1. Nepal administrative staff college
Project Delivery Methods and Types of Contract
Rajendra P. Adhikari, Ph. D.
21st May 2017

2. Presentation outline Meaning Historical development PD methods
Selecting the right PD method
Types of contract
Discussions

3. Project delivery method
A mechanism adopted by an Employer/Agency for development, design or construction/erection/installation or operation and maintenance of system or infrastructure by entering into contract.
Contract is an agreement between two or more than two parties to do or not to do any business, which shall be legally enforceable.

4. Historical development (source: Rajendra P
Historical development (source: Rajendra P. Adhikari (1998) Evolution of construction in Nepal, Journal of construction management, NICMAR, India)
Master Builder
Modern Era
Code of Hamurabi, 1795 BC
Nepal unification,
1769
Madhes Bandobasta*
Pahad Bandobasta
Rana Period
(Sep 1846 – Feb 1951)
Ministry of Transport
Formed, after 1951
Chest Clinic at Mahaboudha, constructed by local contractor (after 1951) * 2nd Nepal telecommunication corporation at Sundhara (1959)
Consulting services,
1960
FAR; PWD 2002 & PPA 2007/PPR 2007
* There were-Jana sewa bibhag; Sarbajanik Nirman Madhes Pahad Report Niksari Adda & Chhevadal Adda were at Kathmandu, Patan, Bhaktapur & Banaune Adda Siksha Phant and Banaune Adda Dosara

5. Project delivery method differs because of …
Contract administration approach
By owner
By Engineer
By professional construction manager
Risk allocation –
Owner
Contractor
Design responsibility –
Separate designer & contractor
Single point responsibility
Contract price determination –
Lumpsum
Unit price
Cost plus

6. Risk allocation …
a) Construction and Engineering industry is a high risk industry b) Management of the risks has overriding importance, c) Every risk must be allocated to one or other party, d) A risk cannot “be left hanging in the air”, e) Practice over many years has shown that sensible and balanced risk allocation results in the lowest overall total cost for completed projects.

7. Project delivery methods
Design-Bid-Build (Traditional)
Design-Build
EPC contract (Full turn key)
Construction Management
Construction Management at Risk
Multiple Prime Contractors (Integrated Project Delivery)
Public Private Partnership (PPP)

8. Design bid build (DBB) Traditional project delivery system
Features:
Traditional project delivery system
Three linear phases- design, bid and build
Three prime layers- owner, A/E (Consultant) and contractor
Two separate contracts- owner to A/E (Consultant) and owner to contractor
Owner warrants the sufficiency of the plans and specifications to the contractor:
The contractor is responsible to build the project as designed
The designer is responsible to design to the professional standard of care
Owner is responsible for any “gaps” between the plans and specifications and the owner’s requirements for performance.
Owner
A/E (Consultant)
Contractor
Subcontractors
Design Consultants

9. DBB Contractor’s involvement
DESIGN
CONSTRUCTION
MAINTENANCE
Contractor Involvement

10. DBB: applicability Advantages Limitations
Widely applicable, well understood & well established
The process may require a longer duration
Owner has significant amount of control
Initial low bid might not result in ultimate lowest cost or final best value
Allows more firms to bid & lowest initial price
Design risk is with the owner
Easy to procure
Potential adversarial relationship among the contracting parties
No incentive to contractor for enhanced/better performance (Except if there is active bonus clause for early completion)
Difficult “fast-tracking”; Constructability

11. Design build (DB) Features:
Integrated process: Combines design and construction under a single contract
Two prime players: owner & design-build firm
One contract: owner to design builder with single point of responsibility
Firms may be:
Contractor led
Designer led
Joint venture
Developer led
Owner
Design Build Firm
Subcontractors
A/E

12. DB DB firm’s involvement
DESIGN
CONSTRUCTION
MAINTENANCE
Design-build firm’s Involvement

13. DB: applicability Advantages Limitations
Single contract for design and construction
Limited involvement of the owner
Accelerate delivery by fast-tracking design & construction
Difficult selection (procurement, setting criteria)
Potential for innovation and quality enhancement
Quality control is the DB’s function
Constructability & VE enhancement
Reduces error and change orders

14. Engineering procurement construction (epc)
The EPC is also called full turnkey method
The EPC Contractor is made responsible for all the activities from design, procurement, construction, to commissioning and handover of the project to the End-User or Owner.
The engineering and construction contractor will carry out
the detailed engineering design of the project,
procure all the equipment and materials necessary, and
construct to deliver a functioning facility or asset to their clients.
Companies that deliver EPC Projects are commonly referred to as EPC Contractors.

15. Equipment supply & process warranty
Single warranty between owner and EPC contractor. Usually in the form of performance bond. EPC contractor manages warranties with subcontractors and suppliers
Project budget, cost overruns
Cost risk of the project is borne by the contractor
Performance risk
Responsible for all risks- schedule, cost, and quality
Communication of construction issues and changes
Problems are solved rapidly and results are available sooner as the interface between the E, P and C functions is connected. Cycle times are reduced.
Benefits of innovations and efficiency
Possibility for innovations and efficiency
Accountable for labor relations
EPC contractor is responsible throughout the project period
Should hire, train & use the local personnel

16. Construction management (cm)
Features:
Owner engages a construction manager (CM) to act as a construction advisor during pre-construction phase and general contractor (GC) during construction
Selection criteria include qualifications, experience, strategic approach and cost elements
Owner
CM/
General contractor
Multiple Prime Contractors
A/E

17. Construction management (cm) at risk
Features:
Owner selects the Architect based upon qualifications and fee
Owner selects CM based upon qualifications and fee during design
A/E & CM work together to deliver the project
Competitive bid for subcontractors
Fast-track possible
Owner
Construction Manager
A/E
Subcontractors

18. Integrated project delivery
Features:
Newer project delivery approach
Owner selects CM and A/E based upon qualifications prior to design
Three parties sign a joint agreement (~Partnering)
Jointly establish project goals and objectives
Considered as high efficiency delivery method
Owner’s risk is limited by team approach
Owners involvement as partner
Procurement issues to be addressed
Owner
Construction Manager
A/E

19. Public private partnership
Long term contractual relationships between public and private sectors (contracts terms up to 30 years);
A single private body is responsible for designing, construction, renovation, repair and maintenance of the assets;
PPP approach can bring value for money in public services delivery;
Project-related risks are shared among partners and allocated to the party best able to manage it;
Risk and benefits are shared
Difficult assets handover process

20. Which one is better … Control on design
Time available for construction – “fast tracking”
Risk allocation
Owners experience
Owners capability
Owners institutional/legal backup

21. Types of contract (PPR 2064, # 22, Schedule 4)
Unit rate contract
Lump sum contract – underground pipelines, bridges
Cost reimbursable contract-
Cost, Overhead & Profit
Time and material cost contract
Labor at hourly/daily rate plus overhead and profit
Material cost within the agreed amount

22. Types of contract Design and build contract Management contract
Performance based repair & maintenance or management contract
Piece work contract

23. Let’s discuss
What are the general project delivery method that are common in Nepal ?
What are the general contract types that are common in Nepal?
How alternative project delivery methods and contract types can be used for the benefit of project in Nepal?

24. Let’s discuss …
How Value engineering & Constructability can be applied in our project delivery process?

25. Thank You