When it comes to a capital project, whether this is the construction of a new manufacturing/RD facility or office premises there are three key factors for any business to consider: time, cost and quality. Delayed completion can affect business reputation, marketing and leases ending on other premises.
All projects have a budget and although there is no such thing as a “fixed price” construction contract, the risk of cost and time overruns have to be kept to a minimum and managed. Quality and workmanship is essential to any project in order to meet a business’ objectives whether this is to achieve a required level of output or reduce energy consumption for example, and the level of your input to the design will differ between projects. Your attitude to the risk allocation for each of these aspects will affect your choice of procurement route.
DESIGN AND BUILD (“D&B”)
With D&B procurement you engage consultants directly to prepare a list of technical requirements for the works; which stipulates the end result required. Tenderers submit their proposals for how they intend to fulfil those requirements. The contractor has control over the detailed design and because of this it is not unusual for more risks which could impact on the successful delivery of the works to be passed to the contractor, so introducing greater time and cost certainty for the employer.
The contractor is a single point of responsibility for the design, construction and commissioning of the works; however, as a consequence of this and any other risks it agrees to accept, the price will usually be higher. There can be an overlap between detailed design and construction activities being carried out resulting in a reduction of the overall project period. Funders tend to prefer D&B procurement because of the greater cost certainty. The potential downsides to this approach are that it can be difficult to compare tenders because each design will be different and the works programmes will vary. You have less control over the detailed design, quality of the development and the contractor’s profit.
Using traditional procurement you engage a contractor to construct the works based on detailed designs which you have procured using your own design team. The contractor is responsible for materials and workmanship (including any sub-contractors it engages) but not design unless expressly provided for in the contract. There is a complete separation between design and construction and therefore requires a full set of detailed drawings before the works can be tendered, which can be time consuming to prepare but it does mean that you retain greater control over the design and quality of the development. However it does create greater difficulties if problems with the project arise following completion. Tenders are easier to assess as all bids are on the same basis, however, if there are any inadequacies in the designs or subsequent changes are required or information is delayed, the contractor can claim additional time and/or money.
This form of procurement would mean you engage consultants to produce all relevant design and a management. The contractor is engaged to manage the construction on site without carrying out any of the construction itself. Their fee is usually calculated as a percentage of the estimated total costs for the project. The construction is separated into works packages and the management contractor engages and manages each of the trade contractors but takes no responsibility for the works themselves and ultimately, if there is any defect in the works, you would need to pursue any trade contractor individually. It can allow for greater flexibility as design can be prepared or adjusted as works commence, however, there is no single point of responsibility for design or construction and there is no certainty regarding costs or programme. Overall responsibility for quality can be diluted between the design consultants, management contractor and works contractors and it is not possible to ascertain the ultimate cost of the project in advance, but it can result in a project being available in a short period of time. Under this procurement route it would not be unusual for you to retain more risk which would result in pressure being placed on the budget for the project unless sufficient contingencies have been allowed for.
Because of the perceived benefits of greater cost and time certainty we see a number of employers preferring D&B Solutions. In our experience it is not a case of one size fits all and each project should be considered individually, having regard to the commercial obligations and risks associated with the project to decide which is the most appropriate procurement route, let alone which contract to use.