A Program Management Approach: Procurement Strategy & Project Delivery (Part 1)

“A budget tells us what we can’t afford, but it doesn’t keep us from buying it.”?- William Feather

The choice of delivery method is one of the fundamental decisions that the owner will need to make at the inception of the project to determine how the project will be designed and constructed.

Project Delivery

The choice of delivery method will be guided by several factors, each of which needs careful and objective consideration, including the following:

• Budget.?The importance of accurately establishing the projected cost of the project is fundamental, in order to set realistic feasibility parameters, secure funding, set design parameters, and establishing risk/contingency allowances. How quickly cost certainty is to be established as well as the level of tolerance in cost variance is also important in deciding the most appropriate delivery method.
• Design.?In order for the project to function as intended and adequately fulfill its design intent, the design team must be well qualified and experienced. Constructability considerations have to be considered during the design phase, and whether it is beneficial to include contractors’ input during the design phase must be determined by the owner. The level of control the owner wishes to exercise over the design is also a factor that must be considered in determining the most appropriate delivery method.
• Schedule.?The duration of the project and the time the owner must wait until it is operational and begins to generate revenues from the project are key considerations. Realistic assessments of anticipated durations, sequencing, and logistics must be made early in the process, and the schedule must be maintained throughout the design and construction of the project.
• Risk Assessment.?The construction of complex projects inherently generates factors that affect schedule and cost.?These factors generally have negative (risks) impacts but positive (opportunity) impacts can also occur. A thorough understanding of these risks, and how they are best apportioned between the parties (predominantly between the owner and the contractor under the construction contracts, but to a certain degree also between the owner and consultant team), is of critical importance. An owner who has little tolerance to increases in budget, may seek to shift as much risk as possible to the contractor/s.
• Owner’s Expertise.?The owner must objectively evaluate its own level of expertise to manage the project to determine the level of external management assistance it requires. Highly complex developments, such as those containing super tall buildings, require specialist expertise normally only found in external organizations.

With the above considerations in mind, the following are the typical Project Delivery Methods:

Design-Bid-Build (DBB).?Design and construction documents are developed by the owner’s design and management team. Competent and experienced contractors are identified and evaluated via a pre-qualification process. Tenders are then solicited, typically on a fixed price lump-sum basis. The contract is normally awarded to the lowest compliant bidder. DBB is currently used for most private and public projects.

Construction Manager at Risk (CMAR).?The owner hires a construction manager early in the process to work with the design team to establish project parameters (cost, quality, and price). The construction manager commits to deliver the project at the set parameters for a Fixed Price or Guaranteed Maximum Price (GMP).

?Design-Build (DB).?The owner engages one entity incorporating architectural and engineering design services as well as construction performance under one contract.

Integrated Project Delivery (IPD).?A delivery method whereby collaboration is contractually required among the primary stakeholders (owner, designers, and contractor/s), so that project risk, liability, and responsibility are jointly managed and appropriately shared.

Other Delivery Methods such as Design-Build-Operate-Maintain (DBOM) and Build-Operate-Transfer (BOT) are generally considered variations of the methods described above. Engineer, Procure and Construct (EPC) and Engineer, Procurement and Construction Management (EPCM) type delivery methods are generally not used for super-tall building projects.

Stay tuned for part 2, where we going to share about Investors & Funding Sources, and Contracting Practices