Introduction
The RIBA plan of work covering these two topics can be seen by looking at the Plan of Work.
For non-architects it is useful to put what this means into context and how by changing the procurement route, the out-tern costs and the risks involved shifts.
Core processes.
A land or building owner has various obligations by simply owning a piece of land or property.
The obligations come in the form of:
Legal – the obligations included in the deeds
Statutory i.e. what is included in legislation
Contractual, included in agreements with others connected with activities on the land or in the building.
When construction is carried out on the land or with a property, the obligations increase due to the construction activity. Depending upon the procurement route then some of the obligations and risks associated with the works can be transferred in whole or part to others, in return for a fee or profit via contractual mechanisms.
Legal – title deeds
These obligations remain with the owner.
Statutory.
Typically, some of the legislation covering construction works is:
Building Safety Act (Safe design of buildings)
Town and Country Planning Act (Local Authority Planning)
Construction (Design and Management) Regulations 2015
Control of Substances Hazardous to Health Regulations (COSHH) 2002
Health and Safety (Consultation with Employees) Regulations 1996
Health and Safety at Work etc Act 1974
Lifting Operations and Lifting Equipment Regulations (LOLER) 1998
Management of Health and Safety at Work Regulations 1999
Provision and Use of Work Equipment Regulations (PUWER) 1998
Work at Height Regulations 2005
Construction waste and Environment Act 2021
Site waste management plans 2008
The Conservation of Habitats and Species Regulation
Building Act 1984 (Building Control)
The Construction Act (Payments)
Public Procurement.
Within the legislation there are several roles which need to be formally appointed. Depending upon how roles and responsibilities are transferred in the contractual arrangements the appointment of responsible persons or staff to comply with the legislation must be made.
The persons or organisations who must be appointed are:
Principal Designer (CDM) – responsible for checking the designers of the building have considered how it is built and operated safely
Principle Designer (Quality) Responsible for checking the designers of the building have considered the construction will be safe.
Principal Contractor – Leads on safety implementation on site.
Procurement route and contractual arrangements.
Developer / contractor.
Some organisations are set up for buying land, obtaining planning permission then designing and building properties for sale. The majority of work is carried out in house. Developer contractors take on all the risks and manage them. They have overall control as they take projects right the way through from buying and owning the land to the sale of the properties.
The main risks at each phase are:
The condition of the land
Obtaining planning permission
Designing and building properties that sell for a profit
Overcoming external factors such as:
- Inflation
- Weather
- Regulation changes
- Labour supply
- Materials availability.
- Changes in buyers expectations / fashion
- Market prices at the time of sale
- Interest rates.
Traditional.
Organisations which are not Developer contractors do not have those resources. They will appoint an internal Project Manager (Client’s PM), to manage external parties, coordinate internally and report to the Board.
They will appoint an external design team who will prepare the scheme and obtain the necessary permissions to construct. The scheme at this time will not be sufficiently detailed to build but the concept and budget will be known approximately. (RIBA 2/3)
To obtain the lowest price to build it they will get the design developed and a Bill of Quantities or the materials and works needed to build out the project. The Bills will be tendered by Main Contractors and usually the lowest is selected. The main contractor then is appointed to build the project and any changes along the way priced as extras or variations. (RIBA 5)
The appointment of the designers and the contract signed with the Main contractor are separate. There are variations on this with some elements being designed or coordinated by the main contractor, but for the purpose of understanding the relationships imagine they are separate.
As works have been outsourced the management of the project and associated risks are transferred. The Main Contractor will allow for those risks in the level they set their profit at for accepting those risks. Typical risks are price changes from the time of tender, performance of their supply chain, wastage and weather etc. The level of profit a main contractor on a small project might expect to make for carrying those risks is 5-15% depending upon the complexity of the project and market conditions.
Within the Site costs and overheads all the other costs to manage the project are quantified. These costs include compliance with all the statutory obligations mentioned above.
Design and Build.
Clients who have procured more than one project often find that the variation account adds considerably more to their final bill for the project compared to the price the main contractor tendered at. This is due to design clarifications and changes for which they are responsible as they appointed the design team separately and the contract with the main contractor allows for these to be added legitimately to the main contractors account.
To reduce the additions, Design and Build Contracts evolved. The client sets out what they want in the “Employers requirements” and the main contractor then prices to complete the design and build it. They include in their price for engaging with a design team, if they do not specialise and have one inhouse. There are no Bills of Quantities issued and detail of the design will be limited. The main contractor is therefore taking more risk and will expect a higher profit. An increase to 10-20% is not unreasonable. But it provides early certainty on the price for the Client compared to the traditional method where variations gradually increase the overall price.
Construction Management.
On seeing these scenarios, a client might consider employing the supply chain direct and coordinating all the trades themselves. However, as they do not have the experience of the contractor, the organisation would be chaotic. A good main contractor makes it look easy. They could buy in a “construction manager” to do the organising and save the equivalent of the Main Contractors profit. The construction manager would be paid a fee for the work which is likely to be around the cost of the person plus profit that the main contractor uses. A considerable saving. There are however other costs e.g. the transaction costs of placing an order with a supplier and then paying the trade or for materials. The transaction costs could be considerable if there is many subcontract packages. The client also accepts the risk that as the subcontract packages are let the prices might not be as expected and there is not the certainty of a single price at the beginning of project when a main contractor is appointed.
Management Contracting.
If the impact of managing all the payments is not palatable, then using a management contractor might work for you. They arrangement is the same as Construction Management, but the client pays a single invoice to the management contractor and they pay the supply chain, essentially adding an accounts service.
In both Construction management and Management contracting, all the services required to satisfy your statutory obligations are met, and you see the cost identified as packages instead of being included in the Main Contractors overheads or Site Preliminaries (Site supervision & attendance costs).
If you would like help considering the alternative procurement routes and assembling a team for a project, please contact Peter.Searle@ba4cs.co.uk
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