From Uncertainty to Certainty; How Clients can Improve their Experience of the Construction Process

Transcription

1 From Uncertainty to Certainty; How Clients can Improve their Experience of the Construction Process

2 Summary This paper is an independent project manager s critique of two projects. One project is procured via a single stage design build whereas the other was the SCAPE procurement framework ( The two projects are uniquely similar as the two schemes were built next to each other at the same time, with the same client and design team. Observations are made which suggest that the single stage approach creates uncertainty for the client, whereas SCAPE provides a greater certainty of outcome from the outset. Suggestions are made for future development of SCAPE and wider construction procurement. Background In 2011 Provelio Project Management found themselves in a unique position from which to critically appraise the construction of two new engineering facilities for educational establishments. The position was unique for a number of reasons: Same client: the same client was involved (in one capacity as the owner occupier and in the other capacity as the lead client acting for the governing body). Both schemes employed the same client representative. This meant the aspirations and expectations of the clients were very similar. Funding and completion: both buildings were to be finished for the new academic year of September 2013 but would start at different times due to funding decisions (the funding being in place for one whilst the other was reliant on an external funding body) Same site: both buildings were neighbours on a demolished school site and faced the same ground conditions Same contract: NEC Option A Priced Activity Schedules Same design team: the same architect, engineers, quantity surveyors and project managers and for the most part with the same staff) Same function: the function of both facilities was essentially the same, i.e. the training of students in engineering, aeronautics and motor vehicle Same client objectives: both buildings were required to be complete for the start of term September 2013, both had absolute maximum budgets that could not be exceeded and the quality expectations were the same It is accepted that there will always be differences with different designs, but this set of circumstances would provide a rare opportunity to compare the construction of two buildings where many of the variables involved were the same or similar. However, both buildings would be procured at different times with different procurement approach (despite being next to each other and being on site at the same time). This paper takes a critical project management view of the process and the outcomes to offer some thought as to how future procurement models might develop. The experiences encountered on each building project are compared to a characterised normal experience. The Normal Experience A characterisation of the project process for a public sector client building an owner-occupied facility (e.g. a school, a college, a university, a hospital, etc.) is proposed as a baseline. That is not to say that all projects are like this, but that many or all experiences would be familiar to a public sector client, design team and contractor. These experiences can occur with or without a project manager and would be considered typical in a traditional or a design build procurement experience. Project Stage Funding: Cost Control: Design: Programme: Risk: Overall Experience: Normal Experience Delays incurred due to internal approvals or the need to comply with the external funder requirements Early budget found to be inadequate after appointment of the design team; budget exceeded during design phase and then tendered in hope for better price from the contractor; lowest tender still over budget and value engineering required; during site phase variations lead to budget being exceeded User engagement by collation of room data sheets and approval of conceptual layouts to get a design freeze; further potential scope changes held back due to budget overrun (or included and reliant on value engineering if required); value engineering leads to re-design and some users feel lost or disengaged from original requirements; end product broadly as original concept but impact of value engineered compromises become clear after occupation Funding delays create disjointed beginning at outset; design team production delays; delays due to the local authority planning process; delays during tender production and tender response; delays over contract approval; delays during construction, snagging and handover Site ownership/acquisition; LA planning; external funding approval Uncertain 2

3 In summary, the client experience can best be captured as uncertain. A client can follow best practice, have robust management processes and controls, appoint the best design and construction teams and still face many of the experiences above. Accepting the price that is highest, lowest or second place is still not going to ensure a certain outcome due to the time delay between designing and price. The reliance on value engineering to recover a budget overrun can be disruptive and still not meet expectations. The College and UTC Experience Having looked at client experience as a characterisation, the College and UTC projects will be contrasted in two ways. Firstly, a comparison of the procurement approach (using W P Hughes et al) and then a comparison of the experiences. The Procurement Approach Procurement Issues Building 1 Building 2 Source of funding e.g. owner-financed, public sector financed, developer financed, supplier financed, private finance initiative, public-private partnership Selection method e.g. negotiation, partnering, frameworks, selective competition, open competition, competitive dialogue Price basis e.g. cost-based labour and materials, single price for a whole building, lease of a managed facility, payment on performance, guaranteed maximum price. Client funded The Buying Solutions framework for selection of design team. OJEU process to determine suitable construction tenderers. Single stage design and build tender. NEC Option A Priced Activity Schedules Single lump-sum price Lowest tender price selected which was still significantly over budget leading to extensive VE Wholly funded by external body, with cost limits. Delays due to funder procurement requirements and their insistence to use another procurement framework of their choice. SCAPE finally agreed with agreement to fund all pre-contract fees SCAPE framework for main contractor. Incumbent design team for the college were suppliers on SCAPE framework and were appointed from outset Cost limit set by funding body Cost limit matched by SCAPE contractor No payment of design fees until main contract signed Main contract signed as the cost limit Responsibility for design e.g. architect, engineer, contractor, novation, client design fees Traditional design team appointed Novated post contract (post VE) Also part retained by client for quality control Initial concept produced at risk by SCAPE contractor Planning application led by contractor Design passed to key sub-contractors Design team management by contractor Design passed to key sub-contractors Responsibility for management e.g. client, lead designer, principal contractor, management contractor, joint venture Client set project goals PM implemented project goals Multi-discipline designer Independent cost manager Principal contractor Client set project goals PM/QS interfaced and monitored SCAPE open book and dealt with risk issues Contractor managed design team from concept, through LA planning and onwards Supply chain integration e.g. integrated, fragmented, competitive, collaborative (a spectrum varying from systems integration to volume integration) Traditional competitive relationship with consultants and contractor Collaborative with 1st tier principal subcontractors 3

