FINAL_FINAL_PROJECT_COMBINED[1]

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KWAME NKRUMAH UNIVERSITYOF SCIENCE AND TECHNOLOGY, KUMASI
COLLEGE OF ART AND BUILT ENVIRONMENT
DEPARTMENT OF BUILDING TECHNOLOGY
TOPIC:
CHALLENGES FACED BY CONTRACTORS USING DESIGN AND BUILD
CONTRACTS
A project report submitted to the department of Building Technology in partial fulfilment of the
requirement for the award of BSc (Hons.) degree in Quantity Surveying & Construction Economics
BY
ALI ABDUL FATAWU
SUPERVISOR
PROF. AYARKWA JOSHUA.
MAY, 2015

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DECLARATION
I hereby declare that, this project report is the result of my own work, except for the literature whose
sources have been explicitly stated and that, this thesis has neither in whole nor in part been prescribed
by another degree elsewhere.
ALI ABDUL FATAWU …………………………………………. …………………….
(STUDENT) (SIGNATURE) (DATE)
Certified by
PROFESSOR AYARKWA JOSHUA ………………………………………. …….………….
(SUPERVISOR) (SIGNATURE) (DATE)
DR.B.K BAIDEN …………………………………………….. …….……………...
(HEAD OF DEPARTMENT) (SIGNATURE) (DATE)

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ABSTRACT
Design and build construction process has been part of the construction industry. As it has grown
much in popularity, design and build has evolved all manner of hybrids. It is mostly popular with the
execution of residential projects and also very complex industrial equipment or plant. In Ghana
however, design and build contract has not seen much development, i.e., no proper procurement route
has been outlined for the execution of large and governmental projects using this system. With all
that, Design and Build contract does not exclude problems such as conflicts between contractor and
other parties (consultant and owner), inadequate experience of consultant, problems communication
and coordination by contractor with other parties by contractors in the construction industry. The aim
of the study is to identify the common challenges faced by the contractor and suggest measures for
it. The questionnaires were distributed to the D3 and D4 contractors registered in the Kumasi
metropolis. The data from the questionnaire were analyzed with descriptive analysis. From the survey
conducted, it was concluded that, mostly design and build contracts are used for residential purposes
where the client hires a contractor to provide services. Also, through this survey, some common
challenges such as client not involved in controlling design, change materials order by client during
construction, insufficient time to evaluate tenders, delays in progress payment by owner to the
contractor and sometimes progress payment for contractor not in time faced by the contractors were
identified. As a result of this, the information obtained, provided guidance for measures to be
developed within the research to provide ways of preventing the situations. These measures were as
follows: setting realistic deadlines and avoid publishing the completion date before it is firmed-up,
effective communication and more coordination between contractor and consultant, and Scrutinize
contractor's financial capacity and track record, etc.

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ACKNOWLEDEMENT
In works of this nature, it is very complex indeed, if not impossible; to recollect all the sources of
ideas used or adequately acknowledge debts where they are due. Any observed failure of such
acknowledgement should not be taken as intellectual dishonesty or ungratefulness. Such ideas might
have been completely absorbed in my thinking, that they become unnoticed as my own.
I'm very grateful to the Almighty Allah for His direction and protection throughout this research
work.
My special gratitude goes to:
My supervisor Professor Ayarkwa Joshua, Deputy Director, Institute of Distance Learning, KNUST,
Kumasi for his guidance, supervision, useful suggestions, encouragement and constructive criticisms
throughout this research and also to my co-supervisor Mr. Acheampong Alexander for his priceless
assistance and encouragement he gave me. I’m most grateful.
All lecturers of the Department of Building Technology for their tremendous assistance and
encouragement during my university education and all persons and organizations who took part in
this research or gave me access to information needed to be obtained for the research.
Finally, my greatest thanks to my parents for their prayers, support and encouragement during my
study and my brother, whose continuous inspiration and love motivated me to work hard to complete
the course.
Last but not the least to Ing. Benjamin Smith, Maintenance engineer, Department of urban roads,
Ejisu- Kumasi for his immense support and encouragements during my study

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DEDICATION
I dedicate this research work to Almighty Allah through whose guidance and protection I have been
able to reach this far in my education.
Secondly, to the people who gave meaning to my life, my parents and my late brother and mate
ABUBAKAR SURAJ who lost his life during his final year of study.

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TABLE OF CONTENTS
DECLARATION.......................................................................................................................................ii
ABSTRACT..............................................................................................................................................iii
ACKNOWLEDEMENT ........................................................................................................................... iv
DEDICATION........................................................................................................................................... v
TABLE OF CONTENTS.......................................................................................................................... vi
LIST OF TABLES....................................................................................................................................ix
LIST OF FIGURES...................................................................................................................................x
CHAPTER ONE........................................................................................................................................ 1
INTRODUCTION .....................................................................................................................................1
1.1 BACKGROUND .............................................................................................................................. 1
1.2 PROBLEM STATEMENT............................................................................................................... 3
1.3 AIM.................................................................................................................................................. 4
1.4 OBJECTIVES..................................................................................................................................4
1.5 SCOPE OF STUDY.......................................................................................................................... 4
1.6 METHODOLOGY........................................................................................................................... 5
1.7 SIGNIFICANCE OF STUDY........................................................................................................... 5
CHAPTER TWO.......................................................................................................................................7
LITERATURE REVIEW.......................................................................................................................... 7
2.1 INTRODUCTION............................................................................................................................ 7
2.2 DEFINITION OF CONTRACT.......................................................................................................7
2.3 PRINCIPLES OF CONTRACT.......................................................................................................8
2.4 ELEMENTS OF VALID CONTRACT ............................................................................................ 9
2.5 COMPOSITION OF THE PROJECT TEAM................................................................................ 10
2.5.1 Client/Developer....................................................................................................................... 10
2.5.1.1 Roles of the client................................................................................................................... 12
2.5.2 Architect.................................................................................................................................. 12
2.5.2.1Roles of the architect.............................................................................................................. 12
2.5.3 Consulting Engineers ............................................................................................................... 12
2.5.4 Quantity surveyor (QS)............................................................................................................ 13
2.5.5 Contractor................................................................................................................................ 13

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2.5.5.1 Roles of the contractor........................................................................................................... 13
2.6 TYPES OF CONTRACT................................................................................................................ 14
2.6.1 Contracts Based On the Method of Procurement..................................................................... 14
2.6.1.1 Traditional Systems............................................................................................................... 14
2.6.1.2 Non-Traditional Systems ....................................................................................................... 16
2.6.1.2.1 Integrated Systems.............................................................................................................. 16
2.6.1.2.2 Management Oriented Systems........................................................................................... 18
2.6.1.2.3 Contemporary Procurement Systems ................................................................................. 20
2.6.2Contracts Based On the Pricing/Payment Criteria.................................................................... 22
2.6.2.1 Fixed Type of Contract.......................................................................................................... 22
2.6.2.2 Cost Reimbursement Type of Contracts ................................................................................ 23
2.6.2.2.1 Cost plus fixed fee contract................................................................................................. 24
2.6.2.2.2 Cost plus percentage fee contract........................................................................................ 24
2.6.2.2.3 Target cost.......................................................................................................................... 24
2.7 TRADITIONAL / CONVENTIONAL CONTRACT................................................................... 25
2.7.1 The Effects of the Conventional Contract on Project Performance .......................................... 26
2.7.2 Advantages and Disadvantages of Conventional Contract........................................................ 27
2.8 DESIGN ANDBUILD CONTRACT.............................................................................................. 28
2.8.1 The Effects of the Design-Build Contract on Project Performance ......................................... 29
2.8.2 Advantages and Disadvantages of Design-Build Contract...................................................... 30
2.9 CHALLENGES FACED BY THE CONTRACTORS ................................................................. 32
CHAPTER THREE................................................................................................................................. 35
RESEARCH METHODOLOGY............................................................................................................. 35
3.1 RESEARCH APPROACH ............................................................................................................. 35
3.2 DATA COLLECTION AND SURVEY DESCRIPTION................................................................ 35
3.3 SAMPLING AND SAMPLE SIZE ................................................................................................. 35
3.4 CONTENTS OF THE QUESTIONNAIRE .................................................................................... 37
3.5 DATA ANALYSIS AND PROCESSING........................................................................................ 37
CHAPTER FOUR ................................................................................................................................... 38
DATA ANALYSIS AND DISCUSSION................................................................................................... 38
4.1 INTRODUCTION.......................................................................................................................... 38
4.2 RESPONDENT PROFILE............................................................................................................. 38
4.2.1 Position in company ................................................................................................................. 38
Table 4.1 Position in company ................................................................................................................. 39
4.2.2 Level of Qualification............................................................................................................... 39

