Property and Infrastructure Specialists
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Managing Contractor – What is it and how does it benefit me?

Of the various forms of contract delivery in the project and construction space that we deal with, Managing Contractor is often an approach that is overlooked by clients and PM’s alike.
Managing Contractor – What is it and how does it benefit me

Why?

With construction, and more often fitout projects, clients always want the quickest less risky approach and therefore opt for Design & Construct (D&C). The D&C approach is understandable and easily recommended to a client with the key benefits being; certainty of cost bar latent conditions, risk novation to contractor and the ability to draw on contractors experience for design solutions.

Win-win right?

In most cases yes, but this is dependent on the project setup which is often rushed, incorrectly structured from a principals project requirements (PPR) perspective and most importantly is often not followed through into the construction phase with a robust contract and strong superintendent. A successful D&C contract is only as successful as the PPR, contract documents and the performance of your superintendent in the delivery of the contract throughout construction. Often the D&C approach is recognised as the “safe” approach which offers the client flexibility and ability to influence the outcome in the form of changes within the PPR guidelines however getting this right takes time upfront which most clients aren’t willing to nor have the option to undertake and in a majority of cases leads to time and cost claims from the contractor.

So how does one find a solution to tight time constraints with the requirement to influence design whilst actively understanding the impacts of time and cost?

Answer in short form: Managing Contractor.

To understand the Managing Contractor approach the key outcomes that need to be answered by the client prior to seeking adoption of this approach are:

  • Do we require a fix cost prior to construction? Or do we have the ability to rely on quantity surveyors costings with a known budget spend (e.g. rent incentive)?
  • Do we need to influence the project design to ensure our ability to perform our work is not compromised by something we haven’t considered during design phase as the time isn’t available upfront?
  • Are we constrained by tight timeframes and therefore need to expedite the construction process to ensure we are minimising work disruption and productivity?
  • Are we comfortable with proceeding to construction based on 20-30% design completion? Which in some cases is not dissimilar to the D&C approach.
  • Do we want the ability to see “live” pricing throughout the project in an open-book approach?

If a large portion of the above is acceptable and sits within your requirement then a Managing Contractor approach may just be the right fit, and to understand how the points above translate into the project lifecycle the following guide should assist in understanding the Managing Contractor process:

  • Design parameters – not essential to understand your business needs in every detail. Future ways of work, key processes, headcount projection and market offering is what requires consideration. The design can be developed based on performance specifications and sketch plans.
  • Project timing – as design completion is not essential under this method, once budgets are known based on concept designs, procurement of the Head Contractor and relevant approvals can be run in parallel. In some cases saving a bulk of time typically consumed by design and design changes under alternative contract methods.
  • Project budget – based on the design parameters a good quantity surveyor can develop a detailed order of cost estimate per trade category to provide the stakeholder group with a spending benchmark for trades letting.
  • Construction process – the key difference here from most forms of contract is around the appointment of the Head Contractor who is engaged on known preliminaries (cost for duration of the works) and an agreed margin percentage per trades package let. Trades package margins are usually around the 3-6% of trades packages.
  • Cost realisation – as trades packages are tendered by the Head Contractor the cost is locked in based on the best positioned trade for the package and the ability to influence. Add or delete from scope can be done at these points throughout the trades letting period.
  • Design flexibility – As costs mature through the trades letting period, the ability to amend scope to save budget in non-key areas can easily be managed and with flexibility, re-distributed to other scopes of work to vary the outcome from average to high-end and so on.

Of course with any contract approach, there are obvious pitfalls and as such the capability of your appointed project manager to track the budget, scope changes and outcomes is critical to the end result.

Having delivered a large variety of contract methods across a range of sectors this type of approach is particularly suited to the tenant fitout and building upgrade market more than new developments.

If in doubt as to the best approach to suit your requirement, our team can step you through the best option to suit your needs, wants and governance structures.

Enquire now