4 The Procurement Experience Experience Building 1 - Design Team from GPS Framework, Single Stage Tendered Contractor Building 2 - SCAPE Contractor Framework Funding As normal experience Delays in funding procurement route approval; Contractor funded all costs from inception allowing the scheme to progress without the client spending any cash; Meeting the constraints of external funding was simplified because the certainty of outcome was underwritten by the contractor Cost Control As normal experience Initial budget determined by Funder and confirmed by SCAPE contractor - remained unchanged throughout design and construction phase See separate section relating to Building Costs Design As normal experience Briefing in manner of normal experience, but cost checked by SCAPE at all stages to ensure budget maintained so little change from original concept; No overrun or value engineering. Programme As normal experience See separate table for Comparison of Key Dates; Funding delays frustrated client Design progress accelerated working directly for contractor; Local authority planning progress created significant risk Risk LA planning, external funding and site ownership/acquisition Overall Experience Uncertain Certain LA planning, external funding and site ownership/acquisition Comparisons of Key Dates Programme Element College UTC Difference Project Start June 2011 January mths Planning permission obtained August 2012 October mths Start on site September 2012 October mths Practical Completion August 2013 September mths Comparison of Building Costs Element Building 1 (Pre VE) Building 2 Building 1 (Post VE)* Value of scheme (pro-rata to 3,306m2) Project Cost per m2 (based on contract sums) 5,232,820 5,172,700 4,769,770 1,582/m2 1,564/m2 1,443/m2 * The accepted tender for Building 1 was significantly lower than other tenders but still over the budget so the client undertook further VE. Specific VE was not undertaken for Building 2 in order to maintain programme, although it was nonetheless within budget. 4

5 Observations Overall Experience: Building 1 outcome was uncertain, whereas the Building 2 was certain. Funding: SCAPE offered a flexible approach to the development, whereby the contracting partner proactively progressed the design phase with very limited expenditure by the client. Cost Control: SCAPE maintained the original cost limits throughout the process and achieved the /m2 target required by the funder. It is considered that there would have been VE opportunities within the SCAPE project. Design: Both approaches offered comparable designs that met the brief. Programme: The SCAPE scheme started 7 months later but finished only 1 month later. Risk: Third Party risks were applicable to both schemes. Price: SCAPE offers clients the ability to get to price extremely early and create significant certainty for all parties. This price is presented in an open-book manner to the client in an open and honest fashion as required by the NEC contract. Early Contractor Involvement: Much has been written about whether early contractor involvement is valuable, but this is often seen through a two stage tendering perspective after an RIBA Stage D design has been produced. Having the contractor on board before this allows them to truly manage, integrate and innovate, whilst formally cost managing the design team (avoiding re-work and wasted fees). Separate Client Involvement from Design and Construction Process: The client (and their project manager) should be focussed upon the strategic value and risk in any project. SCAPE allows them to pass the design team to the party best incentivised to manage them the contractor; allowing the client and PM to concentrate on maintaining the business case and heading off potential road blocks. There is no need to interfere with the technical delivery as the designers and contractors know what needs to be done. This also negates the need for the difficulties of novation. Quality: Quality management was not an issue for either scheme. It was considered that the use of ISOs, Building Control, local authority planning control, professional indemnity insurance, warranties and duties of workmanship ensure contractors either self regulate or are independently regulated on the key aspects. Fees: It should be possible to reduce the fees associated with a SCAPE project due to the reduced amount of re-work. Even if fees do not drop, they should be more profitable and hence sustainable. External Bodies: The local planning authority and external funders still present the largest risk to a scheme. In particular, the behaviour of the funders and their wish to stipulate the rules of how the project is managed actually creates risk in their own funded projects. Audit and Independence: SCAPE is a local authority controlled company acting as a Contracting Authority. It undertakes independent audits of the schemes and maintains up-to-date and transparent KPIs. This ensures a transparent solution in terms of value for money. Future Considerations/Developments of SCAPE To reduce costs still further to be less than the normal experience after value engineering To allow wider industrialised building solutions The integration BIM Pass over the design team from the very outset of the project (ie only prepare a strategic brief) Provide a Programme Management solution whereby multiple schemes can be pre-agreed (ie manage a larger portfolio of risk) Provide fixed price at the outset (regardless of abnormals) By providing certainty to both the client and the contractor, SCAPE offers the potential to drive innovation. Not just in technical areas such as industrialised building, but also in supply chain relationships for issues such as small and medium enterprises, local labour and products and training and apprenticeships. How we Could Procure in the Future Future procurement model: Client produces business case and strategic brief (part of which would state the fixed sum for capital and potentially revenue costs) Hand over to SCAPE type procurement who take whole scheme forward using BIM based upon the fixed cost suite of rates/ generic designs (for laboratories, offices, schools, colleges, houses) Final product within fixed sum of business case Contractor also offers whole life maintenance as a result of establishing Level 3 or 4 BIM References Hughes, W et al (2006). Procurement in the Construction Industry. London: Routledge Hughes, W. and Murdoch, J (2007). Construction Contracts: Law and Management. 4th ed. London: Routledge. 5