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4.2.3 Experience of company ............................................................................................................ 40
4.2.4 Experience of respondent......................................................................................................... 41
4.2.5 Involvement in Design and Build.............................................................................................. 42
4.2.6 Type of project......................................................................................................................... 43
4.2.7 Type of Design and Build form................................................................................................. 44
4.2.8 Number of Projects .................................................................................................................. 45
4.3 CHALLENGES FACED BYCONTRACTORS USING DESIGN ANDBUILD CONTRACT ...... 46
4.3.1 Discussions ............................................................................................................................... 50
4.4 MEASURES TO IMPROVE THE SITUATION............................................................................ 51
CHAPTER FIVE..................................................................................................................................... 55
CONCLUSIONS AND RECOMMENDATIONS..................................................................................... 55
5.1 INTRODUCTION.......................................................................................................................... 55
5.2 ACHIEVING RESEARCH OBJECTIVES.................................................................................... 55
5.2.1 Objective 1: To compare designs & build contract and conventional contract ......................... 55
5.2.2 Objective 2: To identify the common problems and the factors faced by the contractor........... 56
5.2.3 Objective 3: To suggest measures to improve the situation....................................................... 56
5.3 CONCLUSIONS ............................................................................................................................ 56
5.4 RECOMMENDATIONS FOR THIS STUDY................................................................................ 57
5.5 LIMITATIONS............................................................................................................................ 57
REFERENCES....................................................................................................................................... 58
APPENDIX 1........................................................................................................................................... 61

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LIST OF TABLES
Table Page
4.1 Position in company…………………………………………………………………………….39
4.2 Type of project ………………………………………………………………………………44
4.3 Type of Design and Build ………………………………………………………………………45
4.4 Number of project ………………………………………………………………………………49
4.5 Challenges faced by the contractors…………………………………………………………….50
4.6 Descriptive statistics for measures …………………………………………………………….54

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LIST OF FIGURES
Figure Page
1 The So-called triangle of time, budget and required quality ………………………………………11
4.1 Level of qualification …………………………………………………………………………..40
4.2 Experience of firms………………………………………………………………………………41
4.3 Experience of respondents……………………………………………………………………….42
4.4 Involvement in Design and Build ………………………………………………………………..43

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CHAPTER ONE
INTRODUCTION
1.1 BACKGROUND
Construction is an assembly of materials or components which function together to make up part of
a building (Nikolas & Erkki , 2008). It is the means by which property is usually created in the built
environment (villages, towns and cities). It includes not just “new” buildings but the conservation,
maintenance and redevelopment of buildings in accordance with economic and social requirements.
The construction industry is a branch of economic activity whose purpose is to build by fixing parts
together and by managing it. The construction industry occupies a focal position in the economy of
any nation because it is an important contributor to the process of development (Ogunsemi & Aje ,
2006). The effects of changes in the construction industry on the economy occur at all levels and in
virtually all aspects of life (Hillebrandt , 2000).
Moreover, construction has a strong linkage with many economic activities, and whatever happens
to the industry will directly or indirectly influence other industries and ultimately the wealth of the
nation (Ogunsemi & Aje , 2006).
A typical construction industry consist of the following groups; architects, engineers, quantity
surveyors and builders on the periphery of the industry, the planners, economists, lawyers and
accountants. There is also the contractor who may range from a single individual to a multinational
company, suppliers and manufacturers, sub-contractors of various types and specialist firms who do
highly skilled works. The most important person, however, is the client, without him the remainder
are merely a theory. Clients who require the construction of a building or engineering project must
make arrangements with both a designer and a contractor for the execution of the works. The
industry has developed a variety of procedures to meet this demand and is constantly examining its

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method to improve clients’ satisfaction (Willis & Ashworth , 1987). Drawings, written
specifications, various contractual conditions and a signed agreement form a set of contract
documents that legally binds the parties together.
Designers and contractors depend upon their ability to communicate. Designers for instance, are
dependent on the ability of contractors to translate, interpret and the implement the ideas created by
the designer. Unfortunately, a designer must deal in symbolic models, which contractors must use
to form an image of what they must construct with sufficient accuracy to permit them to place a
price on their work. With such an inter-dependent need for understanding based on a primitive
means of information exchange, ample opportunity exists for communications to be misinterpreted
(Roberts , 1983). Inefficiencies during construction result from lack of interaction between
contractors and designers (Tommelein & Ballard, 1997). This is the situation that exists in the
traditional design-bid-and build method.
There has in recent years been a move towards design and build of one sort and another, and other
alternative forms of contracting, and although there are undoubted merits in this, there are demerits
and it is certainly no panacea for every construction. Design-build (D&B) is a project delivery
method in which the D&B contractor is contractually responsible for both design and construction
works (Songer & Molenaar , 1997). This must be undertaken to the satisfaction of the client.
In Ghana, very little can be said about the transformation in the construction procurement landscape
as more than 90 percent of construction projects are still procured through the conventional design-
build-build (DBB) procurement method (Obeng-Ayirebi , 2002) to the neglect of other innovative
procurement methods like the integrated system (design and build) which is now the leading trend
in the construction industry in the world (Akintoye, 1994). Advantages include facilitating faster
construction and lower cost (Akintoye, 1994).

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The design and build system of contracting is best suited to projects when: the construction
commencement and completion times are required earlier than may be achievable under the
traditional system, innovation in design is desirable, cost certainty is required at the commencement
of the design and construction phase.
1.2 PROBLEM STATEMENT
One of the main goals of the construction industry in Ghana is to contribute to national socio-
economic development by providing the buildings which are used in the production of goods and
services in the economy. Therefore for the erection of these buildings, a contractor must be selected
and the selection of a contractor to carry out a construction project is an important matter that
requires extreme care. Contractor selection is a critical aspect in the management of every
construction projects (Ng & Skitmore, 1995).
Cost overruns, project delays etc. can be evident in most construction projects and these are mostly
attributed to the traditional method of contracting. Most projects in Ghana today exceed cost overrun
between 60-180% and delay between 12-24 months (Nicco-Annan , 2006). This usually leads to
disputes resulting to claims and the likes. A little progress has been made toward this by a shift to
the design and build method and its variant forms.
Design and build contracts has seen a little acceptance in the Ghanaian construction industry where
most projects are procured through the traditional design-bid and build method showing a
percentage of 90 (Obeng-Ayirebi , 2002) to the neglect of the other routes of procurement. Though
the D&B method of contracting really seem to avoid all those instances mentioned earlier but it also
comes with its associated advantages and disadvantages. It has evolved its several variant forms
which are equally applied depending on the situation at hand.
This system requires a detailed brief from the client of what he wants the final project to be. The
inability of clients to give a detailed brief often results in a dissatisfaction of the client and this might

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result in the delay of the completion of the project. This serves as a platform for disputes and claims.
D&B contracts is characterized by short bid preparation time, aggressive competition during the
tender stage and lack of knowledge.
1.3 AIM
The aim of the study is to identify the challenges that contractors face when using the design and
build method of contracts in the Ghanaian construction industry.
1.4 OBJECTIVES
For the achievement of the aim above, the following objectives are articulated:
 To compare Design and Build contract and the Conventional contract.
 To identify the common problems faced by contractors when using the Design and Build
contract.
 To identify the effects of both the design and build and the traditional systems on project
performance.
 To suggest measures to minimize the challenges.
1.5 SCOPE OF STUDY
The scope of this study is to carry out a comprehensive research into the nature of the problems or
challenges faced by contractors who use the design and build contract. Since the whole of
contractors in Ghana could not be studied and also due to large number and different classes of
contractors, the survey will only be limited to D3 &D4 contractors in the Kumasi metropolis.

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1.6 METHODOLOGY
Previous works on the topic were looked at for better understanding of the study for questionnaires
to be prepared and given to professionals like Engineers, Quantity Surveyors and the likes in the
various D3 and D4 construction firms.
Specific questions that were asked included whether they had been part of a project procured using
the design and build contract and if they do, the possible challenges they faces. It also dealt with
the ways to minimize or eliminate such challenges.
Both primary and secondary data sources were used to obtain information on the challenges
the contractor goes through with the use of the design and build contract. The questionnaire was
used for the primary data, relevant books, journals, published and unpublished papers as well as
relevant information from the internet were relied on.
The study population was limited to contractors and the various professionals within the
contractor’s firm in the Kumasi metropolis. In all a sample size of fifty (50) was identified
using convenience sampling technique.
Data collected from the survey was analyzed and supported by quantitative figures where
appropriate. Tables were also employed where necessary. The Descriptive Statistics was employed
to determine the most significant challenges and also the most significant measures.
1.7 SIGNIFICANCE OF STUDY
The primary aim of this work is to find the problems faced by contractors using the design and build
contracts and to rank the common problems that they face. Also, to make comparisons by the design
and build contract and the other variant forms of it. The research is directly relating to the D3&D4

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contractors in the Kumasi metropolis. This study brings to light several contract forms which the
client will choose which best suits to a project at a particular in time. The measures developed will
be useful to clients, contractors and the government so as to overcome the problems the contractors
face when executing projects with the design and build method.

