Management Contracting

Basis

The philosophy of Management Contracting differs from that of other more traditional procurement methods in that the management contractor is appointed to manage the construction of the project rather than build it.

The contractor is selected, normally in competition, early in the programme on the basis of a response to a tender enquiry document. This requires the contractor to tender a fee for pre-commencement services and construction services during and after the project as well as a lump sum or guaranteed maximum for site staffing and facilities, etc. As well as price, the required performance of the management contractor is a major factor in the selection process.

For the actual building process the works are divided into separate trade packages which are tendered by trade contractors. The selected trade-contractors are taken on by the management contractor who is responsible for managing them and in particular their ability to meet quality and programme targets.

Advantages

· Enables an early start to be made on site before design is well advanced.

· Allows flexibility for change as the works are tendered progressively. There is a reduced likelihood of claims affecting other packages in the event that major changes are made.

· Lends itself well to complex construction projects as construction can commence before design work is completed. It is important, however, that the design of each trade package is complete at the time of tendering that package.

· Leads to a less adversarial relationship between management contractor and client.

· Can incorporate Design and Build and Performance Specified works if required
Disadvantages

· Can lead to duplication of resources between trade-contractors and the management contractor and therefore higher tenders than would be the case under a more traditional route.

· As no contract sum is established, the client relies upon the Quantity Surveyor's estimate. This is, however, endorsed by the management contractor initially and subsequently firm costs are established progressively during the course of the works.

· The client accepts a greater degree of risk because he has financial responsibility for the default of sub-contractors.

Suitability

Appropriate for large, complex projects where an earlier start is required than can be made by proceeding with the full design process and tendering by a more traditional route. This is achieved by overlapping design, preparation of tender documents and construction.

http://www.kerncm.com/MgmtCont.aspx