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20080704 innovative approach in contracts and tender procurement management
A Presentation onInnovative Approach in Contracts andTender Procurement Management
Presentation Outline Introduction Innovation / Implementation Types of Contract Procurement Why Choose Design and Build Procurement What are the Various Options Case Study to illustrate the suitability Question-and-Answer Session
Innovation Implementation Creativity ( C) is a function of three components by Tereasa Amabile expertise (E) Creative-thinking skills (CTS) motivation (M) E CTS matching people with right projects and tasks C Always ask why, what if? M Making most of the Best by James Quinn know what – knowledge know how – skills know why – understanding can why - motivation Generating ideas by Robert Cooper creativity is the ability to develop new ideas through stage-gate systems (stage 1 – gate 1 – stage n – stage n - ? (i.e. screening process)
N ow f Traditional Contract hink o Procurement - know whatt - know how - know why Bills of Quantities (Firm or Approx.) Lump sum (Drawing & Specification) Remeasurement Design and Build Management Contracting Construction Management
Innovation Contract Procurement Approach Set up a task force led by a “Champion”Mission / Goal Setting Make up a platform for investigation Project Requirement Identify problems Generating Questions - why? what if? Options / Proposal Idea Generating - Creativity Sorting process through innovation Traditional Approach Disadvantages or modified standard Advantages or tailmade version Timeframe / Uncertainties / Risk allocation / Ceiling process Optimization Screening Selections Most effective contract approach
See Common Problems Unforeseen design problems Late design information Programming problems Sub-contractor arguments May not be suited best to Developer’s Objectives
Question 1: How to do get flexibility in design, quicker construction period but with certainty of product? D&B contracts Single Stage Tendering
ee Design-and-Build Procurement t’s s Contractor responsible for design and constructionLe Single-point responsibility Client Employer’s Agent Employer’s Agent Quantity Surveyor Quantity Surveyor D&B Contractor D&B Contractor Designers Designers Sub-Contractors Sub-Contractors Contractual Link Functional Link
Standard Form with Contractor’s Design Contractor’s Particular Conditions Typical D&BDocumentation Employer’s Requirements Employer’s Structure Contractor’s Proposals Contractor’s Contract Sum Analysis Schedule of Rates
Employer’s Requirements Design Intent Proposals Design brief - most important element Salient Points to Note Clear statement of what Owner wants Varies in detail: − Very brief ? Maximum design flexibility for Contractor − Very detailed ? Close control over end-product Ensure ER clearly set out quality benchmarks required As Contractor has fitness-for-purpose obligation, ERs must be clear on what the Employer’s ‘purpose’ is
D&B DocumentationContractor’s ProposalsContractor’sResponse to ERsPresentation format as stipulated in ERPart of contract documentsNo provisional sums allowed unless called for in ERsContract Sum AnalysisContractor’s lump sum priceProvides detailed analysis of offerAssists in valuation of Changes and checking payment applicationsPart of contract documents
Question 2: But even with D&B contracts, how can we get the right contractor for the job? Risk Management & Two Stage Tendering?
Design-and-Build ProcurementWhich Option? (1) Design and Build Form with design consultants engaged by Contractor or through novation of consultants (2) Design and Build Form but retention of Architect by Employer as Architectural QP and Employer’s Agent (3) D&B with Architectural design by Architect engaged by Employer and Structural and M&E design by Engineers engaged by Contractor
D&B Form(including FULL novation of consultants)
D&B Form (including novation of consultants) Salient Features (1) Either Contractor engages all design consultants team or Employer- engaged consultants novated to D&B contractor (2) D&B contractor engages architects and engineers not only to design the works but also to act as the appropriate Qualified Persons for the works under the Building Control Act.
