The Construction Manager and the Contractor

4/9/17
Duck

‘If it walks like a duck, swims like a duck and quacks ……’

A number of articles have appeared in the trade press recently about the resurgence of Construction Management as a procurement route for construction projects and in particular high value, complex projects, in preference to what is termed lump sum design and build contracting arrangements. This has been largely attributed to economic circumstances in which Main Contractors, with depleted reserves and fragile balance sheets, wish to secure work on less onerous arrangements than the projects that have brought them to this consideration; and employers wishing to avoid paying ‘risk premiums’ for eventualities that may never materialize.

There may be some validity to this conjecture, although I believe that there are wider market forces driving the adoption of this procurement methodology, which might warrant further discussion on another occasion. What I have found perplexing in the content I have read is that there has been a careful analysis of the differences in the structure of the respective contracting arrangements in terms of risk allocation, but nothing at all has been said about behaviours. Construction management and lump sum design & build contracting arrangements are being presented as mere procurement options available between an employer and a general contractor – with the only difference being the apportionment of risk. Similarly the management fee and the margin to be earned by a design & construct contractor are portrayed as being inter-changeable terms.

This overly simplistic depiction of these two discreet procurement philosophies is at best misleading and in my view wrong.

The processes to be undertaken in bringing a project to fruition, from site acquisition to occupation and operation are the same irrespective of whether the construction delivery method selected should be construction management or some form of lump sum contracting arrangement; the differences lie in the timing of when certain activities may be undertaken and the ultimate responsibility in terms of time and money for their delivery. Arguably the total project cost ought to be the same irrespective of the procurement methodology adopted.

The key difference is that the Construction Manager is a consultant, a member of the Employer’s professional team whose performance is measured in the competence with which it carries out the services it is required to carry out under the construction management agreement; a Contractor is engaged to deliver the scope of the contract works by the Date for Completion for the Contract Sum, with its performance being measured by the Client against these obligations and by its shareholders in terms of margin achieved. The behaviours required to carry out these different roles are not the same.

The construction market used to be clearly subdivided with organizations that would undertake management contracting work and general contractors; what was termed ‘fee’ contracting and ‘hard money’ contracting at the time. These distinctions are no-longer prevalent with all contracting businesses purporting to carry out both styles of contracting work.

The successful delivery of any project will be dependent upon the selection of the right participants with the competence to carry out their appointed roles as defined in the particular contract. Simply expecting a better, cheaper outcome by adopting a different style of contracting and expecting the behaviours to follow will not work. The old adage holds true: ‘if it walks like a duck, swims like a duck and quacks like a duck; it is probably a duck!’

JP Farnell – 31/08/17