Is there a con in Construction Management?
At a time when building materials can be difficult to source, professional indemnity insurance is becoming harder to procure at higher levels and the risk premiums sought by design and build contractors, many developers are turning to construction management as an alternative procurement strategy for their projects.
Construction management as a procurement route which sees the developer engage various trade packages for the works directly, as well as appointing design consultants and a construction manager who uses their expertise to programme, co-ordinate and tender the contracts. The construction manager is effectively engaged as a professional consultant – they have no contractual link to the trade contracts or design team - but their skill is critical to the success of this method of procurement.
Construction management isn't for everyone – and it is not appropriate for every project. It is most successful when implemented on large-scale project where flexibility and early start on site are key – and where up front cost certainty is not the principal driver.
The advantages are generally seen as:
- High levels of flexibility during the construction process;
- Early start on site possible and savings on construction duration due to overlapping of design and construction process;
- Cost savings by the tendering of each works package;
- Further cost savings as no overall risk premium payable to a main contractor;
- Value engineering during construction phase is easy to implement;
- Allows developer to proactively manage its own project.
However, it is not all sunshine and roses. Critics of the procurement method will warn that the disadvantages of construction management include:
- A lack of cost certainty;
- An increase in administrative and legal time/cost upfront;
- Incorrect programming may lead to trade packages delaying one another.
In terms of the contractual aspect of this procurement method, the Joint Contracts Tribunal (JCT) updated their construction management suite of contracts in 2016 and these are the most commonly used contracts. These are drafted for large construction management schemes – but developers could also use other forms of contract to work for this procurement method (suitably amended) – including or incorporating JCT Minor Works, NEC forms of contract or indeed (for projects with an engineering or plant element) iChemE or FIDIC contracts.
Whilst it is not for everyone, the increasing prevalence of construction management procurement in the market suggests that in these changing times developers are starting to look for alternatives to the traditional or design and build approach to construction. We have recently advised on a number of projects which are using construction management and once the whole construction team and the investors in the project understand the risk profile of this procurement model, the project progresses in the usual way.