Project Delivery Methods, Contracts, And Considerations Essay.

The assignment is designed as an imaginary case study for students to practice the contract management concepts. Apic Consult  serves as a general contractor and project consultant to private companies and government agencies.

Each student act as a professional consultant for Apic Consult and is required to select the best project delivery system, financial contract type, and procurement method for the project. The selection process must contain thorough justification and problem analysis.

Therefore, the assignment has three major deliverables:

1) Project delivery system
2) Financial contract type
3) Procurement method

Types of Project Delivery Systems

A project delivery method entails organizing and financing the design, operations, construction, operations, and maintenance services of a particular structure by entering into legal agreements with one or more parties. (Ballard, 2008). This system is commonly used by an agency or a particular owner. There are various types of project delivery systems which are more preferable, however the choice of a particular project delivery system will depend on some factors such as the ease of the design, desire of the design flexibility during the process of construction availability of suitable project managers with suitable balance sheets, political considerations, and budget constraints should also be put into consideration. (Ballard, 2008).

The different types of project delivery systems include the fixed price contract, the cost-plus contract, the design and construct contract, project management agreement, managing contractor contract, warranted maximum price contract and build own operate transfer contract. At the beginning of the project, the choice of a particular project delivery system is made.  Among the above examples of project delivery I prefer is the cost-plus system. It is one of the best project delivery systems because in this system there is no risk of as to cost for the contractor (Bingham, Asmar & Gibson, 2016).

The project delivery method includes the Design-Bid-Build (DBB) it is also known as the Design- Award-Building (DAB), the Design-Build (DB) or the Design-Construct, the Design-Build-Operate-Maintain (DBOM), Build-Operate-Transfer (BOT), the Integrated Project Delivery and the Public-Private Partnerships.

In this project, I, therefore, recommend the Design-Build method as it has the highest score and it seems to be a big project therefore seamless communication is very important for the project success while working with a very complex and a complicated project team involving multiple organizations. The design-build method allows phased-construction this method can also shorten the given project duration (Cardenas, 2016).

The Design-Build method has the following characteristics

1. Project delivery speed(45%) the speed should be at this given speed since it has to be delivered before the end of 2017
2. Cost control- (27%) been a public project cost control is very important in order to avoid the media attention.
3. The builders are assigned with the responsibility to monitor and control all quantities of work related to their approaches by the Building Company. Some of the contract types provide the contractors with more incentives to approach quality work.
4. The pitch construction project is worth risk sharing as it involves a major undertaking and different parties are involved therefore the contractor and the owner share risk.

In a traditional delivery method in this method, work tends to be very slow.If any changes are made the work tends to delay also during the process of submissions the process delays even more. There is no applause for overlapping of design and construction.

Design-Build this method allows the contractor to design as the construction goes on thus allowing faster construction.

The CM risk offers the ability to overlap some portions of work this only happens through phased construction together with the ordering of long lead times.

In traditional delivery method due to different entities coming together who might have never worked together before led to being given a very low score of. There are different ways in which each firm do their staff like running meetings, perform reviews and communicate can be an obstacle to seamless communication. These issues are mostly in this project delivery system but they can be overcome.

My Preferred Project Delivery System

The design and build method put together a team which might have worked before together. It brings together a group of architects, builders, and contractors leading to smooth working.

When a construction manager is at any risk he will try to use the people whom he had already established a relationship with before like the contractors. The construction manager tries to provide leadership for the entire team.

In the traditional method, scores are high because a tight cost control is set the construction and design are set upfront but unseen site conditions may cause the change of orders and prices escalating.

This method does not show their costs upfront making the government become worried about approving of money if there is no idea of how costs go up.

The construction manager might experience shifts which give him more incentive to control costs while he is trying to maintain the advantages of the traditional method.

A contract is a legal or a formal agreement which entails two or more parties. There are several types of financial contract types which include a bill of sale non -disclosure agreement and a promissory note. In this pitch construction project, I, therefore, choose the non-disclosure agreement. (Lahdenperä, 2012).The non-disclosure agreement is also known as a confidentiality agreement is very important because it helps the company protect their confidential information. Under this agreement, the company agrees to protect their confidential information either received from another organization or other individual. The non-disclosure agreement should include details like who is the main owner of the information, why the information is being disclosed and for how long will the obligations apply (Cui, Ceribelli & Zhang, 2017).