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CHAPTER TWO
LITERATURE REVIEW
2.1 INTRODUCTION
The context within which any study is undertaken needs to be defined in order to enhance the
understanding of its findings. This is the aim of this chapter which seeks to bring to light the
problems faced by the contractors and to rank the problems among them, give a comparison
between the design and build contract and the conventional/traditional contract, and also to the
effects of the conventional contract and design and build contract on project performance. This
chapter will also be focusing on what a contract is, its requisition and the types of contract, and also
reviews the various procurement systems (under design and build and the conventional contracts).
2.2 DEFINITION OF CONTRACT
William Hanson defined contract as a legally binding agreement made between two or more parties
by which rights are acquired by one or more to act or forbear (omissions, not to do something) on
the part of other(s),
In short it is an agreement between two or more parties which is intended to have legal
consequences. Thus, a contract is a legally binding agreement.
Pollock (1876) also defines contract as a statement or set of promises which the law will enforce.
The key issues of what a contract is may be looked at as;
 Whether or not there exist a promise or a statement
 Whether or not there are two or more parties

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 Whether or not promise or statement is enforceable in the court of competent jurisdiction
and
 Whether or not rights to acts or forbearance have been acquired
2.3 PRINCIPLES OF CONTRACT
The principles of Contract here talks about the rules governing the contract. All contracts undertaken
in any construction project should have common rules that make the contract legal to execute. The
following are common rules or characteristics of any contract be it a construction contract or
whatsoever (Osei-Asibey, 2011)
 Sanctity of Contracts: parties are at liberty to determine the terms of their contract. The
contractual obligations undertaken voluntarily under a contract are therefore sacred and
should be observed by all parties as such.
 Freedom of Contracts: Parties are free to enter into any kind of agreement that they so
desire, unless they do not have capacity to undertake the transactions, there is no legal basis
of the agreement or the performance of it is impossible. A person may not be under
compulsion to enter into a contract.
 Contracting Party beware: The principle of caveat emptor (let the buyer beware) applies
to contracting party. A contracting party is to ensure that a due diligence is undertaken,
warranties and undertakings are taken were necessary, and must seek professional advice
where necessary.
 Reasonableness: The court considers the reasonable man’s test in considering what is
reasonable in contracts. The reasonable man is the person ordinary layman or on technical
issues, the ordinary technical person reasoning.
 Intolerance of Fraud: Generally, law does not tolerate fraud, fraud Omnia vitiate, (fraud
vitiates everything). Fraud in the law of contract is actionable.

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 Protection of Innocent Third Party Purchaser: The law of contract protects the third party
who without fraud or deficiency obtains a contractual benefit.
2.4 ELEMENTS OF VALID CONTRACT
The general requirements for the formation of a valid contract include the following (Osei-Asibey,
2011)
 Offer: An offer is a definite promise to be bound or expression of willingness to contract
specified terms and be made to a particular person or class of persons or public at large.
Basically, an offer is an indication in words or by conduct by an offeror that he or she is
prepared to be bound by a contract in the terms expressed in the offer. Accordingly, the offer
has to be definite and final and must not leave significant terms open for further negotiation.
 Unqualified acceptance: Acceptance occurs when the party answering the offer agrees to
the offer by way of a statement or an act. Acceptance must be unequivocal and
communicated to the offeror: the law will not deem a person to have accepted an offer merely
because they have not expressly rejected it.
 Consensus ad idem (meeting of the minds): When both parties to an agreement both have
the same understanding of the terms of the agreement. Such mutual understanding is
essential to a valid contract. It is provable by the express provisions of a written contract,
without reference to any statements or hidden thoughts outside the writing.
 Consideration: Consideration is an essential element for the formation of a valid contract.
It may consist of a promise to perform a desired act or a promise to refrain from doing an
act that one is legally entitled to do. Consideration must have a value that can be objectively
determined.
 Intention to create legal relations: there has to be an intention to establish legality and the
contract must be achievable and legal (Harris & McCaffer, 2001).

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 Genuineness of consent: The intentions of both parties must be well understood when
agreements are being entered into. In a situation where one party (Z) does not actually intend
to enter into a contract or the consent is not genuine, then there cannot be a contract. The
effect of lack of genuine consent is that the contract is voidable.
 Contractual capacity of parties: The ability of a person whether artificial or natural to
enter into a contract.
 Legality of object: The object or context of the contract must be lawful and thus the contract
must be formed within the context of the law.
 Possibility of performance: A valid contract is enforceable if it is capable of being
performed. If a party enters into a contract that cannot be performed by the reasonable, the
court may not enforce it.
 Certainty of terms: The terms of a contract must be clear and certain but not ambiguous.
2.5 COMPOSITION OF THE PROJECT TEAM
A construction project team is a group of people who are responsible for the planning, designing
and construction of a project. The project team consists of a lot of participants but the ‘‘eternal
triangle’’ of construction consist of the owner, designer and the construction organization. All
project delivery systems include these three participants, with others often part of the project team
as well (Dorsey, 1997).
2.5.1 Client/Developer
This is the person or organization that is the principal beneficiary of the project. Generally, the client
has the significant authority regarding scope definition and whether the project should be initiated
and/or continued.

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They directly or indirectly employs all other personnel, with particular responsibility for appointing
the planning supervisor (usually the architect) and nominating the principal contractor (Chudley &
Greeno, 2005). The client requirements are summarized below;
 Quality: - the building must satisfy the needs of the client in terms of space, comfort,
aesthetics and function.
 Time: - the building should be available for use on the specified date of completion, that is,
at the time it is required.
 Cost: - every client would contract a contractor who can execute the project at the lowest
possible cost. The final cost of the building should be very close indeed to the original
estimate given to the client and that the building should be maintainable at reasonable cost
Obtaining a balance between these three (3) elements, Quality, Time and Cost, gives value for
money.
The figure below shows the relationship between the three elements.
Quality Cost
Time
Fig 1. The So-called triangle of time, budget and required quality (Westerveld, 2003)

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2.5.1.1 Roles of the client
According to (Chudley & Greeno, 2005), the roles of the client include;
 Chooses the design and construction teams
 Gives accurate description of his/her design brief
 Makes sure he obtains quality of work from competent professionals
 Ensuring the project is kept within budget
 Responsible for the settlement of all claims submitted by contractors and consultants
2.5.2 Architect
The main aim of the architect is to ensure that the client’s requirements/needs are realized and that
these needs are kept within the framework of his own concept of what should be the client’s request,
in the client’s brief to enable the client obtain a reasonable return on his investment (Chudley &
Greeno, 2005).
2.5.2.1Roles of the architect
 Formulates the financial requirements of the client brief to ensure that the project’s
functional and aesthetic demands are met within the client’s budget
 May recommend the appointment of a team of advisors including engineers and quantity
surveyors and also the main or sub-contractor or suppliers etc.
2.5.3 Consulting Engineers
He is engaged to advise and design on a variety of specialist installations, e.g. structural, services
security. They are employed to develop that particular aspect of the design within the cost and
physical parameters of the architect’s brief (Chudley & Greeno, 2005).

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2.5.4 Quantity surveyor (QS)
A quantity surveyor is a professional working within the construction industry concerned with building
costs. The QS is the financial advisor to the other members of the building team and the client as well
throughout all stages of the project.
He is engaged to prepare cost evaluations and bills of quantities, check tenders, prepare interim
valuations, effect cost controls, and advise the architect on the cost of variations (Chudley & Greeno,
2005). The QS is also engaged to provide legal working document between the client and the
contractor.
2.5.5 Contractor
Building construction is generally performed by labourers and craftspeople engaged for the purpose
by an individual or organization, called a contractor. The contractor signs an agreement, or contract
with the building owner under which the contractor agrees to construct a specific building on a
specified site and the owner agrees to pay for the materials and services provided (Jonathan &
Frederick, 2001).
2.5.5.1 Roles of the contractor
 Ensures that the project progresses in accordance with the contract conditions.
 Coordinates the tasks and responsibilities of other subcontractors
 Liaises with the client’s consultants to achieve the physical completion of the project
 Provide general and special attendance to the nominated and/or approved sub-contractors
and suppliers.

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2.6 TYPES OF CONTRACT
There are several types of contract that exist but they can be grouped under one of the following
heading below.
a) Contracts based on the method of contract procurement.
b) contracts based on the pricing/payment criteria
2.6.1 Contracts Based On the Method of Procurement
There basically two (2) types of procurement systems used in the construction industry.
a) traditional systems
b) non-traditional systems
2.6.1.1 Traditional Systems
a) Two Stage Tendering
Under this system of procurement, usually three or four very experienced contractors are invited to
tender at the first stage after detailed discussion with the client’s advisors on matters relating to the
type and scope of work and the ability of the contractors concerned (Harris & McCaffer, 2001). The
selection of a contractor may be based on bills of approximate quantities or schedule of rates. The
selected contractor works as a member of the design team, details are developed and bills of
quantities are prepared (Owusu-Manu, 2012).
At the second stage, the contractor is asked to submit a detailed price. In the situation where two
contractors are selected at the first stage, they are required to submit a detailed price after which the
most cost effective tender is acceptable. Where more than one contractor is involved in the second
stage of determining the price of the project, the contractor who tenders the more acceptable price
is accepted. The other contractor(s) are reimbursed with their second stage cost.

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b) Term Contracts
A term contract refers to a particular kind of work to be executed in a given period of time. This
type of contract is commonly used for repair and maintenance works. The general nature of the work
required is known but the extent cannot clearly be determined (Owusu-Manu, 2012).
There are, therefore, two (2) main methods are used to determine the extent and the value of work
executed.
 The work could be carried out on a dayworks basis where the hours of labour
employed and the quantities of materials used are paid for.
 It could also be executed on a measure and value basis by a reference to a schedule
of prices. This may be comprehensively pre-priced schedule to cover most
anticipated items that may be encountered in the repair and maintenance.
In both cases, it must be noted that the acceptance of a tender does not set up a binding contract,
because the exact extent of work to be executed is not defined. Each individual variation order issued
becomes a contract itself and the terms of the contract becomes a binding.
c) Continuation Contract
This type of contract is used in a situation during the construction period where the client may want
to provide additional similar structures which may be constructed after the completion of the original
scheme (Owusu-Manu, 2012). Such additions, often because of their size and scope, cannot be
regarded as variations. For instance, a project awarded to a contractor to build houses but due to the
increase in demand prior to completion, a continuation contract may be awarded to the same
contractor to build extra homes on adjacent site using the same contract prices adjusted only to allow
for increased cost caused by inflation.
This form of contract is best suited to situations where the scope, style and the nature of work are
similar.

