Chapter 2: Construction Contracting Methods

Separate Contract Methods (Multiple Prime Contracts)

Arrangement by which the owner lets contracts directly to specialty contractors for the various portions of the work. This is similar to the GC method except without the GV. The owner MUST take charge of the management of the project.

Construction Management at Risk (CM at risk)

As an independent contractor, the CM is at "risk." The CM is responsible for the owner to complete the project by the established substantial completion date and within the agreed budget. The CM must compensate the owner when the construction put in place does not satisfy the established standards of performance for the project. CM at risk enter contract prior to design completion.

General Contract Method

Consists of a contract drawn up between the owner and a general contractor. Owner is represented by the firm that was responsible for drawing up the contract documents. The owner will enter into two separate contracts, one with the designer and one with the constructor. Attempt to reduce costs of construction for the owner

CM at Risk and GMP(Guaranteed Maximum Price)

Contract established as a cost plus fee a fixed fee at risk approach with a GMP. It is assumed that the actual costs will be less than the GMP. If price exceeds the GMP, the CM is at risk firm will be required to absorb those costs, unless the scope of the project can be shown to have been changed such that the GMP should be modified. If the opposite, the owner is inclined to keep the savings and not share these funds with the CM.

Fast tracking (in Design-build)

Designing the foundation and then developing the design as construction commences. This overlap of design and construction is referred to as fast-tracking, as it is meant to deliver the project to the owner earlier that would occur if the design had to be complete before the start of construction.

When is the general contract method advisable?

Generally assumed that the GC has unique skills that should reduce the costs of construction for the owner. These skills include: -admin. of construction operations -efficient procurement of materials -effective management -planning and coordination of the constr. process

When is the PCM Method advisable?

On large or complex projects when construction expertise is needed during the design phase. Permits considerable flexibility for changing the project as the design evolves. Ex. Hospitals are constructed using this method.

professional Construction Management Method

Owner hires a firm with construction expertise to perform construction management services on the owner's behalf. PCM method is generally hired by the owner before any substantial design work is done and before any construction work has begun. Becomes an agent for the owner.

Self-Performance Method

Owner may "self-perform" some construction work or essentially do the work "in-house." Also known as force account work, no contracts are written for a construction project. The owner provides all the material, labor, equipment, and supervision. The owner plays the role as the manager.

Design-Bid-Build

The general contract approach; occurs when the general contractor subcontracts all the work on the project. Disadvantage: often extends the project duration, in the GC approach the owner does not have an agent or "friendly" party involved.

When is self-performance method advisable?

appropriate when the project is small scope, simple in character, and ongoing in nature.

When is separate contract methods advisable?

prerequisite for employing this method is the availability of a competent construction manager. If such personnel are employed by the owner, this method is particularly appropriate on projects where the required specialty of work is restricted to a few types of construction. Not widely used...owner rakes greater risk

When is Design-Build advisable?

since this method integrates the design and construction function within one firm, it is possible for construction to begin before completion of the design for the project. Attractive when projects are large and technically complex. The owners best contribution to the design-build method project is to clearly define the scope of the project prior to entering into a formal design-build contract. Disadvantages: less control by the owner, laws and regulations that may place restrictions, fewer checks and balances

Design-Build Method

the owner lets a single contract for both the design and the construction of a project. Utilized construction firm's experience in the design phase, as a result, the final project should have a higher degree of constructability. Similar to the GC method, except the contractor is also responsible for the design of the project. GMP..(pg23)