In this project a non-disclosure agreement can be used for the following reasons:

• In employment: mostly in the environment it is used in disclosing business, or trade information, client to consultants or employees.
• Business Deals: Information’s such as profits and losses is disclosed to the clients and other secrets are disclosed to a buyer or seller.
• Inventions: on disclosure agreements are used to protect informations such as inventions of products or designs of products and recipes.

In a Non-disclosure agreement customer information, intellectual property, marketing, product, and service information is considered a confidential information. It is ones choice to decide whether to protect or not. The non-disclosure agreement includes information which talks about:

• The number of parties involved
• Full details about what should be shared with the other parties
• Time restrictions about how long the confidential information must be communicated
• The obligations of  the agreement
• Ownership of the information and return of the information
• Signing of the information

In financial contract types, there are several examples such as the lump-sum, the unit price, the GMP and the CPFF. In this types of financial contract types, the CPFF seems to be the best appropriate contracting method.This is due to its advantages in project delivery speed and its ability to offer quality work.

In lump sum usually, the budgets are not yet established and this leads to it not being tracked faster. This method does not provide the contractor with the incentive to finish the construction early because the contractor is trying to lower the cost and maximize his or her profits. The only disadvantage of this method is that it cannot be fast-tracked (Hale et al., 2009).

Different Types of Project Delivery Methods

Unit price with this method the contractor does not have an incentive to reduce the schedule but instead, the contractor can take his time to since he gets paid to the quality of work he delivers.

GMP this method can easily be tracked but due to many parties involved, there may be a coordination problem. GMP does not give the contractor the incentive to finish work early this is because the contractor would prefer to continue to work until his or her GMP is met.

Cost plus fixed fee this method allows fast-tracking and it provides a high intensity for the contractor to finish work early. This is because the contractor receives the same fee regardless of when the project is finished.

A lump sum in this method even with the slightest change in the project or an escalation in the material prizes would lead to a change order being issued to the owner.Therefore the owner takes his or her changes at such kind of a situation.

This method delivers good cost control since the cost of each item is at the upfront of the contract. In order to make this method work for this project is to ensure regular inspection of finished work.This will help keep the contractor honest.

The GMP this contract gives the contractor the incentive to keep the cost under the maximum price, providing a control of costs.

Cost plus fixed fee it does not provide a ceiling for the cost of the owner in this method there is no financial insurance of ultimate cost and is not preferred to a public project.

A lump sum in this method the contractor strives his best to provide good quality in his or her work. If the project exceeds the lump sum the contractor bid a problem could arise. This would lead the contractor cut back on his or her quality of the product.

A unit price in this method the contractor will strive so hard to give quality work since the owner is the one supposed to pay him or her.

In GMP the contractor has to bear all the costs and therefore ensuring it is below the fixed amount. Therefore the quality ends up being sacrificed.

With CPFF the different qualities of work are rewarded equally but in this method, there is no penalty for high quality since the owner pays all cost.

A lump sum in case of any unforeseen problems there is a very high risk for the contractor. This contract does provide flexibility in order to incorporate performance incentive to the fixed price established between the project and the contractor.

Advantages of the Design-Build Method

The unit price contract in this method payment is based on the actual quantities so the contractor will make his or her profit. However, in this method, there is a risk of accurately pricing the units and incorporating their overheads in their prices is the contractor.

In GMP contract there is the risk shared equally between the owner and the contractor. This method has high incentive to contain costs under the cap while the contractor is at risk for additional costs.

In CPFF contract there exists a level of sharing risk between the contractor and the owner. But in this case, the risk is high to the owner that the cost may escalate (Mafakheri et al., 2007).

Project considerations

• Project delivery speed (47%)since it  is essentially the work should be completed by the end of 2017
• Since is a large and a complex project, the work should be divided into various geographical areas, seamless communication is required by the project team even though every participant has their own method of doing their work.
• Cost control (30%) due to media attention it is very important because it is a public project.
• Working with local sub-contractors (6%) because this is an essential public project.

