diligence and
complete them in accordance with the contract, but they are not held responsible for
design deficiencies.
Since the 1980s, this traditional approach has become less
popular due to the following factors:
• Severe Adversarial relations between the designer and contract administration
consultant and the contractor
• Fragmented contract for the project owner
• Project owner responsibility for risks associated with the design and contract
administration
• Non -Impartiality of the Design and Contract Administration services
• The inability of design and contract administration consultants to cope up with new
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construction technologies and constructability issues of their designs
 Advantages may include:
Long history of acceptance,
Open competition;
Distinct roles are clear;
Owner flexibility and
Easy to tender;
Disadvantages may include:
Innovation not optimized,
Usually cost overruns;
Disputes between parties,
Client retains risks;
Usually low bid-incentive for change orders
Owner responsible for errors & omissions

40
 Cont…….
B) Design-Build
 Design-Build or Turnkey, in principle, reduces numbers of procurement processes engaged
in the fragmented process and employ only one procurement process and a single
contractor to provide the entire Construction Implementation Process (Design &
Construction Implementations)
 In this arrangement both the design & construction liability rests with the Contractor.
 Reduces fragmentation, adversarial relations and Project Owners’ risk.
Advantages may include:
 Single source responsibility both for design & construction;
 Integrating design & construction;
 Reduction in administration, Innovation;
 Cost savings, Constructability optimized;
 Most risks transferred to the design-builder;
Disadvantages may include
 Limiting competition, High tendering costs;
 New method & unfamiliarity;
 Client needs quicker decision making;
 Clients bringing design requirements (30%) (reduces design innovation)

41
 Cont…….

C) Design-Build-Operate
• According to FIDIC, the D-B-O approach to contracting combines
design, construction, and long term (ex. 20 years) operation (and
maintenance) of a facility in to one single contract awarded to a
single contractor (who will usually be a joint venture or consortium
representing all the skills for in a D-B-O arrangement)
Advantages of D-B-O
• The advantages are categorized in terms of: time, finance & quality.
Time :
• With possibilities to overlap some design & build activities it will be possible to minimize delays &
optimize the smooth flow of construction activities.
Finance
• With cost restraints & commitments & other risks being carried by the contractor, there is less risk
of price over-run.
Quality
• With the contractor responsible for 20 years operation, he has an interest to design & build quality
plant with low operation & maintenance costs.
• Not only will then plant be “fit for purpose” but it will be built to last.
• The FIDIC has now prepared conditions of contract which facilitate the D-B-O process.

42
 Cont…..
D) Full Delivery or Program Management
Under full delivery method the selected contractor shall under take
the whole range of activities from thought to finish & operation
inclusive of maintenance.
The possible activities include:
Planning & acquisition;
Finance, Design, Construction, Operation, Maintenance;
Upkeep & Improvements;
Advantages may include;
Shorter time to project competition
Fully integrated process from project inception;
Maximization of planning & reduction of problems during
execution;
Knowledgeable alternative funding sources;
Good for large & complex projects
Single source expertise; 43
Disadvantage may include:
 Difficult to tender & not knowing the costs;
 Compatibility issues wit client;
 Quality based selection process(Negotiated);
 Client needs to make decisions quicker;
E.Finance/ Build-Operate-Transfer (B-O-T)
 B-O-T is a form of procurement and contract delivery system that
promotes Public Private Partnership ( PPP) in which a private
company is contracted to finance, design, construct, operate for a
certain period ( usually 10 years) and transfer the facility to the
Project Owner.
 The typical BOT project contract is the process whereby a
government grants a concession to a project development company
to develop & operate what would normally be a public sector
project, for a given period of time known as the concession period.
 BOT project involves a potentially complex contractual structure.

44
 F. Construction Management
 Under Construction Management the Owner contracts separately, but
somewhat simultaneously, with a design consultant and with a firm
whose primary expertise is construction (the Construction Manager).
 The owner procures the management services of the Construction
Manager (in most cases a general contracting construction firm) early
in the design phase.
 Construction Management should not be confused with Project
Management.
 Project Management implies a much broader set of responsibilities than
Construction Management.
 Project Management is the overall management by, or on behalf of, the
Owner of all aspects of a project from its inception through design,
construction & use.
 CM is of two types: CM At Free/as Agent & CM At Risk/as
Constructor. This distinction determines the contractual approach to
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CM.
 Cont…..
F.1. Construction Manager (CM) as Agent
This is a form of CM under which the Construction Manager
acts as an agent of and advisor to, the Owner.
The Owner enters in to multiple trade contracts with the trade
contractors & suppliers.
The Construction Manager is retained on a fee for services
basis & acts on the Owner’s behalf in managing & coordinating
the trade contracts in the best interests of the Owner.
The Owner retains all of the contracting risks inherent in each
of the trade contracts.
It essentially involves the Owner acting as its own general
contractor, with the assistance of a Construction Manager.
This form of CM is sometimes also referred to as the CM as
Advisor or owner contacted form of CM.
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Advantages may include:
 Provides a managing & administering for all phases of a
project;
 Treats planning, design, construction as an integrated tasks;
 Some costs & schedule control
Disadvantages may include;
 No contractual relationship with trade contractors;
 No contractual responsibility for outcomes of a project;
 Client retains the risks;

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F.2. Construction Manger (CM) At Risk (as Constructor)
• This is a form of CM under which the Construction Manager enters in to
multiple trade contracts with the trade contractors & suppliers.
• The Construction Manager assumes responsibility for the performance of the
trade contracts (subcontracts) much as a general contractor under the traditional
method, and is paid for the trade contract work on a cost reimbursable basis.
• The Construction Manager may, or may not, also provide a guaranteed
maximum price & schedule to the Owner under a cost plus type of
arrangement, or enter into a stipulated price contract, when the design is
sufficiently complete
Advantages
 Good for clients with insufficient staff;
 Owner flexibility;
 Responsible for time & cost overrun;
 Holds & manages the trade contractors;
 Constructability design review;
 Same legal position as a General Contractor;
 Works closely as a teaming effort & encouraging partnering & trust;

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 Disadvantages
 Duplication of administration & additional paperwork;
 More paper work for the client
 Some duplication of administration;
 Fast tracking difficult to control with designer & CM;
 Sometimes difficult to manage all phased packages with costs,
changes & schedules

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