16
d) Serial Contracts
This contractual system is used in a situation where the client intends to have a number of similar
projects in the future, for instance schools; a contractor can be selected at the outset following
competitive tendering on a master bill of quantities (Harris & McCaffer, 1989).This document then
acts as a standing offer open to the client to accept on the succeeding projects. The quoted rates are
used with a separate bill of quantities for each new contract updated for inflation (Harris &
McCaffer, 1989).
2.6.1.2 Non-Traditional Systems
a) Integrated systems
b) Management oriented systems
c) Contemporary procurement systems
2.6.1.2.1 Integrated Systems
The integrated systems combines the responsibilities of design and construction of the project
(Ashworth, 2001). Both responsibilities are contracted out to a single contracting organization. It is
also called a parallel or single responsibility procurement system whereby the client will only need
to deal with a single organization for both the design and construction for the proposed project
(Owusu-Manu, 2012).
Several contract forms fall under this section and they are discussed below,
a) Design and construct contract
b) Design and build contract
c) Turnkey contract
d) Package deal contract

17
a. Design and construct contract
Under this system, the client separately employs the advisor to arrange for an architect in the case
of building contracts or a civil engineer to produce the scope drawings generally relating to specific
functional or essential aesthetic details, and specifically a specification fully describing the design
(Harris & McCaffer, 2001). The contractor thereafter add more details to the drawings with his on
working drawings and secures all stator approvals including those needed from the advisor.
b. Design and build contract
With the design and build contract, the contractor is responsible for full design and construction,
embracing the production of aesthetic and working drawings together with obtaining statutory
approvals (Harris & McCaffer, 2001). Hence, there is no sharing of design responsibility at all.
c. Package deal contract
In the package deal contracts, the contractor uses readymade standard components, or elements, or
modules to produce a scheme which may not meet all the client’s needs (Owusu-Manu, 2012). With
this, many proprietary systems have been tried and tested over a period of years and thus likely to
be free of the initial construction defects which affect some bespoke buildings (Masterman, 2002).
d. Turnkey contracts
This is a construction contract in which the client and the contractor agree on a fixed contract sum
for a contract under which the contractor will take responsibility for the entire project (Majmudar,
2001). The construction company is held liable for exceeding the budget. The contractor is
responsible for the project from design through to the point where the key is inserted in the lock,
turned and the facility is immediately operational. Here the contractor is responsible for devising
the scheme, raising the finance, operating facility, and finally transferring ownership (Harris &
McCaffer, 2001). The common types include;

18
 Build Own Operate Transfer (BOOT)
 Build Own Operate (BOO)
 Design Build Operate (DBO)
 Lease Own Operate (LOO)
2.6.1.2.2 Management Oriented Systems
In the management oriented contract, the construction manager joins the professional team at the
earliest possible time prior to construction on equal terms to other consultants (Harris & McCaffer,
2001). Responsibilities cover preparing the overall construction programme and works packages,
steering these through the design stage, recommending/appointing contractor(s) and securing
smooth integration. The following systems will be addressed below;
a) Management contract
b) Construction management contract
c) Design, management and construction contract
a) Management contract
This is where a single management contractor is engaged early to provide planning, management
and co-ordination of construction who then sub-contracts the work in the normal manner (Harris &
McCaffer, 2001). Each subcontractor enters into a contract with the management contractor. He/she
does not undertake the actual construction, but as part of his/her services, provides and maintain all
the necessary site facilities (scaffolds, security, offices, plants etc.) and deals with any labour issues.
Overlapping of design and construction in the management contracting system can significantly
reduce the time requirement, resulting in an earlier return on the client’s investment. Also, the
contractor’s practical knowledge and management expertise are available to assist the design team.

19
There could be a possibility that the number of variations and amount of re-measurement required
may be greater than on traditional contracts because of greater opportunity to make changes in the
design during the construction periods, because of problems connected with the interface between
packages, and packages are sometimes let on less than the completed design information (Owusu-
Manu, 2012).
b) Construction management contract
Here, the construction manager is appointed by the client to oversee the construction of the project;
planning, management and co-ordination. The client first selects an architect/engineer to prepare
the construction documents for the project. The client then selects a construction manager through
competitive tendering based on experience and qualification (Owusu-Manu, 2012). The
construction manager is not allowed to carry out any construction itself, but takes responsibility for
advising the designer on buildability, including drawing up suitable work package contracts,
arranging procurement contracts and managing the bidding phases of the works contracts (Harris &
McCaffer, 2001).
c) Design, management and construction contract
In this system of procurement, principal contractors take responsibility for managing the design
phase. The initial scope design is often executed by the client’s own staff or an independent design
firm, and forms the basis for inviting tenders.
The contractor offering the lowest cost scheme for full design, management and construction is
normally selected but reputation, quality of service and management fee charged are also important
considerations (Harris & McCaffer, 2001).

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2.6.1.2.3 Contemporary Procurement Systems
a) Joint ventures
b) Partnering
c) Alliancing
d) New engineering contract
a) Joint ventures
Ramus et al. (2006) cited NJCC (1996) which defines Joint venture (JC) as the partnering between
two or more companies covering building, mechanical and electrical engineering, or other specialist
services for the purpose of tendering for, and executing a building or civil engineering contract, each
of the participating companies having joint and several liability for their contractual obligations to
the employer. Members of a joint venture can be sole proprietorships, partnerships, or corporations,
but the joint venture is a separate business entity.
The participants in a joint venture enter into agreement that defines the aims of the association and
clearly delineates such matters as the advance working capital, the percentage interest of each
participant, which contractor will play the leadership role, termination of the agreement etc.
(Clough, 1986).
A joint venture, if properly used can be a means of pooling resources and facilities and for spreading
risk. JC is desirable when a contractor is contemplating work in a new geographical location
(Clough, 1986).
b) Partnering
Originally developed for engineering construction-type work. It is normally regarded as the strategic
and long-term arrangement whereby a partner is selected by a client/advisor for a series of projects
(Harris & McCaffer, 2001). The aim of such arrangements include lowering costs and improving

21
efficiency, thereby reducing delays and ensuring completion of projects on time, to budget.
Contractors are carefully selected based on a whole series of performance measures related to
quality and competitiveness usually conducted through a two-stage tendering process unless already
in the position of a favoured contractor, with quality criteria being screened before financial bids
are considered (Harris & McCaffer, 2001).
For a partnering to be meaningful, the client should be well experienced in construction procurement
and possess considerable ‘in house’ skills relating to design and construction of projects in order to
have meaningful dialogue with the contractor. Work is generally progressed and paid on a cost plus
fee basis. However, it also incorporates agreements that allow for sharing the benefits of cost savings
between the client and the parties to the contract, achieved largely through open access to plans,
estimates, costs and financial accounts (Harris & McCaffer, 2001).
c) Alliancing
Here successful partners, both design collaborators and contractors having demonstrated full
commitment in terms of previous behavioural attitudes, are invited to co-operate in developing new
schemes (Harris & McCaffer, 2001). The client’s project team, designers and contractors jointly
prepare target costs coupled to a risk/award structure based on the final outcome, the implication
being that future opportunities will only be forthcoming if the final product meets the client’s
satisfaction.
d) New engineering contract
This form of contract is largely devised by the Institution of Civil Engineers and aim to reduce
adversarial aspects (Harris & McCaffer, 2001). The document specifically defines the role of the
leader and the responsibilities of an adjudicator. In this manner, anticipated ambiguities should be

22
lessened, particularly the duality of architect/civil engineer’s duties with respect to design and
supervision roles.
2.6.2Contracts Based On the Pricing/Payment Criteria
One of the principal methods of classifying contracts is based on the method by which the contract
price is determined and subsequently payment is made to the contractor. Here, although there exists
traditional terminology to describe the methodology adopted in specific applications, recent
practices in the industry have led to the blurring of precise definitions thereby creating considerable
confusion on the part of practitioners (Frederick & Nancy , 2003). This method of contracting has
been further divided into the following types of contract;
a) Fixed type of contract
b) Cost reimbursement type of contract
2.6.2.1 Fixed Type of Contract
a) Lump sum contract
b) Measure and value contract
c) Schedule of rates contract
a. Lump Sum Contract
Under this contractual arrangement, the contractor consents to execute the entire work described or
specified for a stated total sum. The agreed sum is normally based on information derived from
drawings, specifications, bills of quantities and/or site inspection. To arrive at the pre-estimated
price, the contractor takes into account all contractual risks involved, the condition of the
construction market and his or her current workload. The pre-estimated price is paid to the contractor
regardless of the actual costs incurred in executing the works, provided there are no variations
(Kwakye , 1997).

