Chapter 5 6 AkhmadRusli Dhini Ilham Satrya_FINAL

7/31/2019 Chapter 5 6 AkhmadRusli Dhini Ilham Satrya_FINAL

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AKHMAD RUSLI (9111 202 701)DHINI SYALINA (9111 202 703)ILHAM KURNIAWAN (9111 202

711)SATRYA PRATAMA (9111 202 718)

Chapter 5 & 6Management Contracting and Construction

Management


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Table of ContentManagement Contracting

History of Management ContractingConstruction Contract Type SelectionBackground of Management Contracting

Management Contracting OverviewUse and Principles of Management ContractingRisk in Management Contracting

Approaches to Management Contracting Advantages & DisadvantageThe Implementation


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History of Management Contracting

At the end of1980s,

managementcontracting was

introduced

Prior to 1987,modified standard

contract forms wereintroduced and

drafted by one of theparties (usually the

contractor).

Since 1987 standard-form contract published

by independentinstitution, e.g. JCT,

FIDIC, AIA, SIA


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Selection


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Management ContractingOverview ~ 1

The characteristics of amanagement contractare the employer engages the

management contractor to :participate in theproject at an early

stage,contributeconstruction expertiseto the design andmanage theconstruction

The managementcontractor = managingthe process undertaking any of the

works.Managementcontracting is aprocurement method

consisting of 100% sub-contracting.Every item of buildingwork is sub-contractedto works contractors .


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anagemen on rac ng verv ew~ 2

Contractual relationships inmanagement contracting:

Favoured due to has equal levelas professional consultants.

More effective use of labor force, plant and equipment.

Reduce operating costssignificantly.

Construction risk is distributedentirely between themanagement contractor and theworks contractors

Works contractors arecontractually responsible for thework quality.

Employer can terminate therelationship after the designstage but before constructionwork actually commences.


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Use and Principles of ManagementContractingUse of ManagementContracting

Principles of

ManagementContracting

The condition that support touse the management contract:1. Independent architect and

design team2. Early completion3. Size of project4. Complexity of project5. Changes to the employers

requirements duringconstruction.

6. Competition on price

The scope of the work &responsibilities are well definedusing project-specific data.

The use of project-specific data :Enables the details to be easilytailored to suit individual projects.Provide a succinct summary of what it is the parties are actuallyagreeing to do.

Data would usually be defined in amanagement contract:1. Description of project2. Prime cost3. Services provided by

management contractor 4. Lists of project drawings and of

site facilities


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Risk in Management Contracting ~ 1

The management contractor is responsible for the administrationand operation of the works contractors.Liability for work quality is belong to works contractor, as long asthe management contractor performed well.In some cases, the employer required management contractor toabsorb the risk.The main risks involved were those associated with responsibilityfor works contractors,

1. Time overruns2. Defects maintenance3. Preliminaries & Design


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Risk in Management Contracting ~ 2

RiskCategory Responsibility Mitigation

ProjectExpense

(Money)

Employer and ManagementContracting

Create cost reimbursementcontract between employer and managementcontracting

Time Management Contracting andWorks Contractor Overlap between design andconstruction

Quality

Option 1: Managementcontractor fully responsible andliable on the quality of workmanship & material.

Option 2: Works contractor responsible for quality of workmanship and material.Management contractor

Involve only experiencedand qualified contractors


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Advantages & DisadvantagesAdvantages

Lower Cost

Contract management helps companies lower their business costs, whether they relate to producing goods and services or running ancillary businessoperations.

Business Relationship

Companies can use contracts to create lasting business relationships. These

relationships allow companies to develop revenue streams by consistentlypurchasing goods or services from a company.

Competitive Advantage

A competitive advantage is the ability to produce or distribute goods andservices better than other companies in the business environment. Usingcontracts can help companies maintain their advantage by limiting the amountof economic resources in the business environment.

DisadvantagesLoss of Control

A major disadvantage of contract management is that the organization gives upa considerable amount of control over the services that will be provided to

customers.Time Dela


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Advantages & DisadvantagesDisadvantages

Loss of FlexibilityFlexibility is an important part of doing business in a global economy. When theorganization outsources work to third parties, the organization reduces itscapacity to adapt its internal business processes to meet the needs of clients ina dynamic business environment

Loss of QualityWhen a parent organization provides a certain level of quality in its products andservices, the result is a professional reputation gained in the industry. If individuals in the contractor company are delivering products or services onbehalf of their client, a loss of quality could have disastrous effects on thereputation of the client firm.

Compliance

Although a service contract between client and contractor is generally viewedas a legal agreement, the client can face huge legal costs to enforce thisdocument in the courts. The contract should include teeth, or mechanisms for

ensuring that the contractor will provide services as agreed. However, largefirms should plan for unforeseen circumstances and legal costs for contractual


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The Implementation

Hotels in AsiaSuch as The Marriott International Corporation. Theycan more easily obtain economies of scale, a globalreservation system, brand recognition, etc.