D&B Form (including novation of consultants)Organisation Structure Client Employer’s Agent Employer’s Agent Quantity Surveyor Quantity Surveyor D&B Contractor D&B Contractor NOVATED DESIGN TEAM •Sub- •Sub- Contractual Link Contractors Contractors •QP (Architect) •QP (Architect) •Suppliers Functional Link •Suppliers •QP (Structural) •QP (Structural) •QP (M&E Services) •QP (M&E Services)
D&B Form (including novation of consultants)PROS and CONSPros• Single point responsibility – Contractor engaged professional architects and designers not only to design the works but also to act as appropriate Qualified Persons (QPs) for the works.• Whole design process (statutory and non-statutory) carried out by D&B contractor => Contractor cannot argue that his design liability has been discharged by the involvement of another party
D&B Form (including novation of consultants)PROS and CONS Cons • Employer appointed project manager to administer the Contract • May not know history
D&B Form but retention of Architect as ArchitecturalQP and Employer’s Agent
D&B Form but retention of Architect as Architectural QP and EA Salient Features (1) Contractor engaged structural and M&E consultants (including Employer- engaged structural and M&E consultants novated to D&B contractor) (2) Employer-engaged Architect is retained to act as the Architectural QP for the works and to act as the Employer’s Agent.
D&B Form but retention of Architect as Architectural QP and EA Organisation Structure Client Employer’s Agent Employer’s Agent (Architectural QP) (Architectural QP) Quantity Surveyor Quantity Surveyor D&B Contractor D&B Contractor •Sub- Contractual Link • QP (Structural) • QP (Structural) •Sub- •QP (M&E Services) Contractors Contractors •QP (M&E Services) Functional Link •Own Designer •Suppliers •Suppliers •Own Designer
D&B Form but retention of Architect as Architectural QP and EAPROS and CONSPros• Employer appointed project manager is discharged from duty to act as Contract administrator.
D&B Form but retention of Architect as Architectural QP and EAPROS and CONSCons• Liability for Design in the Employer’s Requirements - Employer’s Architect prepare the Employer’s Requirements (ER). - Contractor may rely on above fact to discharge or reduce their liability for the design of the works by arguing that they should not be liable for the adequacy or fitness of the design contained in the ER.
D&B Form but retention of Architect as Architectural QP and EA PROS and CONS Cons (..continued) • Employer’s Architect’s statutory submissions and supervisions - Contractor may argue that since the Employer’s Architect had made the necessary submissions (which would include checking the submission)=> this fact should discharge or reduce his liability for any inadequacy in the detailed design.
D&B Form but retention of Architect as Architectural QP and EAPROS and CONSCons (..continued)• Employer’s Architect’s Approval of the Contractor’s Detailed Design and Shop Drawings - Contractor may argue that such approval discharges or diminishes his responsibility and liability for the detailed design for the architectural works that have been approved by the Employer’s Architect.
Partial Novation Design and Build on Structural and M&E works
SIA Form with Design and Build on structural and M&E Salient Features (1) Architectural works are designed by the Client-appointed Architect whilst the Contractor is responsible for the design and construction for the structural and M&E works
SIA Form with Design and Build on structural and M&E Salient Features (2) Lump sum tenders are invited based on the following: - Full detailed drawings for the architectural works - Employer’s requirements comprising the design brief and performance requirements for the contractor-designed portion (structural and M&E works).
SIA Form with Design and Build on structural and M&E Organisation Client Architect (Qualified Person Architect (Qualified Person Structure and Contract Administrator) and Contract Administrator) Contractor Contractor Structural Engineer Structural Engineer (Technical advisory role) (Technical advisory role) Contractor-Designed Contractor-Designed Services Engineer Services Engineer Portion Portion (Technical advisory role) (Technical advisory role) Quantity Surveyor (Full pre Quantity Surveyor (Full pre • • Structural Works Structural Works and post contract services) and post contract services) • • Mechanical and Mechanical and Electrical Services Electrical Services Contractual Link Nominated Nominated •Nominated •Nominated Sub-contractors Sub-contractors Suppliers Suppliers Functional Link
SIA Form with Design and Build on structural and M&E Organisation Client Architect (Qualified Person Architect (Qualified Person Structure and Contract Administrator) and Contract Administrator) Contractor Contractor Quantity Surveyor (Full pre Quantity Surveyor (Full pre and post contract services) and post contract services) Contractor-Designed Contractor-Designed Portion with Portion with Novated Consultants Novated Consultants • • Structural Works Structural Works • • Mechanical and Mechanical and Electrical Services Electrical Services Contractual Link Nominated Nominated •Nominated •Nominated Sub-contractors Sub-contractors Suppliers Suppliers Functional Link
SIA Form with Design and Build on structural and M&EPROS and CONSPros• Client has full control over architectural design.• Contractor is responsible for co-ordination of all drawn and written information between and within the different disciplines and integration of his design with the design of the Works as a whole.• Contractor assumes a fitness for purpose obligation where the choice of materials and workmanship and/or design is left to him.
