CONS6817_S03'16

Procurement (CONS6817) Lara Tookey
PROCUREMENT – SESSION #3
Evaluation of Separated and Integrated variations
Introduction to Management techniques

Today:
• Review of the Traditional (DBB) and Design &
Build (DB) procurement options
• Evaluate alternative integrated procurement
options in relation to client objectives
• Introduce Management procurement
options

user
owner
developer
design team
contractor
subcontractor
supplier
Procurement system
financiers

DBB Process
• Client conceives project
• Client hires archi/enge
• A/E provides budget / feasibility
• A/E designs project
• GC bids for project
• C hires GC
• GC hires sub contractors & manages
construction

Defining characteristics
• Linear / Sequential process
• Design led - Bespoke results
• Detail design drawings completed – time
consuming
• Has no input from contractor – limitations?
• Competitive tendering on completed briefing
documents
• Q/A – all parties are self governed

• Considered to be a transparent process
therefore fair
• Reasonable price certainty therefore Fixed
price contract
• Subject to design changes and flexibility
• Well understood process
• Well defined relationships

• Client not heavily involved in construction
process
• Reduces risk to client – no uncertainty
• Contractor does not start construction
process until design / tender process is
complete.
• Changes easy to arrange (dependant on
progress of works)

Quick overview of DB Process
• Client assembles team of advisors
• Project manager – process and brief
• Quantity Surveyor – establishment of budget
• Lawyer – propose contractual arrangements
Only as
required by
the client

DB Process
• O contracts with a single entity to provide the
design and to construct the project (according
to that design).
• The contract could be negotiated with a single
design-builder or result from competitive
proposals.
• Call for proposals (tendering stage)
• Sent to short list of capable D&B contractors
• Response includes
• Statement of capability
• Sketch plan
• Pricing structure

• DB provides the owner with a single point of contact
for project responsibilities, eliminating the need to
assist in resolving designer – contractor disputes.
• With the contractor playing a major role in design,
costs are typically defined to a greater degree.
• The DB’lder makes many decisions that the owner
would make under DBB, due to delegated and
increased authority.
• DB contracts with all A/E firms and subcontractors.

Defining characteristics
• Single point of responsibility
• QA & performance responsibility issues?
• Early determination of final price and schedule.
• Lump sum / Guaranteed maximum price / priced
schedule
• Contractor can manage the design & build
phases overlap and give better control over the
end date.
• Clearer assignment of risk
• Innovative technical solutions

• Can take time to negotiate the contract
• (design needs to be advanced enough for the
client to know what they are buying).
• No certainty that a “best price” has been
achieved.
• Rushing to a contract price before the brief is
clear can lead to later scope creep and
budget blow out.
• Hard to specify quality levels in the contract.

• Differing objectives & priorities
• Different levels of experience
• Different attitudes to the risks they are
willing to take
Clients
>>DEPARTMENT of CONSTRUCTION

How can the design
disadvantages be
overcome or minimised?

Same as Design Build, BUT
• The Client selects a design team and works
with them through brief and sketch plan
phases (sometimes through developed
design).
• A sketch / developed design / outline
specification are produced by this design team.

Novated Design Build
• Through a bid or negotiation process a contract
is agreed with a contractor to finalise the design
and construction of the building.
• As part of that agreement the contract(s) between
the designers and the client are transferred
(novated) to the contractor.
• The contractor selected then takes
responsibility for the development of the
construction details (working drawings) and
construction.
• The design team are ‘novated’ to the contractor.
Novate ~ Law the substitution of a new obligation for an old one by mutual agreement
between the parties

Novated Design Build
Feasibility
Design
Construction
SketchPlan
Developed
Design
Construction
Drawings
Appointment
of design team Appointment of
Contractor
Design team novated from client to
contractor

Today:
• Review of the Traditional (DBB) and Design &
Build (DB) procurement options
• Evaluate alternative integrated
procurement options in relation to client
objectives
• Introduce Management procurement
options

Procurement (CONS6817) Lara TookeyOur focus for the course

Package Deal
• The precursor & originator of DB.
• Clients wanted to purchase a total package (off
the shelf).
• To satisfy need for speed and economical pricing
• May include land
• May be:
Standard house design e.g. Jenian Homes, Lockwood
Homes etc
Standard sheds or farm buildings e.g. Skyline,
Totalspan

Difference between DB and PD
• Design & Build
• Provides bespoke design solution to suit clients
specific requirements.
• Package Deal
• Uses a proprietary building system in order to
produce a scheme.
• The building type is often modular so that its
size can be adjusted.

