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Contract Procurement

• Traditional procurement methods
• Design and Build procurement methods
• Management procurement methods
• Further reading (on the Building Contracts page)

Traditional procurement methods

• The client appoints the consultant members of the Design Team who prepare a full set of project documentation prior to the tender.
• The contractor is generally appointed after competitive tendering although negotiation is possible.
• On larger contracts there is increasing use of what has become known as "two stage tendering". Contractors generally tender for the Preliminaries, overheads, and profit against the level of information appropriate to the Scheme Design stage. The Design Team then works in conjunction with the appointed contractor during the Production Information Stage. The intention behind "two stage tendering" is to achieve a higher degree of cost certainty, in a shorter overall time period, than has traditionally been the case for lump sum contracts.
• The client may exercise some control over which specialist companies the contractor appoints to carry out certain parts of the work.
• The contractor generally has no responsibility for the design of any of the works. Most of the JCT suite of contracts do, however, make provision for specific areas of the work to be designed by the contractor (or more likely a specialist sub-contractor) using the Contractor's Designed Portion Supplement.
• Cost/Time/Quality: Traditional methods are biased more towards control of cost and quality than control of time.
• Risk: Is fair and balanced between client and contractor. Read more on the Building Contracts page.

Design and Build procurement methods

• The client generally appoints the consultant members of the Design Team who prepare a set of project documentation appropriate to the amount of control which the client wishes to exert over the design. This may vary from a very basic statement of requirements up to something very close to the documentation produced for traditional procurement methods.
• The contractor may be appointed after competitive tendering or negotiation. Negotiated design and build contracts are very popular with major clients who have a regular building programme of similar buildings, e.g. national retailers and distribution companies. The contractor then appoints his own design team to complete the work started by the client's team.
• The client has little or no control over the detailed design, or over the companies appointed by the contractor to carry out the work. Unless the client makes specific provisions, they will have no control over who the contractor appoints as the design team to complete the design of the project on their behalf.
• This lack of control over the appointment of the Design Team has led to an increasing use of "novation" - the process whereby the consultants are employed by the client to design a building and prepare the tender documentation, and the same consultants are then "novated" to the successful design and build contractor to complete the design and prepare the production information. Novation places a very specific set of requirements on the Design Team and consultants working on design and build contracts must always be aware of the specific constraints of their current project - they should not assume that all design and build contracts are the same.
• It is not unusual for the client's original Design Team, particularly the architects, to be retained in an over-seeing role throughout the construction contract to ensure that the contractors are building in accordance with the client's requirements (known as the "Employer's Requirements" in the JCT contracts). When this is coupled with "novation" it is even more important for consultants to be continually aware of the specific constraints of their current project. It is not unusual for the larger firms of consultants to have one team of staff working for the client, and another completely different team working for the contractor, but this contractual luxury may be unavailable for smaller firms of consultants.
• Cost/Time/Quality: Design and Build methods are biased more towards control of cost and time than control of quality.
• Risk: Is biased heavily towards the contractor. Read more on the Building Contracts page.

Management procurement methods

• Management methods are most suited to large and/or complex projects, particularly those where early completion is an important factor.
• Management methods require a much higher degree of trust between client and contractor than either traditional or design and build methods. With construction management the level of trust must be equal to the trust between the client and the consultants. Many clients develop long term relationships with construction management companies, although often choosing different consultant teams for different projects.
• Management methods may appear to be biased away from control of cost. This is rarely of practical concern for clients and Design Teams experienced in this method of procurement and, indeed, a high level of cost control can be achieved for most projects. This does, however, generally depend on the client organisation having in-house expertise to manage the client-biased risk inherent in management procurement methods.
• Management methods first became popular in the UK during the building boom of the mid-late 1980s when management contracting was the favoured route. More sophisticated clients saw the benefits of construction management and many have continued to use this procurement method ever since. The use of management contracting seems to have declined over the same period, generally in favour of the traditional methods coupled with "two stage tendering". This offers many of the time benefits of management contracting but with a greater degree of cost certainty and less management input from the client.
• Although standard forms of contract are available bespoke forms are quite common, particularly for construction management.
• Cost/Time/Quality: Management methods are biased more towards control of time and quality than control of cost.
• Risk: Is biased heavily towards the client. Read more on the Building Contracts page.

There are two main types of management procurement in the UK and, although very similar in many ways, it is important to understand the significant differences between the two methods:

Management Contracting

• The management contractor, often selected by a process not dissimilar to that used for "two stage tendering" under Traditional Procurement, is appointed by the client. The management contractor then employs a number of 'works contractors' to carry out the actual building work.
• Before management methods were introduced to the UK sub-contracting was generally restricted to the installation of services, and a few other specialist trades, with most 'traditional' contractors still directly employing a significant number of tradesmen.
• Now that very few contractors employ tradesmen directly, and almost all work is sub-contracted, the differences between management contracting and traditional procurement methods are almost totally contractual rather than practical.

Construction Management

• The construction manager is employed by the client in a similar manner to all the other professionals and becomes a member of the Design Team. The works contractors are employed directly by the client and have no direct contractual relationship with the construction manager.
• As the differences between traditional procurement methods and management contracting have become blurred, so the differences between management contracting and construction management have been heightened.

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