23
b. Measure and value contract
Price for sections of construction work under this contractual arrangement is pre-estimated but the
total price cannot be ascertained until the work is measured and valued on completion. The
evaluation of the measured construction work is by the application of an agreed unit rate obtained
from either bills of quantities or schedule of rates. This contractual arrangement can be procured on
an approximate bills of quantities (when client’s requirements are not known in advance) or
schedule of rates (when client’s requirements are insufficient to permit the production of bills of
approximate quantities). It may be adopted for projects where prompt commencement on site is
required (Kwakye , 1997).
c. Schedule Of Rates Contract
This form of contractual arrangement is used to address any difficulties in contracts, where the
whole or major parts of the work are provisional (e.g. erection of a process plant or maintenance
works) (Ameyaw, 2009).The contractor is required to insert rates in the schedule for the listed items
of work. It is best suited for projects where the exact nature and extent of the works may not be
known until the work is executed. It is also adopted in a situation where it is almost impossible to
predict realistic and accurate quantities of work to be undertaken. The contract price is derived by
measuring the works done and pricing them at the tendered rates (Ivor , 1997).
2.6.2.2 Cost Reimbursement Type of Contracts
In this contract arrangement, the contractor is paid the cost of inputs and a sum of money for his
profit. The client undertakes to pay the contractor the prime cost. Prime cost is the total cost to the
contractor of buying materials, goods and components, of hiring or using a plant and of employing
labour, in order to carry out construction works (Ramus, et al., 2006)

24
a. Cost plus fixed fee contract
b. Cost plus percentage fee contract
c. Target cost
2.6.2.2.1 Cost plus fixed fee contract
Under this contract arrangement, the contractor is paid a fixed fee irrespective of the final cost of
the project (Owusu-Manu, 2012). The fee is normally based on the estimated final cost of the
project. The only justification to vary the fee might be if the scope of the project or the conditions
of carrying out the project were materially changed after the contract has been signed (Ramus, et
al., 2006). Under this contract type, it is always in the best interest of the contractor to complete the
project early and release his labour, plant and machinery to other projects.
2.6.2.2.2 Cost plus percentage fee contract
Under this contract arrangement, the contractor is paid the actual cost inputs (prime cost) and a
percentage of the cost for profit. Thus, the higher the cost, the higher the contractor’s profit. It is
obvious here that there is no incentive for the contractor to be prudent in the use of materials and
other inputs.
2.6.2.2.3 Target cost
Under this contract arrangement, the contractor is paid the cost of construction and a sum for profit
which may be fixed or calculated as a percentage of the total cost. As an incentive for the contractor
to keep within the target cost, the contractor is paid a bonus if the total cost is less than the target
cost or he pays a penalty for exceeding the target cost. The bonus or the penalty is calculated as a
percentage difference between the actual cost and the target cost (Harris & McCaffer, 2001).

25
2.7 TRADITIONAL / CONVENTIONAL CONTRACT
The traditional method of contracting is also called Design Bid and Build contract (DBB).The
traditional method is one whose most significant feature is the carrying out design and construction
as two distinct, separately consecutively executed, processes. The two processes are undertaken by
separate parties under contract to the developer (Keith , 1993).
The traditional contracting system is mostly used in the construction industry. The system is a series
of end-on activities incorporating the brief, design production, design finalization, development of
tender documents including (Bills of Quantities), estimating the tender and finally the actual
construction (Osei-Tutu , 1999).
Under this system, the client engages design consultants who interprets the client’s briefs and
develop them into design and further prepare the necessary documents for the award and execution
of the contract. A contractor is employed by the client through a competitive tendering process or
other equally accepted forms of tendering to execute the project. In most cases, the contractor with
the lowest evaluated responsive bid is awarded the contract (Public Procurement ACT, ACT 663,
2003).
Once a contractor has been selected, he is responsible for delivering the completed project in
accordance with the contract documents and they may be updated to incorporate addenda and they
are issued for construction. The necessary approvals must be achieved from all jurisdictional
authorities for the construction process to begin (Moro, 2014).
Supervision of the quality of the construction work is usually undertaken by the designer, the
architect. The administration and settlement of the financial terms of the contract between the
developer and the builder is carried out by the quantity surveyor (Keith , 1993).

26
2.7.1 The Effects of the Conventional Contract on Project Performance
Time
Due to the sequential nature of the traditional method of contracting, it has been recognized as the
slowest project delivery approach. This approach involves three stages mainly consisting of the
design phase, bidding phase and construction phase and thus the pre-contract stage of this system is
longer (Owusu-Manu, 2012). This system however provides more time for the client and the project
team to scrutinize and review the design before construction. This approach thus is more preferable
because it provides clear accountability and better design and construction control by the client
(Owusu-Manu, 2012).
Cost
Since the client and the project team are able to scrutinize the design before construction, it provides
more price certainty to the client at the very onset of the project. Firm and competitive prices are
obtained because the design and workings are complete and fully developed and detailed prior to
bidding (Owusu-Manu, 2012). It eliminates many design or construction ambiguities or uncertainty
which are the basis of most construction claims.
Quality
The traditional contracting system provides the owner with the opportunity to combine the best
design, management and construction expertise between contractor and consultant. Also, it provides
a high degree of quality certainty and functional standards.
Sufficient time is available for the owner and the consultants to review and develop fully, the design
and specifications thus allowing for better documentation preparation prior to construction (Owusu-
Manu, 2012).

27
2.7.2 Advantages and Disadvantages of Conventional Contract
Advantages of the traditional contract
The advantages of the traditional system include the following (Kwadwo, 2011):
 This system of contracting offers the advantage of being widely applicable, well
understood, and with well-established and clearly defined roles for the various
parties involved
 It offers the owner a significant amount of control over the end product, particularly
since the facility’s features are fully determined and specified prior to selection of a
contractor;
 The project cost can be estimated, planned and controlled during the design and
production phases to keep the cost within the client’s budget;
 The client’s approximate financial commitment is known before the contract is
signed; and
 The existence of a bills of quantities enables interim valuations to be assessed easily
and variations to be accurately valued by means of pre-determined rates.
Disadvantages of the traditional contract
The disadvantages of the traditional system of contracting include the following (Kwadwo, 2011):
 The process is time-consuming since all design work must be fully completed prior
to preparation of the construction contract;
 The client generally faces exposure to contractor claims over design and
constructability issues since the client accepts liability for design in its contract with
the contractor;
 The traditional approach tends to promote more adversarial relationships rather than
cooperation or coordination among the contractor, the designer and the client;

28
 The contractor pursues a least-cost approach to completing the project, requiring
increased oversight and quality review by the client; and
 The absence of a contractor’s input into the project design may limit the effectiveness
and constructability of the design. Important design decisions affecting both the
types of materials specified and means of construction may be made without full
consideration of a construction perspective.
2.8 DESIGN AND BUILD CONTRACT
The term Design and Build has almost been unanimously interpreted and defined as being an
arrangement where one contracting organization takes sole responsibility, normally on a lump sum
fixed price basis, for the bespoke design and construction of a client’s project. This contains three
main elements the responsibility for design and construction, contractor’s reimbursement is
generally by means of a fixed price lump sum and the project is designed and built specifically to
meet the clients’ needs (Masterman, 1992).
The design-build concept as originally conceived, was based on the concept that a single firm had
the in-house staff and expertise to perform all planning, design, and construction tasks. Later,
increased interest in the concept had engineers, architect and conventional contractors seeking to
compete with the original design-build firms to meet the growing interest by owners in the project
delivery process (Frederick & Nancy , 2003).
Here, the selection of the required firm may be done through a two-stage process. First, the owner
request interested design-build firms to apply for prequalification. The prequalification document
includes information on the scope of the project, project site, special features, budget, design
requirements and other important information. The interested design and build firms are short-listed
according to their expertise, ability to perform, technical competence, previous performance and
other important factors submitted by the firm (Owusu-Manu, 2012).

29
Secondly, the short-listed firms are further requested to submit technical proposal concerning their
technical approach, implementation plan and cost. Based on the information in documents submitted
by the firms, the client may then select the firm which offers the best value (Owusu-Manu, 2012).
This mode is used extensively particularly industrial construction. The complexity of the industrial
projects such as oil refineries and power plants makes them a good candidate for design-build.
2.8.1 The Effects of the Design-Build Contract on Project Performance
Time
The design-build system is sometimes referred to as fast-tracking or build-it-fast project deliver
system where the design and actual construction responsibilities are combined. This system allows
the process of detailed design and construction to run almost concurrently to each other, thus
reducing the overall project development period considerably. As a single firm responsible for both
design and construction, the contractor is able to control both the construction time and also the time
reserved for the design of the project, therefore reducing the overall project duration (Owusu-Manu,
2012).
Cost
The cost involved with this system is often higher than the traditional contracting since it is subject
to design changes although the cost is fixed at the tender stage. Aside the fact that few contractors
are invited to submit tenders, lack of detailed design during tender results in contractors raising up
the price to allow for uncertainties. This is because once it is accepted, the tender price will be the
final contract sum and it is not subject to change unless there is a variation in design (Owusu-Manu,
2012). Cost savings are mostly usually made through the reduction of the overall development
period and also if the client offers the contractor some form of incentive if he is able to save a
significant amount of cost.