Airline IndustrySuch as Qantas airlines. They thought managementcontract is an alternative that can yield higher returnsfor the company.


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Background of ConstructionManagement

Design

Programming

Construction

Quick, Reliableand Complex

BuildingConstruction

Management Issues

Architectur al Issues

Origins : USA; Emerges: 1930

Adopted in UK due tosuccessful of implementation inUSA.

Construction managementoffers alternative besides themanagement contracting

Construction managementbecomes popular due to themore complex problem inmodern construction projects.

USA UK


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Construction Management OverviewContractual relationships in construction management

The basic problem with management-based contracting systems lies

with the contractual links, information links and authority.The construction manager acts as consultant who assist the employer in project completion.


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se o cons ruc on managemencontracts

The Joint Contracts Tribunal published their first and still current standard-form construction management documentation in 2002.The construction management method is most suitable where some or all of the following circumstances are present:1. The employer is familiar with construction, and knows some or all of the

professional team.

2. The risks associated with the project are dominated by timeliness andcost (for example the employer may be a private sector employer requiring a commercial building).

3. The project is technologically complex involving diverse technologies andsub-systems.

4. The employer wants to make minor variations to requirements, as theproject proceeds.

5. There is scope for separating responsibility for design from responsibilityfor management of the project.

6. The employer requires an early start on site.7. The price needs to be competitive, but value for money is more important

than simply securing the least possible cost.


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tan ar orm ontract02)

First publication was in 2002.Developed from common practice andindustrial practice.Two main part of JCT CM 02 :

1. Construction managementagreement (JCT C/CM 02) betweenthe employer and constructionmanager

2. Construction management tradecontract (JCT TC/C 02) between thetrade contractor and the employer

3. Each part consists of of articles of agreement, conditions, schedulesand an appendix


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Risk in Construction Management ~1


Time Construction Manager andTrade Contractor

Since construction manager plays important role in

optimizing project timeexecution, highly qualifiedand experiencedconstruction manager isrequired

ProjectExpense(Money)

Employer and Trade Contractors

Monitor the forecast since

the payment is direct fromemployer to tradecontractors

DesignDefect(default)

Trade Contractor

- Involve only experiencedand qualified contractors- Clearly stated the liability of trade contractor in the


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Risk in Construction Management ~2


Completion Trade ContractorsClearly stated the obligationof trade contractors to

complete the works

Quality Trade Contractors

-Put specific contract clauseto govern the obligation of trade contractors to deliver high quality works- Establish performancematrix- Ensure good design andspecification beforeexecution


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Approaches to Construction Management

Popular in US.Its fairly unusual and onlyused in certain, very specificcircumstances UKspecific issueContract standard form isavailable from JCT

documentation, Engineeringand Construction Contract,etc.The standard form shall be

anlyzed and customized (as


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Advantages and DisadvantagesAdvantages

Lower Forecasted Cost

Construction costs are identified and predicted reliably during the design phase.Team interacts relating to construction cost, completion schedule, and quality workto maximize owners value. Also Protect the Owner from unnecessary liability.

Controlled Schedule

Schedule is controlled during design phase to ensure that design efforts areintegrated with construction phase requirements. Facilitates fast track methodologyor phased construction providing earlier completion Lend itself well to complexconstruction projects as construction can commence design work is completed.

Single Point Contact

Single prime responsibility for construction. No additional owner personnel required

to monitor construction. Serve as an objective, experienced Owners Representativeto protect the Clients and projects best interests first and foremost.

DisadvantagesDuplication of some supervision and contractors mark -ups. These costs must beoffset by value engineering, etc.

The client takes all the risk, particularly in the construction management.


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The Implementation

PT Chevron Pacific IndonesiaEmployed contractor to manage their ownconstruction work in house and an outsideconstruction manager is appointed. In this case thetrade contracts are still direct with PT CPI.


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Construction Management vsManagement Contracting ~ 1

Significant different between constructionmanagement and management contracting is theemployer places a direct contract with each of thespecialist trade contractors.Construction Management: The employer willutilizes the expertise of a construction managerwho acts in the role of consultant in order to co-ordinate these contracts.This technique overcomes many of the problemsof the management contracting method, becausethere is no direct contractual link between theconstruction manager and the trade contractors


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Construction Management vsManagement Contracting ~ 2

The Construction Management was that the employer would organize the management of the constructionactivities in house by appointing a constructionmanager. The trade contractors have direct contractwith the employer.While, in Management Contracting the actual worksare divided into separate work contractors which havedirect contract with Management Contractor.Management contractor reports and has directcontract with the employer.

Because of the criticism of Management Contractingthat has arisen over the past few years, the constructionmanagement approach has become more widelyapplied.


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MC vs CM Organization Comparison

Management Contracting

Construction Management


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Reference

John Murdoch nand Will Huges, Construction Contracts Law and Management, Taylor andFrancis, 2008www. kerncm.comwww. Wikipedia.comwww.ehow.com


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TERIMA KASIH


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Chapter 5 6 AkhmadRusli Dhini Ilham Satrya_FINAL

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