By Christopher Sell
With investment showing no signs of abating, methods of procurement are evolving. Christopher Sell takes a look at the growing popularity of design and build contracts.
As the construction boom has maintained its level of investment, the strain being placed on contractors through conventional methods of procurement and operating in the emirate has required a major re-think. Dispensing with the traditional ‘us and them' attitude, contractors have started to pursue agreements that offer shared responsibility and greater transparency with developers.
While recently a number of developments have focused away from traditional contracts - Aldar recently formed a joint venture with contractor Laing O'Rourke on the $18 billion Al Raha Beach project, of most interest is the proliferation of design and build contracts.
We find purely as a contractor, generally where you get tripped up is when you don’t receive the information in the right sequence...
Though popular in other parts of the world, this form of contract is steadily becoming more notable in Dubai, offering a reduction in overall cost, earlier completion and occupancy and elimination of the traditional liability gap through a straightforward procurement model. Dubai Festival City is being built entirely under this contract by Al Futtaim Carillion.
Simon Buttery, operations director, Al Futtaim Carillion says: "With projects where the client's main aspirations are cost certainty and passing as much risk from himself to the contractor as early as possible, then design and build is the best route because what he is looking to do is take on responsibility of the design and manage that for the lifetime of the project."
There are other benefits, adds Buttery: "We can say if you do it this way it will be cheaper and quicker so we can provide benefits much earlier so there are big advantages to a client going design and build."
This approach has taken hold in the UK, with 90% of all its work following design and build, and Buttery expects a similar pattern to be taken up here, with more contractors following this route. "It is becoming more popular. We are finding more clients are looking to go into this form of procurement, and is definitely something you will see more and more of in this market."
There is a caveat here. According to Buttery, the client influences this decision, depending how much control they wish to forgoe. A traditional contract, for example, offers the client far more control over his designers as he is managing and paying for them himself and therefore able to guide them to what he wants. Therefore bespoke, one-off projects - such as a grand mosque for instance - would be better implemented by a traditional contract as it affords close control by the client.
But this isn't to say it is a simple methodology to undertake. For this approach to work, the contractor is under far more pressure in what is an already fraught market. Buttery explains that to undertake a design and build contract means serious responsibility, and it must be in a position where it can manage it. "It is much more onerous for the contractor to deliver as there is far more for us to do."
Buttery also believes that such an approach makes better employees, citing those project managers who consequently get involved in design often turn out to be the best design managers, as they bring knowledge of the building process and can apply that. Furthermore, it isn't only the client who benefits from tighter project control and a cost-effective approach. From a contractors' point of view, it simplifies the construction process, eliminating erroneous procedures. According to Kez Taylor, managing director, ALEC, it affords the company greater control. "We find purely as a contractor, generally where you get tripped up is when you don't receive the information in the right sequence in order to execute the work efficiently.
I think we have got past the stage where everyone is wary of everyone else. I think it’s a construction thing. I don’t think we will get away from it completely but I think partnerships will be better in the future.
"In design and build, the design component falls under our responsibility, so we will appoint the consultants and from a client's perspective, you have a one-stop shop. What happens in traditional contracts is that you have a lot of conflict with the design team and execution team. So you end up with conflict because the contractor has huge penalties and has to pull the job off, and the design team that is continually changing the design and not giving you the information in the right kind of sequence and time you require."
Taylor isn't surprised at the reticence shown so far by clients in the region, indicating it will take a while for clients to change to another model. In other parts of the world, namely Australia, it is a very common approach to construction. So far, just 20% of its projects are through design and build including the Between the Bridges contract - a $272 million project in Abu Dhabi being one of them. Taylor is confident that, once the message gets heard, more will follow this form.
Cyril Williams, commercial manager, Al Rostamani Pegel, highlights the change in mindset among clients, explaining also that it presents another avenue for companies to expand their business. "We have done about four towers now (design and build), and it's another way to grow our business. We go to a client who has a piece of land and say: ‘let us do everything for you'. They say, ‘well that's great, but how do you know what we want?' And we tell them, we will make them part of the team. It's gaining ground."
Like Taylor, Williams believes a shift in conventional thinking needs to happen before design and build is embraced fully. "I think we have got to get past the stage where everyone is wary of everyone else; I think it's a construction thing. I don't think we will get away from it completely, but I think partnerships will be better in the future."
While there has been a distinct shift away from the ‘us and them' form of contracting that prevailed in the years gone by, there is a growing understanding from contractors that, with the proliferation of projects on offer, theirs is a strong position. It is arguably the ability to be more selective in the future, as much as changing attitudes that could drive change in the future.
Lump sum/Fixed price contract -One of the most popular forms of contract, this sees the work carried out at a specified price. With massive fluctuations in materials prices, this has come into question, as contractors are at a disadvantage and stand to lose sizeable sums over the course of a project.
Remeasured contract -This contract is based on remeasurement whereby the consultant estimates the quantities required for the construction and the contractor commits to the unit price, which defines the initial tender price and quantities of materials used by the contractor. This may change, depending on the quantities of materials used.
BOT -The build-operate-transfer (BOT) model is an integrated partnership that combines the design and construction responsibilities of design-build procurements with operations and maintenance. It is commonly used for plant projects.
Cost-plus contracts-A move away from fixed-price contracts, this takes into account price fluctuations and other added project costs. This is recognised as a far more collaborative approach to construction.
NEC3 -A form of contract that says the developer and contractor share the risk. Believed to be an improvement over more traditional forms of construction contracts due to its flexibility, clarity and simplicity. Its focus is designed to improve the partnership between the project manager and the contractor, and encourage them to resolve matters, which may hinder progress or increase costs, as they arise.
Design and build -One entity performs both the design and construction under a single contract. Often the design and build contract is awarded by some process other than competitive bidding thus, design and build differs from traditional contracts in two ways. First, the design and construction components are packaged into a single contract and second, the single contract is not necessarily awarded to the lowest bidder after competitive bidding.