There are several procurement methods which are commonly recognized.These methods are a competitive method, negotiated method, and the best value method. Of the three examples, the best value method is preferred because it has the highest value (Oberlender, 1993).

Project delivery speed

Competitive bidding it involves abiding period as well as bid evaluation .it is also a time-consuming process it also consists of review time prior receiving a notice to proceed with the process.

Negotiated contracts in order for the process to move on faster, the contractor is selected on basis of overall qualifications of the job and reputation

Best value procurement this method involves reviewing the proposals received through this it takes more time than the negotiated product but less time compared to competitive.

This project can use competitive bidding to attract different owned firms and even other more contractors from the locality to bid on the contract. A joint venture is built as the pitching company cannot handle the whole project alone. This form receives a mid-level score as it reduces the pull of bids that the project could evaluate.

In a negotiated procurement, the contractor is definitely pre-selected because they may have worked with the owner successfully at past. Negotiated procurement may face problem in this case because the pitch project is a public entity which may need to allow a large level of competition.

Best value procurement this involves the process of reviewing a firm based on its technical merit as well as its price. It is important that the company gets the best contractors and most qualified and therefore the construction goes on smoothly.

Competitive bidding in this method the work awarded to the lowest bidder and the project is therefore constructed the required quality at lowest price. However, in this method, there is also a problem as a result of the quality specifications are not yet completely defined and subjected to change. In addition, the lowest bidder does not provide a top-notch quality.

For the negotiated contract the contractor is actually preselected, this is because he once worked successfully with the owner of the job and the owner has proven his quality. However, unlike the best value procurement, the contractor might not be able to identify any technicalities involved with the project and how they will be able to approach this technology in order to achieve the quality desired by the owner (Shrestha, Batista & Maharjan, 2016).

It entails reviewing a firm or a contractor based on the technical merit as well as the price. It is very important that the project gets the best contractors who are well equipped with skills and the most qualified so that the construction runs smoothly.

In conclusion, in order to comprehend the different contract management concepts I have come up with the best of the project delivery system elaborated its characteristics and also the best financial contract type and procurement method (Thomas et al., 2009).

References

Ballard, G. (2008). The Lean Project Delivery System: An Update. Lean Construction Journal Bingham, E., Asmar, M. E., & Gibson Jr, G. E. (2016). Project Delivery Method Selection:

Analysis of User Perceptions on Transportation Projects. In Construction Research Congress 2016(pp. 2110-2118).

Cardenas, D. P. (2016). Evaluation of Construction Project Delivery Methods: A study of Axiomatic Design Principles Measuring the Efficiency of the Design Process (Doctoral dissertation, Worcester Polytechnic Institute).

Cui, Q., Ceribelli, J., & Zhang, K. (2017). Efficient and Effective Implementation of Alternative Project Delivery Methods (No. MD?17?SHA/UM/3?35).

Hale, D. R., Shrestha, P. P., Gibson Jr, G. E., & Migliaccio, G. C. (2009). Empirical comparison Of Design build and design/bid/build project delivery methods. Journal of Construction Engineering and Management, 135(7), 579-587.

Lahdenperä, P. (2012). Making sense of the multi-party contractual arrangements of project Mafakheri, F., Dai, L., Slezak, D., & Nasiri, F. (2007). Project delivery system selection under Partnering, Project alliancing and integrated project delivery. Construction Management and Economics, 30(1), 57-79

Oberlender, G. D., & Oberlender, G. D. (1993). Project management for engineering and Construction (Vol. 2). New York: McGraw-Hill.

Shrestha, P. P., Batista, J., & Maharjan, R. (2016). Risks Involved in Using Alternative Project Delivery (APD) Methods in Water and Wastewater Projects. Procedia Engineering, 145, 219-223.

Thomsen, C., Darrington, J., Dunne, D., & Lichtig, W. (2009). Managing integrated project Delivery. Construction Management Association of America (CMAA), McLean, VA, 105.