contract law

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Clients Selection Of The Procurement

Suppose, I am working on a prestigious hotel and commercial complex development which the client require it to be opened as soon as possible to meet the expected increase in visitors for an international sport event in 2012.

However the time is very tight, the client definitely wants the hotel portion completed first if the completion of the whole project is not possible.

Firstly, I purpose use selective tender of selecting a contractor. It is because selective contractor is made sure the contractor fulfill the standard of qualification. It avoids having too many unsuccessful tenders. And then, it can reduce the risk on claim and tender time.

After that, I suggest using the following methods of procurement to client's choice of development:

General contracting;

Design and build;

Construction management; and

Management contracting

General contracting is the traditional procurement method by which the contractor agrees to build the design that is provided by the employer. The contractor only has responsibility for construction and not for design. The contract price is often based on a bill of quantities provided by the employer, which quantifies, so far as possible, every aspect of the works. Occasionally contractors will price the works without a bill of quantities, for example from drawings. However, re-measurement contracts, target cost contracts and even cost plus/prime cost contracts are also not infrequently used as a method of pricing. This method of contracting remains popular and in its favour it can be said that most employers and contractors would have experience of it. It is also thought that this route offers some price certainty if the design has been fully scoped out prior to construction (which is often not the case); and gives the employer greater control of the design as the employer controls the design team. This method also offers the advantage to an employer of having an independent professional in the role of the contract administrator monitoring the project. The main disadvantages of general contracting include split responsibility between construction and design. This can, and unfortunately often does, lead to disputes about whether defects are really design defects (for which the employer is responsible) or defects in materials and workmanship (for which the contractor is responsible). The other major disadvantage of this route is that the final design is often not fully developed before construction starts and this can create problems and price uncertainty. As we shall see below it can make general contract unsuitable for public bodies with budgetary constraints.

Design and Build comes in various forms but is typified by the contractor taking both design and construction responsibility. In integrated D&B contracting the contractor develops the design and constructs the building based on a set of requirements provided by the employer. In contrast, novated D&B contracting is closer to the traditional model in so far as the employer's design team develops the design but is then novated to the contractor who takes the design responsibility and then constructs the building. “Turnkey “or EPC contracts are a type of D&B contract but Turnkey and D&B are not synonymous. The fundamental characteristic of Turnkey contracts is that at completion the contractor should simply be able to "hands over the keys" to the employer who can then operate the plant in question. Turnkey contracts are typically associated with process or power plants or works with a heavy engineering element and tend to be associated with performance-based contracts. They typically place most of the risk on the contractor. The main advantages of this method of procurement are single point responsibility by the contractor for both design and construction and the ability to fast track the project. D&B lends itself more readily to allowing contractors to start on site before the design is completely finished. This can be important, particularly to government bodies who sometimes need to spend their budget for the project within allocated periods. This procurement method is increasingly common and shares the advantage that most employers and contractors would have experience of it. The disadvantages of D&B include the loss of design control by the employer. Experience suggests that in an effort to bring projects in on budget D&B contractors can often compromise on design and this can be a problem for employers. It places a greater responsibility on employers to carefully detail their requirements without being over prescriptive to the point where they are effectively providing a design themselves. The client also faces the absence of the contract administrator as his eyes and ears for the project.

Management Contracting

This is a fast track strategy which overlaps the design and construction stages and allows early elements of the construction process to be commenced before design has been completed. The Management Contractor is engaged to manage the overall contract in return for a fee. The Management Contractor can therefore be appointed early in the design and can advise on buildability and programming. In addition to the contract with the Management Contractor, the contracts for the individual work packages are between the Management Contractor and the individual sub-contractors. A cost plan is utilised to control the development costs although actual costs cannot be obtained until the final work package has been awarded.

Construction Management

This is also a fast track strategy where individual elements of the project are let before the design of later work packages or elements have been completed. The provider will appoint a Construction Manager to manage the overall contract in return for a management fee as with Management Contracting. Also, as before, the project can benefit from early involvement of the Contractor. In this process the contracts for the sub-contractors are placed directly between the Client and the sub-contractor and the Client will need to have a high level of involvement during the design development and the construction phases of the work. As with Management Contracting, the final costs will only be known once the final work elements have been awarded.

Base on the criteria, the project programme is very tight, high standard level as prestigious and the project is complexity. The traditional procurement method does not suitable in this project. It is because the traditional procurement method should apply the design is sufficiently time advanced to prepare the BQ, drawing. It required a long time to prepare contract documents. Base above criteria, time is very tight. It cannot fulfill the project requirement. So, the traditional procurement method does not suitable in this project.

In the view of design and build, it can fulfill the criteria. It included the time, complexity and standard of qualification. The methods can maximum overlap between design and construction is permitted. It can avoid the nominated sub-contractors and one line responsibility to reduce the risk on the client. The contractor carries the liability of design work, management construction. It can suitable to all types of jobs. On the other hand, it has some disadvantages. The tender cost is very expensive. The contractor can be recovered time and direct loss and expense for delays in obtaining any statutory approvals or consents. And the variations of design could be expensive when the client changes the design and detail of the project. Those reasons of the cost may claim from client directly.

View of management contracting, it involves the management contractor directly employing works contractors to undertake all construction packages. The management contractor does no construction work himself. He exercises coordination, time cost and quality control over the work package contractors and provides facilities for their common use. So, it can fulfill overall of criteria included time tight, complexity project and landmark grade of qualification. However this method also the disadvantage is cost of the complete works is relative expensive. But those advantages can cover all lose of money.

After the client’s selected of the procurement, I suggest the client’s use cost reimbursement contracts with contractor signed the contractual. The reason is using this contractual can motivate for the contractor faster complete of the project. This contract is the price to be paid is determined on the basis of the actual cost incurred by the contractor in carrying out the work, plus an agreed amount to cover overheads and profit. It is suitable for shortage of time development project.

In conclusion, according to all the factors I recommend client’s use management contracting procurement method and cost reimbursement contracts for whole project development.