Management Contracting Procurement Case Study

Management procurement is a method where construction work is completed using a series of separate works or trade contracts which the main contractor is responsible for managing. The contractor does not actually do the physical work, but is paid a sum for managing the project through the various works packages.

The employer starts by appointing consultants and a contract administrator to prepare drawings, a project specification and cost plan. The employer has control over design throughout the project through their professional team. The contractor is appointed by negotiaiton or tender, and interview. The works packages are usually let by competitive tender.

It is beneficial for the proposed contractor to be involved as early as possible as they will provide expertise in terms of buildability and programming of the works packages.

Other features of management procurement

  • Design can proceed in parallel with construction, and much of the design might be of a specialist nature related to a specific package of work. Early starts on site are often possible and overall project time can be reduced as a result.
  • There is no certainty over cost at the outset and work proceeds on the basis of the cost plan. The final cost of the project will not be known until the final works package is let, however costs can be monitored and controlled by the employer’s professional team.
  • Design changes are possible during the construction phase, provided that the changes do not affect work on packages already let, which can result in aborted work.
  • Completion within the contract period is an obligation of the contractor, and extensions of time cannot be granted without permission from the contract administrator.
  • Risk is largely with the employer, in respect of costs and time. A degree of trust and in-house expertise is required for management procurement projects. However this is a low risk option for the employer in terms of design and quality because of the control they have over the professional team.

Management Contracting vs. Construction Management

Management procurement generally works on the basis of two different methods:

Management Contracts

With management contracts, the employer appoints a professional team and a management contractor who is responsible for managing the works. The management contractor does not directly undertake any of the construction, this is spilt into packages and carried out by works contractors. The management contractor appoints the works contractors, and they are directly and contractually accountable to the management contractor. A pre-construction phase will allow a programme of works packages to be developed from the drawings, specification and cost plan, which are then let out by competitive tender.

Although contractually responsible for the works contractors, the management contractor is not liable for any default by a works contractor, provided they have complied fully with the terms of the management contract.

A variation on this method is ‘design and manage’ where the management contractor is responsible for the design team as well as the works contractors.

Construction Management

With construction management contracts, the employer will appoint a professional team with either an in-house manager, or enters an agreement with a construction manager to oversee the work. The construction manager does not directly undertake any of the construction work, this is split into packages and carried out by trade contractors. The employer appoints the trade contractors and is directly responsible for them. The construction manager manages the works, but the employer has a major role in directing the project.

Types of JCT Management Contracts

Today we are facing an increasingly uncertain world that can pose a threat to any business, but also an instance to leverage and generate new opportunities. Risk Management (RM) understands that present decisions and actions can influence the future, by identifying opportunities and threats. This paper addresses these issues with regards to the procurement and contract management of construction services in the mining industry, considering that this industry has not yet established a systematic framework for the application of RM in these functions. This situation results in the lack of knowledge about RM performance and gaps in procurement and contracting, making an evaluation and monitoring system of this function a needed methodology. With such a system, gaps in RM can be identified, improvement actions recommended and performance controlled. Then, a prototype evaluation system has been constructed based on maturity models where the evaluation is based on 1) a knowledge-based system that is able to propose actions to overcome current limitations of the RM function, and 2) a monitoring approach that is able to show the evolution of the RM function with the goal of improving it continuously. The maturity model and the prototype system used for this evaluation are described and results from two case studies corresponding to two mining companies are discussed. Also, main conclusions obtained from their analysis are presented. The prototype system has been validated through these cases and it might become the basis for the construction of a more functional system that could improve RM in procurement and contracting management in the future. These mining companies have considered the prototype as a useful tool because it establishes a framework for RM in the management of procurement and contracting processes, it can generate a systematic evaluation of RM in this area, and it is of easy access and use.


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