SIA Form with Design and Build on structural and M&EPROS and CONSCons• As the SIA Form is a traditional delivery contract, it is unclear to what extent the draftsmen of the SIA Form intended it to be used as a form of D&B contract => If such form is to be used, modifications would be required in particular the Clause 3 of the SIA Contract Conditions.
GFA • 125,726m2• Retail area • 38,240m2 (4 levels basement retail + 4 level retail podium)• Residential areas • 87,486m2Height • 218 AMSLResidential Unit MixConfiguration• 3 Bedroom • 84 nos• 4 Bedroom • 84 nos• Garden Unit • 3 nos• Penthouse Unit • 4 nos 175 high end Residential unitsMajor consultants listConcept Design Architect Benoy LtdLocal Architect RSP Architects Planners & Engineers Pte LtdStructural Engineer Architects Planners & Engineers Pte LtdM&E Engineer Squire Mech Pte LTdQuantity Surveyor Davis Langdon & Seah Singapore Pte LtdLighting Consultant LPA with Parsons LightingAcoustics Consultant Acviron Acoustics Consultants Pte LtdFaçade Consultant Arup Consulting EngineersBuilding Consultant Integrated Building ConsultantsWater Feature Consultant OASE Asia Pacific Pte LtdVideo Wall Consultant Lightscape TechnologiesRetail Designer Benoy Ltd
The Project1. Tight Time lines from conception to completion 1. Retail targeted to open in 1st quarter 2009. That means that Completion & TOP need to be obtained in December 2008 for tenant fit-out. 2. Consideration for top-down construction with fast construction cycle time 3. Possible need for construction innovation2. Numerous specialist works needed coupled by complicated contractual relationships 1. Specialist needed for related works such as fire, security, temporary works etc. 2. Eventual contractual relationship will be complicated due to multiple contractual relationships 3. Possible cross-liabilities
The Project3. Numerous Authority Approvals for the construction of the building e.g. LTA, MRTC, URA and BCA requirements. 1. No night working which involves noise generation 2. Stringent scrutiny for approval by authorities due to existing infrastructure works (e.g. MRT box, lines, bus routes, HT cables etc) 3. Neighbouring high-end residential blocks less than 100m.4. Complication of Design 1. Tall tower over podium 2. Podium over MRT box (need for transfer structure) 3. Deep basement (safety and construction risks)
What choices ? What if ?Common Procurement Routes in Singapore Bills of Quantities (BQ) Traditional Lump Sum (LS) Contracting Design & Build (LS) + GMP Option
Common Problems in TraditionalContracting in relation to Project Unforeseen design problems due to technicalities Late provision of design information Splits construction and design Possible Programming problems Sub-contractor arguments due to multiple contracts High chance of variation due to clashes in coordination High possibility of time and cost escalations Long design development time = June 2008 deadline will not be met in all circumstances for commencement of Tenant Fit-out High time and cost risk to JV owners
Design & Build - Innovation(Develop & Construct) Design intent drawings has to be completed i.e. key plans, layouts, framing plans sections and elevations. No need for construction detailing at this stage (usually 1st two to three months from project commencement). Tender to include Performance Specification, Prime Cost Rates, Employer’s Requirements etc. Contractor to bring to completion and carry out design development and be solely responsible for the design in totality. (Single point responsibility) Combines the technical know-how and knowledge of the contractor and the ability to amalgamate design and construction
The D&B Approach in relation to Project Single point responsibility Shorter construction period due to the condensing and overlapping of the contractor’s programme I.e. design development commences during piling and as the work proceeds. The risk for the deep basement excavation and building on top of the MRT box lies solely on the contractor as compared to the traditional approach whereby certain risk can be linked to the Employer (Employer’s consultant’s design) Quality can be met via the Employer’s Requirements, Schedule of Finishes, Prime Cost Rates, Provisional Sums etc Coordination responsibility lies with the Contractor. Better time and cost certainties.
