What's the alternative to design and build?
The design and build procurement route remains ubiquitous for the construction of affordable housing in the United Kingdom. This is despite repeated calls for the construction industry to re-think its adherence to traditional procurement methods and its “deep-seated cultural resistance to change”. Following the collapse of Carillion and the publication of the Hackitt Review, some housing associations and private developers are now exploring alternatives to the design and build route and revaluating the habit of passing all risk to a single contractor.
To recap, design and build is a procurement route where one contractor is appointed by a client (known as the employer) as the single point of design and construction responsibility for the works. The extent of the contractor’s responsibility will be determined by the standard form contract used and the bespoke amendments to that contract.
The benefits of design and build are clear from an employer’s point of view; most design and build contracts offer a fixed price lump sum contract where the contractor takes all (or the majority) of the risk for the design and construction of the works. The contractor, it is assumed, can add value to the project by “owning” the design, adding to its buildability and reducing the construction programme.
But not everything about design and build is positive. Following the collapse of Carillion in January last year, the principle of a single point of design and construction responsibility has lost its shine. Those with completed projects which had Carillion as its design and build contract will find it more difficult to bring claims for defective design and/or construction.
The Hackitt Review, the Government’s independent review of building regulations and fire safety, has also criticised design and build contracts which result in “uncontrolled, undocumented and poorly designed changes being made to the original design intent”. Concerns were also raised that design and build procurement incentivises a “race to the bottom” where risk is pushed by the contractor down the supply chain.
So what are the alternatives to the design and build procurement route? Below we set out some of the other procurement routes available:
Under the traditional procurement route, design and construction are separate activities undertaken by the professional team and the contractor respectively. The employer appoints the professional team to design the works in detail. Once the designs are completed, the employer appoints the contractor, following a competitive tender, for the construction of the designed works. The contractor is not responsible for the works (although some forms of contract do allow the contractor to be responsible for certain elements of the works).
The traditional procurement route gives employers certainty in relation to design quality and cost as most traditional construction contracts are fixed price lump sum. Examples of traditional contracts include the JCT Standard Building Contract and the JCT Intermediate Building Contract.
Construction management is a procurement route where the works are constructed by a number of different trade contractors appointed by the employer. The employer also appoints a construction manager who manages those trade contractors. As with the traditional procurement route, the employer appoints the professional team to design the works in detail; the construction manager is also appointed at this stage, effectively as a consultant appointed by the employer, to improve efficiency and buildability and to advise on trade contract packages.
As the employer appoints and administers each of the trade contracts, the employer takes greater construction risk than the traditional or design and build routes. In addition, this sometimes leads to price uncertainty where detailed designs for the whole of the works have not been completed prior to the first packages being let. An example of a construction management contract is the JCT Construction Management Appointment and JCT Construction Management Trade Contract.
Under the management contracting procurement route, the management contractor manages the execution of the works through works contractors. As with construction management, the employer appoints the professional team but, in contract to construction management, the management contractor appoints the works contractors and is responsible for administering the works contracts. The management contractor, however, is not liable for any default by a works contractor and there is no single point of construction responsibility. This allows the employer to retain control of the design of the works and to engage an experienced management contractor.
Management contracting also does not provide cost certainty; the JCT Management Building Contract, for example, is a prime cost contract (plus the management contractor's fee). In recent months, there has been an increase in management contracting, mainly in relation to cladding works where employers want to engage experienced contractors to manage the works but such contractors do not want to take the risk for the works themselves.
Unlike the other procurement methods outlined, partnering or alliancing intentionally moves away from an adversarial approach to construction. The employer, professional team, main contractor and specialist subcontractors all enter into a partnering contract on the same terms, creating a contractual "hub" which aligns contractual processes throughout the project's lifetime.
While partnering can be used for a single project (known as project partnering), greater benefits are usually achieved through long-term strategic partnering. Examples of partnering/ alliancing contracts include the PPC2000, the FAC-1 and the NEC 4 Alliance Contract.