30
Quality
The integration of both the design and construction responsibilities allows the contractor to utilize
his knowledge and experience to develop coherent works program and to develop more efficient
design and project control programme. It also creates room for innovations to improve the
construction process and techniques, thus allowing for better work and process quality since the
contractor is involved in the project through the design stage to completion (Owusu-Manu, 2012).
Also, assigning of design and construction duties to a single contractor causes the client to lose
control of design and supervision of the wok. This is especially evident when the client does not
have his own team of consultants (Owusu-Manu, 2012).
2.8.2 Advantages and Disadvantages of Design-Build Contract
According to (Kwakye , 1997), the advantages and disadvantages of design and build include the
following:
Advantages
 The system allows for a simplified contractual arrangement between client and contractor
with a single-point responsibility and improved communication channels between parties to
the contract.
 The integrated design and construction allows for design and management input from the
contractor and this leads to production efficiency in terms of cost and time
 Project duration is shortened due to contractor’s familiarity with his system and parallel
working on design and construction;
 Client obtains competition in design as well as in price.
 Client obtains a design cost element lower than that which an independent designer would
charge under other methods

31
 Client’s total financial commitment is known at an early stage and provided the client does
not introduce major alterations, this will not change.
 Innovation in construction production is encouraged under this procurement system as the
building contractor, being in charge of design, can reap the benefit of innovative products
and processes.
Disadvantages
The disadvantages of design and build include (Kwakye , 1997):
 Tendering costs are high as contractor must design and produce accurate proposals as well
as estimates
 The client surrenders for the most part, the control of the project.
 The contractor’s in-house expertise may be insufficient to solve the client’s construction
project needs efficiently.
 An inexperienced client still requires the expertise of professional advisers to prepare the
briefing document, tender information and to evaluate quality and cost of design.
 The contractor requires an adequate insurance to cover design failures as he or she assumes
the role of design as well as construction.
 The client will find it difficult and/or costly to introduce variations once production has
commenced on site.
 Tender comparison becomes complex as it involves evaluation of design, quality of
specification and construction cost.
 The Client may become stranded with a construction product which is unsuitable for his/her
needs.

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2.9 CHALLENGES FACED BY THE CONTRACTORS
There are several challenges which contractors face when undertaking any form of project and thus,
the design and build form of a contract is not and exemption.
Some of the challenges unfortunately only surface after commencement of a project and if not
expected, can pose real problems to unsuspecting employers and contractors (Tan, 1997).
The unsuspecting client may find that he still requires the expertise of his own consultants for
technical guidance and preparation of material setting out the employer's requirements. The
contractor may find that his costs and effort for tendering would be quite high especially if he is
unsuccessful in the tender exercise. Also, a contractor's perception of liability assumed for design
could be much wider than anticipated (Tan, 1997).
Below are some of the enlisted challenges that the contractor might probably encounter when
undertaking a project with the Design and Build contract;
 The problem of delays in the construction industry is a global phenomenon and the
construction industry in Malaysia is no exception (Murali & Yau, 2005)
 According to (Nuhu & Issaka , 2008), delays and disruption to contractor’s progress
are a major source of claims and disputes in the construction industry. The matters
often in dispute concern taking responsibility for delays (projects owner or his
contractors) partly because of the multifarious nature of the potential sources of
delays and disruption. With increased project complexity and requirements coupled
with multiple parties all subject to their performance exigencies, the resolution of
such claims and disputes has become a matter of the greatest difficulty.
 Delays causes and financing of and payment for completed works, poor contract
management, changes in site condition and shortages in materials (Mansfeild , et al.,
1994) are possible changes.

33
 The factor adversely affecting the cost performances of project are conflict among
project participants, ignorance and lack of knowledge, presence of poor project
specific attributes and non-existence of cooperation, hostile socio economic and
climatic condition, reluctance in timely decision , aggressive competition at tender
stage and short bid preparation time (Iyer & Jha, 2005).
 According to (Abdul Rahman & Janidah , 2006), delays or late deliveries, sub-
standard workmanship and materials, poor safety management on sites and cost over-
run of government’s projects are some the issues that been seriously discussed by the
government.
 Late and non-payment will cause severe cash flow problems especially to contractors
(Mohd , et al., 2006).
 Delay via project participants and extraneous factors (Odeyinka & Yusif , 1997).
 According to (Abdul Rahman & Janidah , 2006), failures to perform to the quality
expectations.
 (Wellington & Mpendulo , 2008), stated some
siness
 According to (Abdul Rahman & Janidah , 2006), some common forms of problem
faced by bumiputera contractors in Malaysia construction industry are shown as
follows:
i. Lack of expertise and experiences
ii. Over-optimistic estimation in tender bids
iii. Material price escalation

34
iv. Financial Problems
v. Materials supply networking
vi. Lack of skilled workers
vii. Lack of construction materials and machineries
viii. Inefficient and ineffective planning and management
ix. Communication problems
All these challenges quoted from authoritative sources clearly depicts some of the challenges that
the contractor faces when undertaking a project using the design and build contract. All these
challenges can then be summarized as follows;
 Lack of expertise and experiences
 Over-optimistic estimation in tender bids
 Material price escalation
 Financial Problems
 Materials supply networking
 Lack of skilled workers
 Lack of construction materials and machineries
 Inefficient and ineffective planning and management
 Communication problems
 Delays
 cost
 Late and non-payment

35
CHAPTER THREE
RESEARCH METHODOLOGY
3.1 RESEARCH APPROACH
This research took the form of literature review and survey using questionnaire approach from
construction professionals in the construction industry in Kumasi Metropolis to get their views on
the design and build contracts; the problems encountered by the contractors and possible
suggestions.
The data information required can be obtained directly from questionnaire and require little duration
to answer and also more convenient to the respondent due to limited time they have and a lot of
work to do. This is because, all required answers needed, need to be organized in the form and the
respondent just need to tick the appropriate answer. Therefore the questionnaire survey is the most
effective method to be applied in order to obtain the data collection (Nurhajar , 2009).
3.2 DATA COLLECTION AND SURVEY DESCRIPTION
This section of the research methods addresses data collection instruments, methods, and
procedures. Questionnaires were used as the data collection instrument. Questionnaire is defined as
a formal set of question or statement designed together the information from respondents that will
accomplish the goals of the research project (Redzuan, 2006).The questionnaire designed need to
meet the objective and aim of the study. The design decisions depend on the purposes of the study,
the nature of the problem, and the alternatives appropriate for its investigation (Isaac, 1971).
3.3 SAMPLING AND SAMPLE SIZE
In order to achieve the objectives of identifying the challenges faced by contractors using the Design
and Build contract, the study was focused on the various construction professionals in the

36
contractor’s firm. This was because these contact groups are those who are directly confronted with
these issues as they occur in the industry. The sample size was limited to a relatively small portion
of the population which is the Kumasi metropolis resulting from the difficulty in collecting data
from the whole population due to limited time and financial constraint.
For the purpose of this study, convenience sampling was used due to lack of reliable database of the
projects and subject been investigated to obtain the data required. Convenience sampling is used
where the nature of the research question(s) and the population do not indicate any particular form
of sample and so, the researcher collects data from a sample which can be accessed readily (Fellows
& Liu, 2008). As a result, a total sample size of fifty (50) was used.
Yap (2013) cited Naoum (2007) that the term sample means a specimen or part of a whole
(population) which is drawn to show what the rest is like.
Fellows & Liu (2008) explain that the objective of sampling is to provide a practical means of
enabling the data collection and processing components of research to be carried out whilst ensuring
that the sample provides a good representation of the population.
In all, fifty (50) set of the questionnaire forms were sent out to the various construction companies
and consultancy firms in the Kumasi metropolis.
From the field survey undertaken, forty-seven (47) sets of the questionnaire forms were returned
completed. However, three (3) of the questionnaires were not returned due to events beyond the
control of the respondents. Therefore forty-seven (47) sets of the questionnaire forms were used for
analysis representing a response rate of 94 %.
The response rate is the proportion of completed questionnaires in the total number of eligible
respondents and literature assumes that higher response rate demonstrates validity of the study
findings (Coffey, et al., 1996). With this mind, the researcher had to ensure considerable high
response rate from the survey questionnaires.

37
3.4 CONTENTS OF THE QUESTIONNAIRE
Having identified the respondents for the questionnaires and their characteristics, the next step was
focused on the design of the actual questions that were asked to solicit the requisite information for
the study. The way in which survey questions were presented would affect the quality of the
responses and therefore it was important to ensure that the right questions were asked, well
understood and asked in the right way (Wahab, 1996). The questionnaires consisted of twenty-seven
questions mainly; closed-ended and scaled-response type.
For the purpose of this study, the questions were group under three sections.
The first section of questions related to the respondent’s profile: this was intended to find out the
background, experience of respondents.
The second section was to establish the known problems that the contractor faces when undertaking
a project using a design and build contract. This section of the questionnaire was based on a Likert
Scale starting with 5 for strongly agree to 1 for strongly disagree ease the person to answer the
questionnaire.
The third section consist of ten measures which would help improve the situations of the contractors
and it is also based on a Likert Scale starting with 5 for strongly agree to 1 for strongly disagree.
The full detail of the questionnaire is attached as an appendix to this document and it demonstrates
the summary of the questions.
3.5 DATA ANALYSIS AND PROCESSING
In the analysis of this study, all the results data from the tables were analyzed using the Relative
Importance Index (R.I.I) where the results were arrange in order of their importance. The
discussions were mainly to evaluate the results obtained from the survey and rank the factors. The
summary of the study then presented with the conclusion of the study, recommendation from the
conclusion along with the recommendation for further studies in this area.

