Introduction Conventional Civil and Building projects in the construction industry use a number of traditional, popular and familiar forms of contracts. These have a good track record in meeting time, cost and quality requirements for straightforward projects; however, they are unlikely to meet the timeframes and budget constraints expected by Governments when undertaking complex and high risk projects were the scope of the work is not yet defined (Ma & Xin). Insufficient or poor quality design documentation is often the cause for construction overruns and cost blowouts, creating claims for variations and omissions. (Pullen) All too often, the building site becomes a hostile environment to do business. This is in no small way, due to the …show more content…
(Smith, 1995, as cited in Mosey) Traditional contracts struggle to deliver these requirements especially for complex and high risk projects. Consequently, the allocation of risk can be complicated and costly if its not assigned correctly. A shared risk mechanism might be more appropriate in this case. However this can only work when all the parties are aware of the implications involved. This is precisely why the traditional construction only or D&C contracts don’t work for these projects, because they exclude the main contractor’s influences from the early design and project planning stage. The builder is not introduced until after the design is finalised and tenders are being sought (Mosey, 2009). The contractor’s attempts to assess the risk involved and prices accordingly are inhibited. Insufficient time or information usually results in additional cost to cover potential risk. This is just one reason ECI,s were developed. Also the adversarial environment in traditional contracts stifles innovation and communications, proving to be detrimental to the professional relationships, ultimately affecting the clients objectives (Pullen) Creating a team A famous industrialist once said, “Coming together is a beginning, staying together is progress and working together
A basic definition for the procurement is “the way the building is realised” and “involves assembling and organising the skills and services of a team of construction professionals”. (the Construction Round Table, 1995). More precisely, the construction industry describes procurement as “a system that establishes the roles and relationships which make up a project organisation”; hence the overall organisation and communication structure for the management, administration and control of a project is established by the procurement system. (D.C.H Coles, 2010)
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In the initiation phase of the project, Anderson and Gable, decided to deliberately present false information to the client in regards to the project specification. Therefore, they both knew the risk that they did not have the capability of satisfying the project specification. However, they decided to go through with giving false information in order to win the tender, armed with the intention of negotiating the specification scope with the client halfway down the project. This approach of managing risk should not be accepted and is not recommended as it shows that the management
“Coming together is a beginning, staying together is progress, and working together is success” This quote was from Henry Ford, maker of Ford Motor Company. This quote means when you start working together, it’s just the beginning. When you stick together, you’re making progress with your peers. And when you are working together, it’s most likely to be successful.
In construction projects, mostly the firms (in this case the firms become client) do not have the skills or develop skills inside the firms to undertake the projects due to amount of the projects should be conducted or the complexity of the projects (Reve and Levitt, 1984). Therefore, the economic decision to conduct the projects is to procure them to third parties. However, more commonly the client agonize the final quality of the projects will meet standard requirements. Thus, impacts to involvement of complex contracts of construction procurement.
A design and build project allows the low risk factor as for the client has the contractor takes on the risk by offering a fixed cost contract. The web address designbuild-network.com states the original provision for a building cost was around £352m, with total project costs of £757m. A
Construction projects can be extremely complex and fraught with uncertainty. Risk and uncertainty can potentially have damaging consequences for the construction projects. Therefore nowadays, the risk analysis and management continue to be a major feature of the project management of construction projects in an attempt to deal effectively with uncertainty and unexpected events and to achieve project success. Risk is inherent on construction projects and disputes frequently arise. One in four construction projects results in a dispute that leads to arbitration or litigation. With large scale, complex projects the likelihood of serious, time-consuming and expensive claims increases.
Within a project, the project’s success and budget belong to and are the responsibility of the customer. The Customer should have the final say in regards to what is acceptable and unacceptable in regards to risk and the quantification of risk. It is however, the contractor’s responsibility to be the primary source of expertise on a project or what they are being contracted to do. The contractor should offer their opinion and recommendations, and the customer should take their contractors opinions and recommendations seriously due to their expertise in the area. Overall, collaboration between the customer and the contractor should be the ultimate way to resolve a matter of dispute. Members from both the customer and contractor side should meet discuss historical events, modeling and simulation to arrive at the appropriate answer. Also, with quantifying risk, the customer and the contractor should be able to go back and look at the data. With risk quantification, there should be very little room for opinion and judgment which should make it easy to base a decision or a resolution based on hard core data. If a solution or an answer is not able to be decided upon, a third party consultation
The implementation phase of the Chunnel Tunnel was rife with risks and issues as the project team opted to fast track the design and construction phases of the project (Anbari, et al.,2005, p. 12). Fast tracking is described by the Project Management Institute (2013, p. 540) as a schedule compression technique in which activities or phases normally done in sequence are performed in parallel for at least a portion of their duration. Typically, project teams use this technique in hopes of shortening the delivery timeframe with the knowledge that this approach makes the project susceptible to additional risks (Anbari, et al.,2005, p. 10). The Chunnel Tunnel project team chose to fast track overlap the execution of these two phases due to schedule delays and cost overruns in previous phases. For the project team, compressing the construction time was crucial to ensure that the project objectives would be completed. In time, banks and private investors recognized the incremental risks associated with continuous delays and began weighing in on project decisions to minimize risks (Anbari, et al.,2005, p. 9). Financial stakeholders expected a return on investment (ROI) and the project team allowed them to have too much control when recommending risk mitigation strategies (Anbari, et al.,2005, p. 9). Thus, subcontractor contracts were changes to fixed price contract and later resulted in a contractor claim (Anbari, et al.,2005, p. 9).
terms of time can be managed in this scenario, as there is no specific delivery
Risk allocation is performed as part of the development of the project structure, which takes into account the distribution of responsibilities and risks during the planning, construction, financing and operating phases (Corner, 2006). The aim is to identify an efficient and effective structure that optimises the costs of the project and ensures that the risk occurrences do not damage the project (Delmon, 2009). According to Grimsey and Lewis (2007) risk allocation has two elements: optimal risk management and value for money. The first implies that the
When engaging in a construction contract, time is of the essence and running over time projections can cause literally millions of dollars in additional non-contract costs. Therefore, construction contracts that can provide incentives to complete the project on time or early are beneficial because they effectively penalized contractors who fail to deliver on-time performance. With a CPIF contract, the
According to the Bid Manger, at the outset consortium members reviewed the “Local Authority Requirement" and decided on the strategies to meet them. For sustainability, the decision was to achieve BREEAM “Excellent” on the new-built projects, and “Very good” on the refurbishment. The consortium also decided to exceed the authority’s planning requirements of 10% renewable energy generation. Two biomass boilers were installed on the two new-built PFI projects which provided around 98% of their heating requirement. The team was, therefore, able to achieve 24% renewable energy generation across the estate. The team also introduced further improvements to the buildings insulation and achieved
There however are challenges in the industry occasioned by uncertainty on future spending on construction projects by the government. Moreover, the cost of doing business and the ability to increasingly make revenue have created a challenging environment for the construction firms. Therefore stakeholders in the construction industry are concerned with whether the government would increase its spending and whether the public construction projects will be available in the future since less than 10 percent are currently financing their clients.
When choosing a type of procurement it is based on the clients experienced and knowledge of construction that the client has and there requirements. Once this has been decided then the relevant contracts can be drawn up outlining the relevant responsibilities shared and risk taken into consideration and also meeting the correct legislation and the Housing Grants, Construction and Regeneration Act 1996. With regards to the Housing Grants, Construction and Regeneration