Turnkey
• A variant which includes the process plant
within the building.
• Used for projects (more industrial) that are
designed, built, and put into operation
before the project is turned over to the
owner.

• The company providing the turnkey service
may:
• Secure the land for the project;
• Perform / coordinate all aspects of the design;
• Arrange / administer the construction contract;
• Manage construction;
• Staff & train the personal to operate the facility;
• Turn the project over to the owner.

Develop & Construct
• The contractor also acts as the developer, or
the developer also acts as the contractor and
takes responsibility for the development,
design and construction phases
• A common variant to this in NZ is the ‘design-
build-leaseback’ approach to developing
industrial buildings.

User
Owner
Developer
Designer
Contractor
Subcontractor
Supplier
Financiers
So Far………..

User
Owner Developer / Contractor
subcontractor
supplier
financiers
Now………..

Develop & Construct
• The developer has their own construction
team and plays the role of the construction
contractor as well as that of developer.
• Example:
• Manson Developments
• Multiplex
• Industrial building developers

Develop & Construct examples
Lumley Building
Manson Developments
Delloite Centre
Brookfield Multiplex

Design – Build -
Leaseback

Design – Build - Leaseback
• Typically initiated by developer / contractor
• most often for industrial buildings
• Developer finds client (C1) who wishes to lease
a custom designed building.
• Developer puts together a development
proposal which includes C1 as lessee.
• Developer then sells the development to an
investor (C2) as a complete package including
the tenant (C1).

Design – Build - Leaseback
User (tenant)
owner
Developer / contractor
subcontractor
supplier
financiers
Lease
agreement
transferred
from
developer
to owner
Contract to purchase the building
with tenant in place
Lease agreement initially established
between developer and tenant

WHAT ABOUT MANAGEMENT?

Traditional Role of the
Architect
Architect
Clients
Representative
Project Manager
Design Team
Leader Architect (Engineer) to
the Contract
Designer

Separation of management and
design functions
• Project Manager
• Responsible for managing the overall process and
coordinating the design team and the construction
team
• May also be the design manager
• Design Architect
• Lead designer
• May also be design manager
• Design Manager
• Responsible for coordinating all members of the design
team

Service offered by Manager
• Based on a fee
• Coordination
• Planning
• Controlling
• Managing design
• Managing construction
• Ensures contractor part of client team from outset
• Maximum construction experience fed into design.

Integration of Design &
Construction
Objectives can include:
• Need for contractor input into design phase:
• Build efficiency
• Incorporation of proprietary systems of contractor
or subcontractor
• Construction programming requirements effect
design
• Fast tracking requirements
• Coordination of the design outputs with overlapping
construction programme
• Construction contractor as project manager

Used when…..
• Project is large & complex
• Fast-track procurement required
• Client wishes to select designer separately
• Often a result of a competition
• Work is not sufficiently designed prior to
construction
• Design and technology designed in tandem – early
contractor involvement essential

Used when…..
• Project is organisationally complex
• Flexibility is required throughout
• Less adversarial approach is preferred
• Choice of competitive tendering for each element
is preferred
• Target price rather than fixed lump sum accepted.

Management
Orientated
Procurement
Options
Construction
Management
Management
Contracting
Design &
Manage

Office Building Whittaker Place
• Project Managers: Carson
Group
• Architects: Warren &
Mahoney
Included Design Management function

Sky City Casino & Tower
• Project Managers: Carson
Group (now Coffey
Projects)
• Design Managers: Beca
• Architects: Moller
Architects
• Management Contractor:
Fletcher Construction
Fee plus GMP & gainshare

Te Papa – Museum of New Zealand
• Project Managers: Carson Group
• Architects: Jasmax
• Construction Managers: Carson
Group
Construction packages included,
• moving existing buildings
• ground consolidation and foundations,
• main building,
• major services packages,
• fit out & displays

These management
orientated systems are
normally an overlay of a
separated or integrated
system (most often separated)

What impact does
design certainty have on
procurement?

Fully
Developed
Design
Undeveloped
Design

Lump
Sum
Guaranteed
Maximum
Price
Cost Plus
Fully
Developed
Design
Undeveloped
Design

CONS6817_S03'16

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