38
CHAPTER FOUR
DATA ANALYSIS AND DISCUSSION
4.1 INTRODUCTION
This chapter is the data analysis and discussions of the results obtained using Statistical Package for
Social Sciences (SPSS). The statistical tool employed for the analyses was descriptive statistics. The
chapter also presents the results of the analysis and discussions in the form of texts, figures, tables
and the like. A total of forty seven questionnaires were retrieved out of the fifty distributed
representing a ninety four (94) percent response rate.
4.2 RESPONDENT PROFILE
4.2.1 Position in company
From Table 4.1 below, 12 of the respondents representing 25.5% were Engineers, 14 of the
respondents representing 28.8% were Quantity Surveyors, 6 of the respondents representing 12.8%
were Technicians, 3 of the respondents representing 6.4% each were Architects and Project
Managers respectively, 1 of the respondents representing 2.1% was a Site manager, 2 of the
respondents representing 4.3% each were for Draughtsmen, Estimator, Site foreman and
Contractors respectively. This implies that majority of the respondents for this study were Quantity
Surveyors.

39
Table 4.1 Position in company
Position Frequency Percent Cumulative Percent
Engineer 12 25.5 25.5
Quantity Surveyor 14 29.8 55.3
Technician 6 12.8 68.1
Architect 3 6.4 74.5
Project manager 3 6.4 80.9
site manager 1 2.1 83.0
Draughtsman 2 4.3 87.2
Estimator 2 4.3 91.5
site foreman 2 4.3 95.7
contractor 2 4.3 100.0
Total 47 100.0
4.2.2 Level of Qualification
From Figure 4.1below, 11% of the respondents had HND, 59% representing majority had Degree.
Furthermore, 11% of the respondents had MSc while the remaining 19% had Technical
qualifications.

40
Fig 4.1 Level of qualification
4.2.3 Experience of company
From figure 4.2 below, 10 of the respondents firms representing 21% each had 0-5 years’ and more
than 15 years’ experience respectively, 13 of the respondents firms representing 28% had 6-10
years’ experience and 14 of the respondents firms representing 30% had 11-15 years’ experience
which represents the majority. In all majority of the respondent firms constituting 79% indicated
that they had experience more than 5 years and it may therefore be concluded that those who
responded to the survey are sufficiently experienced in the construction industry to provide credible
data.
59%
11%
19%
11%
Degree HND Technician MSc

41
Fig 4.2 Experience of firms
4.2.4 Experience of respondent
From figure 4.3 below, 7 of the respondents had more than 15 years of experience in the construction
industry, 12 of the respondents each had 0-5 and 11-15 years’ experience respectively and 16 of the
respondents had 6-10 years of experience in the construction industry representing the majority. In
all majority of the respondents constituting 88% indicated that they had experience more than 5
years and it may therefore be concluded that those who responded to the survey are sufficiently
experienced in the construction industry to provide credible data
21%
28%30%
21%
0-5yrs 6-10yrs 11-15yrs more than 15yrs

42
Fig 4.3 Experience of respondents
4.2.5 Involvement in Design and Build
From figure 4.4 below, 45 of the respondents representing 96% had ever been involved in a design
and build project, while the remaining 2 respondents representing 4% had never been involved in a
design and build project of any sort. From this analysis, majority of the respondents had been
involved in a design and build project and this results suggests that they can provide credible
information for the completion of this study.
0
2
4
6
8
10
12
14
16
0-5yrs 6-10yrs 11-15yrs more than 15yrs

43
Fig 4.4 involvement in Design and Build
4.2.6 Type of project
This question sought to know from the respondents the project type of the Design and Build contract
which they undertook. From table 4.2 below, 2 of the respondents representing 4.3% had never been
involved in any design and build project, 6 of the respondents representing 12% had undertaken a
project in education using the design and build contract, 4 of the respondents representing 8.5% had
been involved in a project for Health, 5 of the respondents representing 10.6% for Civil Engineering
projects, 3 of the respondents representing 6.4% for commercial projects, 1 of the respondents
representing 2.1% had undertaken projects in education, residential and commercial, 1 of the
respondents representing 2.1% had undertaken projects in Civil Engineering and Commercial, 1 of
the respondents representing 2.1% had undertaken projects in Civil Engineering, Residential and
Commercial, 1 of the respondents representing 2.1% had undertaken projects for Residential and
Commercial purposes, 23 of the respondents representing 48.9% had undertaken projects only for
Residential purposes which represents the majority. From this analysis, it could be seen that, 96%
96%
4%
Yes No

44
of the respondents had undertaken any project using the design and build contracts and that the
majority were mostly used for residential purposes.
Table 4.2 Type of project
Type of project Frequency Percent Cumulative Percent
Education 6 12.8 13.3
Health 4 8.5 22.2
Civil Engineering 5 10.6 33.3
Residential 23 48.9 84.4
Commercial 3 6.4 91.1
education, residential and commercial 1 2.1 93.3
Civil Engineering and Commercial 1 2.1 95.6
Civil Engineering, Residential and
Commercial
1 2.1 97.8
Residential and Commercial 1 2.1 100.0
Total 45 95.7
No 2 4.3
TOTAL 47 100
4.2.7 Type of Design and Build form
This question was sought to know from the respondents the particular type(s) of Design and Build
they undertook. From Table 4.3 below, 2 of the respondents representing 4.3% had never been
involved in any design and build project, 2 of the respondents representing 4.3% had undertaken a
project using a Design and Manage contract, another 2 of the respondents representing 4.3% had
undertaken projects using the Traditional Design and Build, Turnkey, and the Design Construct and
Manage contract, 5 of the respondents representing 10.6% had undertaken a project using the

45
Develop and Construct contract, 6 of the respondents representing 12.8% had undertaken a project
using the Turnkey method, another 6 of the respondents representing 12.8% had undertaken a
project using the Design Construct and Manage contract, 1 of the respondents representing 2.1%
had undertaken projects using the Traditional Design and Build and the Design Construct and
Manage contract, 23 of the respondents representing 48.9%. From the analysis above, it is evident
that, 96% of the respondents had undertaken a project using design and build contract of one sort or
the other and thus the majority of the respondents had undertaken such projects using the Traditional
Design and Build contract.
Table 4.3 Type of Design and Build
Type of Design and Build Frequency Percent Cumulative Percent
Traditional Design and Build 23 48.9 51.1
Develop and Construct 5 10.6 62.2
Turnkey 6 12.8 75.6
Design and Manage 2 4.3 80.0
Design Construct and Manage 6 12.8 93.3
Traditional, Turnkey and Design Construct
and Manage
2 4.3 97.8
Traditional and Design Construct and Manage 1 2.1 100.0
Total 45 95.7
No 2 4.3
TOTAL 47 100.0
4.2.8 Number of Projects
From Table 4.4 below, 2 of the respondents representing 4.3% had never been involved in any
design and build project, 8 of the respondents representing 17% had undertaken 6-10 projects using

46
Design and Build contract, another 8 of the respondents representing 17% had undertaken 11-15
projects, 8 of the respondents representing 17% had undertaken more than 15 projects, 21 of the
respondents representing 44.7% had undertaken 0-5 projects using the Design and Build contract.
From the analysis above, it could be seen that 51.3% of the respondents had undertaken more than
five projects using design and build contract. The almost equal ratio of 44.7% - 51.3% representing
executing 0 -5 and more than 5 projects respectively using the design and build shows that, the
design and build contract has not gained much popularity in the Ghanaian construction industry.
Table 4.4 Number of Projects
Number of Projects Frequency Percent Cumulative Percent
0-5 21 44.7 46.7
6-10 8 17.0 64.4
11-15 8 17.0 82.2
more than 15 8 17.0 100.0
Total 45 95.7
No 2 4.3
TOTAL 47 100
4.3 CHALLENGES FACED BY CONTRACTORS USING DESIGN AND BUILD
CONTRACT
From Table 4.5 below, the factors Owner less involved in controlling design, Changed materials
order by owner during construction, insufficient time to evaluate tenders, delays in progress
payment by owner to the contractor and sometimes progress payment for contractor not in time

47
were ranked as the most severe challenges faced by contractors using the Design and Build contract
in the order 1st, 2nd, 3rd, 4th and 5th respectively.
Table 4.5 Challenges faced by the contractors

48
CHALLENGES Mean Std. Deviation Ranking
Owner less involved in controlling design 5.0213 7.51083 1st
Changed materials order by owner during
construction
4.5106 4.32823
2nd
Insufficient time to evaluate tenders 4.3617 .89505 3rd
delays in progress payment by owner to the
contractor
4.2766 .99350
4th
sometimes progress payment for contractor not in
time
4.1702 .84233
5th
actual price for project higher than owner's target
price
4.1702 .89246
6th
Contractor takes control of design compare to
consultant
4.1277 .89969
7th
Consultants submits construction drawings late 4.1277 1.07576 8th
time is limited to establish if using design and build
contract
4.1064 .91447
9th
insufficient time to prepare tenders documents 4.1064 .96084 10th
Problems in communication and coordination by
contractor with other parties
4.0851 .77543
11th
Project completion not in time as agreed 3.9787 .70678 12th

