A guide to the UK construction market: understanding procurement

Traditional procurement

The traditional route involves the client separately appointing a design team under direct contractual appointments and maintaining this direct contractual relationship throughout the project.  The traditional route requires the client to appoint the contractor separately under a building contract.

Design responsibility evidently resides with the design team and the contractor has a responsibility to build to their design. Although the contractor has no overall design responsibility, he may design discrete specialist items.

Design and build

The contractor is responsible for carrying out most of the design, as well as managing the risk in the design process. The contractor may carry out design in house, or appoint his own design team. Alternatively, the design team appointments originally entered into by the client may be novated to the contractor, allowing for continuity of design.

Hybrid and variant versions of such single point responsibility include:

  • BOT (build, operate, transfer)
  • DBO (design, build, operate)
  • EPC (engineer, procure, construct)

Management

Management procurement allows work to progress quickly but provides little cost certainty. The main types are:

Management contracting

This approach overlaps the design and construction stages, allowing early parts of construction to be started before design is completed. The management contractor is appointed at an early stage by the client. Their role is to manage the contract in return for a fee. Contracts for individual work packages are entered into by the management contractor/individual subcontractors. Final costs cannot be confirmed until the final work package has been awarded.

Construction management

Similar to management contracting, the contracts for the subcontractors are placed directly between the client and the subcontractor. In this sense, the client needs to have a high level of involvement during both the design development and the construction phases. As with management contracting, the final costs will be known once the final works elements have been awarded.

Partnering

Partnering refers to a more collaborative management approach to contracting. An overarching partnering agreement can be used, together with one or more contracts.

Alliancing

Like partnering, alliancing is based on a collaborative approach.  It relies on the creation of an integrated/collaborative team from across the supply chain. Client outcomes and requirements are agreed and risks and returns are shared between the participants.

Framework Agreements

A framework agreement seeks to establish terms that will govern any contracts that are subsequently entered into during the period for which the framework agreement is in place.  It sets out the general terms under which more specific orders/contracts will be placed or “called off”.

Early Contractor Involvement (ECI)

ECI is used in two-stage tendering. It is used as a way of achieving an integrated approach to design. The contractor is retained during the early stages of the project. Normally this is when design is being carried out so that its specialist knowledge may benefit the design process.

When implemented properly, ECI has the advantage of achieving a realistic and comprehensive price for the works.  This both reduces the risk of subsequent claims and variations and gives the contractor an appropriate margin.

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