Saturday, October 13, 2012

Contract Administration In Building Vs Building Project Management

Something that is discussed regularly among builders and construction project managers is the distinction between building contract administration and project management.

Usually there are two aspects to these discussions:

1. The distinction or differences that we see between them.
2. The quality of service that is offered.

Let me explain a little.

The on-site contract administration service that is offered by project management companies is much the same as that offered by many architects following their design service. It involves the letting of a build contract to a single (main) contractor, overseeing the production of a programme, monitoring onsite decisions, progress and quality and then overseeing the closing of contracts, finalising accounts and ensuring defects inspections are carried out and addressed.

These same architects will, in some cases, choose to pass the site-based aspects of contract administration to a project management company and this may be down to the complexity or risk of the build, or perhaps the site attendance and workload that is involved.

Many architects also understand that project managers are specialists at on-site management and that they are able to deliver great value, therefore achieving greater value themselves or passing the value difference on to their clients if they use a project management company to handle the contract.

Whatever the motivation, the result for architects is usually that they are able to focus and spend a greater proportion of their time on design, which is the skilled aspect of the RIBA architectural service. It is in this way that they can add most value and consequently gain the greatest reward through premium fees.

The on-site project management service that is offered by some project management companies is slightly different to others in terms of contract administration but can achieve the same building finish for the client. The greatest difference or distinguishing factor found between project management companies is that some do not let a contract go to a single (main contractor). Instead they carry out an analysis of the trades and building operations that make up the project and look at how these could be best arranged into trade packages.

These packages are then let to separate specialist builders, suppliers or tradesmen, each contracted directly by the client.

Rather than oversee the main contractor's programme production and implementation, it would fall to a project manager to produce a programme ensuring the various actions are carried out in the correct order and to an appropriate quality. This trade route is unlikely to be offered to clients by architects for the same reasons highlighted above. In some cases this route requires an even greater attendance and workload and is not likely to enable them to offer the client or themselves value.

Many architects will ask why anyone would want to contract a project in this way. The answer is that some project management companies have become specialists in this approach to on-site management and find that this route is able to offer much greater end value to the client.

The increase in build value is often needed by a client in order to be able to 'unlock' a project in financial terms that otherwise would not go ahead. Splitting a project down into trade packages can bring this needed value by:

1. Removing the main contractor's overheads and profit - often reducing a budget by around 10% - 15%
2. Ensuring that risky activities or those with a high quality requirement are let to and performed by specialists
3. Enabling the client to maintain maximum control over budget and specifications of work as the project progresses
4. Enabling self-builders to gain 'sweat equity' through their own or family's input or perhaps involve particular tradesmen that are known to them.

Is there a preference for either route? The simple answer is no!

Project managers often find that they spend more time explaining the project managed service, especially to architects, because it is professionally less recognised and can be overlooked.

Usually, given clear information about the build costs, the fees and the risks associated with each, one option will usually stand out as a preference for the client.

In some cases the project managed route suits both parties and enables the job to move ahead and be completed when otherwise it may have floundered. In other cases the main contractor and contract administration route is the obvious method of delivery.

Fees are usually calculated on likely time input in each case and the more laborious project management is priced slightly higher than the contract administration.

Charlie Laing Project Management provides quality project management services for residential and commercial properties in London, Oxford & the South of the UK. More articles and advice about building and construction are available on the Charlie Laing Project Management Blog or a website

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