49
Insufficient instruction and information in the
contract
3.9787 1.07318
13th
Delays in commencing work because of under-
estimated time needed to obtain statutory approval
3.9149 .95165
14th
Contractors always do an additional works compare
with consultant
3.8723 .71070
15th
contractor submit claims for items not clearly stated
in contract documents
3.7021 .83184
16th
Mistakes and discrepancies in design documents 3.7021 1.06148 17th
Changed conditions/differing site conditions 3.6809 .78315 18th
Conflicts between contractor and other parties 3.5745 .80067 19th
contractor does not have good cash flow or good
financial planning
3.5106 1.08091
20th
Inadequate experience of consultant 3.3830 1.09452 21st
Lack of construction materials and machineries 3.3617 1.18735 22nd
Project does not follow owner's specification 3.3617 1.07188 23rd
Ineffective planning and scheduling of project by
contractor
3.3191 1.06539
24th
quantity surveyor/consultant does not estimate work
done and materials on site correctly
3.2766 1.01515
25th
Low productivity level of labour 3.2553 .87148 26th

50
Contractors disregards quality of material in the way
to get profit
3.2340 1.16494
27th
Lack of staff and labour 3.1489 .97755 28th
4.3.1 Discussions
The following are comments on the important challenges the contractor faces from respondents in
the contractor’s firm.
i. Owner less involved in controlling design
Results from the survey showed that, the most significant challenge the contractor faces is
attributed to the client been less involved in controlling design. This was ranked first by
the respondents. According to them, the client does not contribute much to controlling the
design in the sense that all the design aspect is been assigned to the contractor which may
later on not suit the client’s specifications.
ii. Changed materials order by owner during construction
From the answered questionnaires, it was found out that most clients order the change of
construction materials during construction and this was ranked second. This normally
happens for instance, client ordering the change from wooden door to metallic door or from
monolithic floor finish to ceramic floor tiles finish. These all alters the construction process
and might result in a claim and this possesses as a challenge.
iii. Insufficient time to evaluate tenders
This was cited as a challenge by the respondents and ranked third. According to them, this
situation arises because earlier completion date is important and also incomplete documents
during pre-contract so the tenders are not given the much needed consideration. Since the

51
pre-contract stage is shortened, limited time is available to evaluate the tenders.
iv. Delays in progress payment by owner to the contractor
This was ranked as the fourth challenge the contractor faces during a design and build
contract. According to the respondents, client delays payment when valuation is been done
and a payment certificate is been issued. It takes quite a long time for the client to honour
payment and this adversely affects the contractor’s cashflow.
v. Actual price for project higher than owner's target price
From the results of the survey, it was established that, the actual contract after completion
is higher than the target cost. This all comes about as a result of variations, delay payments,
claims which tend to escalate the contract sum much higher than the target cost after the
practical completion. This was ranked as the sixth challenge.
4.4 MEASURES TO IMPROVE THE SITUATION
From Table 4.6 below, majority of the respondents showed agreement for the factors setting realistic
deadlines and avoid publishing the completion date before it is firmed-up, effective communication
and more coordination between contractor and consultant, scrutinize contractor's financial
capacity and track record, requesting contractors to provide quality specific qualifications and life
cycle cost and set up a tender evaluation system and ranked them as the most significant measures
to improve the situation in the order 1st, 2nd, 3rd, 4th and 5th respectively.

52
Table 4.6 Descriptive Statistics for measures
Measures Mean Std. Deviation Ranking
setting realistic deadlines and avoid publishing the
completion date before it is firmed-up
4.6809 4.26873
1st
effective communication and more coordination
between contractor and consultant
4.3404 .78786
2nd
scrutinize contractor's financial capacity and track
record
4.3191 .88726
3rd
requesting contractors to provide quality specific
qualifications and life cycle cost
4.2340 .86509
4th
set up a tender evaluation system 4.2128 .68955 5th
prequalify design and build teams 4.1277 .82402 6th
main contractor selecting his project team 4.1277 .76944 7th
involving client in design control 4.0213 .82064 8th
use project management tools such as CPM to plan and
schedule activities
3.8085 .85053
9th
provide float in the program for resubmission to
authorities to meet their requirement
3.7021 .99815
10th

53
4.4.1 Discussions
The following are comments on the important measures suggested to deal with the situation from
the respondents.
i. Setting realistic deadlines and avoid publishing the completion date before it is firmed-
up.
Results from the survey showed that, the most important measure was to set realistic
deadlines and avoid publishing the completion date before it is firmed-up and this was
ranked first by the respondents. According to them, in-house project managers may have
difficulty meeting the deadline given by their management to call tenders, thus to
overcome this problem, it is suggested that management set realistic deadlines and for
public sector projects, to avoid publicizing the completion date before it is more firmed-
up.
ii. Effective communication and more coordination between contractor and consultant.
Through this survey, it was realised that there was insufficient communication between
consultants and DB contractors’ team due to the absence of contractual relationship
between owners and contractors’ design consultants, subcontractors and suppliers.
Contractually however, besides the DB contractors, owners are not allowed to deal
directly with other members of the project team because of lack of privity of contract. A
DB contractor may not allow owners to negotiate with his consultants and subcontractors
in his absence because this may lead to design changes and consequently cost increase.
In reality, for design matters, it is sometimes more efficient for client project managers
to communicate with contractors’ designers, instead of DB contractors themselves
because a DB contractor’s core expertise is in construction rather than design. The
message passed down to consultants via the contractor might be distorted along the way
and causes misunderstanding. It is recommended any direct communication with sub-

54
contractors, suppliers and consultants be followed up with a written confirmation to the
main contractor, copied to all relevant parties.
iii. Scrutinize contractor's financial capacity and track record.
From the survey, it was suggested that management should scrutinize contractor's
financial capacity and track record by asking tenderers to submit their financial report
and track records, to help project managers determine their suitability to be awarded the
design and build project. Project managers should also cross-check the contractors’ past
performance with other owners, sub-contractors and suppliers.
iv. Requesting contractors to provide quality specific qualifications and life cycle cost.
According to the respondents, the client’s management should require design and build
bidders to submit quality-specific qualifications of both the design and construction
members of their team. These include a record of quality performance and quality-
specific individual credentials, so that quality risks of design and build projects are
reduced. Also, to help clients get value for money, project managers should evaluate life
cycle costs, instead of just the initial capital cost. In practice, clients’ perception of value
for money is usually limited to the construction cost, especially property developers of
residential projects. At the long run, the end-users end up bearing the running cost. It
was therefore recommended that recommended that contractors be asked to provide life
cycle costs together with their proposals, so that the overall costs of contractors’
proposals are known.
v. Set up a tender evaluation system
According to the respondents, setting up a tender evaluation system will help avert the
challenges. The system should consider pre-qualification of bidders, evaluation of bids
that provide the best combination of costs and value for owners, selection criteria and
weighting of criteria

55
CHAPTER FIVE
CONCLUSIONS AND RECOMMENDATIONS
5.1 INTRODUCTION
This research which is on challenges faced by contractors using Design and Build contract is divided
into five chapters. Chapter one talks about the introduction. Chapter two explores the review of
pertinent literature. Chapter three explains the methodology used. Chapter four analyses and
discusses the data and results. Chapter five is the conclusion and recommendations for the research.
The aim of the study was to identify the challenges that contractors face when using the design and
build method of contracts in the Ghanaian construction industry.
The following objectives were articulated:
 To compare Design and Build contract and the Conventional contract.
 To identify the common problems faced by contractors when using the Design and Build
contract.
 To identify the effects of both the design and build and the traditional systems on project
performance.
 To suggest measures to minimize the challenges.
5.2 ACHIEVING RESEARCH OBJECTIVES
5.2.1 Objective 1: To compare designs & build contract and conventional contract
The first objective of this research was to study the comparisons between Design & Build contract
and conventional contract. Design & Build Contract one in which the contractor is responsible for
construction and the full design, embracing the production of aesthetic and working drawings
together with obtaining statutory approvals (Harris & McCaffer, 2001). Otherwise for the traditional

56
method, the client first hires a design professional, who then prepares a design, including complete
contracts documents.
The design professional is typically paid a fee that is either a percentage of the estimated
construction cost or a lump sum amount, or he or she is reimbursed for costs agreed-upon the bill
rate. With a complete set of documents available, the client invites tenderers to bid to obtain the
lowest price from contractors to do the work or negotiates with a specific contractor. The contractor
is then responsible for delivering the completed project in accordance with the contract documents.
5.2.2 Objective 2: To identify the common problems and the factors faced by the contractor
Descriptive statistics was used to analyze the data. It resulted in Owner less involved in controlling
design, Changed materials order by owner during construction, insufficient time to evaluate
tenders, delays in progress payment by owner to the contractor and sometimes progress payment
for contractor not in time ranked as the five most severe challenges faced by the contractors using
Design and Build contract.
5.2.3 Objective 3: To suggest measures to improve the situation
Descriptive statistics was used to analyze the data. It resulted in setting realistic deadlines and avoid
publishing the completion date before it is firmed-up, effective communication and more
coordination between contractor and consultant, scrutinize contractor's financial capacity and
track record, requesting contractors to provide quality specific qualifications and life cycle cost and
set up a tender evaluation system ranked as the five most significant measures to the improve the
challenges the contractors go through.
5.3 CONCLUSIONS
Based on the above literature review and the analysis of the survey results, it could be concluded
that all the research objectives stated in section 1.4 have been achieved successfully. It was realised

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