Why choose the D&B Approachin relation to Project? As this project is of high quality and is in the heart of the Orchard Road district, quality of the Architectural works is important. Therefore, it is our recommendation that the Architect remains with the Employer ( not novated like the M&E and C&S Consultants). However, all design responsibility still rests on the Contractor Procurement package can be further tightened with a Guaranteed Maximum Price (GMP) Methodology. This is to safeguard the client’s interests in any variations that may lead to cost and time implications
Design-and-BuildDesign-and-Build Services contracts Client Procurement cancelled Procurement •Project Manager •ArchitectContractor (Qualified Person and Contract Administrator) Novated Consultants •Quantity Surveyorresponsible for •Civil and Structural Engineer (Full pre and post contract services)design and M&E EngineerconstructionSingle-point Novated Mainresponsibility services contracts Contractor Domestic Domestic Sub-Contractors Suppliers
Post Contract Administration – Merging of Singapore & Hong Kong Practices How to merge two countries one system SHK & CapitaLand’s concerns Variation Process AIP System / meeting CPO at site apart from project office ICU Cost Report / Cost Plan / Cost Reporting Executive Cost Report Monthly cost Review Overbudget Vs Saving Benchmark JV approval in monthly DC meeting Sub-Contract Semi system as DSC
Contract provisions to protect the Client in Contractors VO claims Prices to be inclusiveArticle 5 of the SIA Conditions Subject to adjustment of the Contract Sum for variations under Clauseand Contract (7th Edition) 12 of the Conditions …. The Contact Sum and Contractor’s Rates and prices in the SOR, …. , shall be inclusive of all ancillary and other works and expenditure,… which are either indispensably necessary to carry out and bring to completion the Works described in the Contract Documents, or which may contingently become necessary to overcome difficulties before completion adopting the GMP Conditions whereby notwithstanding clauses 1(2), 1(4) and 12(2) of the Conditions of Contract or any other provisions of this agreement and the Contract, nothing whatsoever in the Design Development and/orAlso added Construction Detailing or the Contractor’s compliance with such Design Development and/or Construction Detailing shall constitute a variation under this Contract, or at law and/or shall result in any increase whatsoever of the Contract Sum or EOT for the completion of the Works, unless; the Architect issues an instruction which … the GMP shall have included the latest fundamentally and materially changes the development in rules and regulation that are being overall floor plan area, building volume, discussed and/or contemplated y the Government of function of an area and/or the level of Singapore that is relevant and is in connection to the quality of an area; or construction industry of Singapore but not yet enacted up to and until the submission of the Tender.
GMP Variations and Adjustment Architect’s Instructions that materially change: - Overall floor plan - Building volume - Function of an area - Level of quality of an area Changes as a result of legislation or statutory requirements Changes of Intent
Relevant Project ExperiencesVivoCity (Design and Build with GMP)One George Street (Design and Build with GMP)Church Street (Design and Build)SIF Building (Design and Build with GMP)Condominium at Draycott (Lump Sum with GMP)Ang Mo Kio Town Centre Mall (Design and Build)Other Projects with Full D&BSt Regis (JCT Form) One Marina Boulevard (JCT Form)City Square (JCT Form)City Lights (JCT Form)The Sail (JCT Form)
What’s the beauty?Our preference to embrace the innovatiive Design and Build (Develop and Construct) procurement approach for this project are as follows 1. Concurrent planning, design and construction activities. 2. In Develop and Construct there is single-point responsibility that the contractor will be responsible for the design. 3. A seamless involvement of the original design consultants by novation combined with early dialogue with the authorities and relevant parties. 4. Architectural structure requirements are stipulated and drawn at time of tender and therefore this important aspect is not compromised. 5. Higher degree of cost and time certainty (if the GMP methodology is adopted) as opposed to the traditional procurement route. 6. Modified form of contract incorporating latest legislations. 7. Not only a scientific approach but also an art of expression?