How To Define The Scope Of Work And Procure A Complex Project?

1. Define The Scope Of Work – What Needs To Be Done In What Order And In What Timeframe?

This is the eternal question for any project, what will be the scope of work for the project?

This applies not only to the construction, but also to the design and specification of the project which is usually the definition of what will be the built scope of works. However, it is not necessarily that simple, since the Operator(s) of the built facility may also have requirements that need to be incorporated into the built works, therefore into the designs as they are developed scope of work .

A good example of such a complex structure and definition for the scope of works of a project may occur on a resort hotel project, especially if the resort hotel also has a casino attached to it.

We have carried out such projects in the past and it is necessary to clearly identify all the involved parties and their respective responsibilities and to have a good process in place for the management and control of the budget for the project scope of work , since everything comes back to the question: Is what is being proposed essential for the operations of the built facility, and fundamentally what is the payback or Return On Investment.

A resort hotel and casino may have different operators for the hotel than for the casino, so that is immediately 2 parties that need to be at the table during design development meetings, giving input about their requirements to the hotel and casino designers, who may be the same or could possibly be different designers.

There should be a document from each of the hotel and the casino operators that spells out clearly what are their specific operational requirements for the hotel part of the development and also for the casino part of the development.

There needs to be a compatibility check for consistency regarding security requirements for both the hotel and casino operators, and there needs to be a process for ensuring the security of such information, so that it is not possible for criminals or potential criminals to get insights into what is going to be installed into the hotel and especially the casino security systems.

The hotel and casino operators may have their own preferred contractors or suppliers for certain items of operational security equipment, and their design specifications need to be prepared and incorporated into the design documents for the project overall.

Everything needs to be defined and described and allowed for in the contract scope of works, otherwise the Owner will be open to claims from contractors applying for additional reimbursement and time for the additional scope of works added in variations or change orders.

1.1 Fitting Out Contracts

There may be a sectional or phased handover from a Main Contractor who manages and completes the overall works, but there may be specialist contracts that are designed, procured and built out as separate fitting out contracts for Casino and even for particular public areas of the hotel, for example the Reception Area Fit Out Scope Of Work, Bar And Lounge Area Fit outs, Restaurant fit outs (there may be several of these restaurants on large resort developments, and they could be themed differently involving specialist contractors for different themes, eg Chinese style, Polynesian style, Thai Style, French or Italian style etc).

1.2 Programme Of Works

The overall programme of works is essential to be established realistically and to reflect the investment and interest rates at which the investment has been made, and the planned payback period to the investors.

Revenue needs to be gained from the newly developed facilities in order to pay back investors, so there is a lot of pressure to maintain timescales.

Contracts should be established with a realistic amount of damages in the event of non completion and handover. If there are delays they can be expensive for all concerned.

1.3 Sectional Or Phased Handovers

Sometimes areas are handed over for staff training and familiarisation, such as kitchen and back of house areas as their operational efficiency must ramp up prior to an opening, which may take several months to achieve peak efficiency.

Access and facilities including temporary services all need to be defined and specified.

2. Establish A Budget – How Much Can A Client Afford To Invest In The Project?

The good thing about dealing with experienced clients who have previous results from previous projects, is that they frequently have good actual records of costs from previous projects scope of work, even if these are in different countries, it is possible to establish realistic budgets from past projects, and especially regarding active operations and real figures.

The cost consultant, project or construction manager can use such realistic budgets to establish an overall budget for the new project, that allows for the unknowns and risks of the current project, from real costs with allowances for any local variations, currency fluctuations and risks or uncertainties about the current project.

Unless a realistic budget is established fairly early on, it can lead to a lot of wasted time and effort on the part of the project team carrying out what could be un-feasible designs.

3. Procurement Or Contracting Strategy

It is important to establish the right and most suitable Procurement Strategy for the project scope of work, or this may be known as the Contracting Strategy. This means a plan of who will be responsible for designing and constructing each part of the works.

Fundamentally this breaks down into a decision regarding a Traditional Process where the Client engages the consultants and there is a contractor procured for the delivery of the works (construction and fitting out).

Alternatively some or all of the works could be carried out using a Design and Build contract, so that one party i responsible for all the designs and coordination. Variations or change orders may be more difficult to negotiate with this sort of contract.

A third approach is to use a Construction Manager rather than a Main Contractor, and this party manages all the design and construction contracts on behalf of the Owner or Employer or Client.

There are some other variations of these three main choices or strategy options.

4. Prequalify Suitable Designers And Contractors

At the prequalification stage, it is normal to invite suitably experienced and qualified designers and contractors to give their preliminary view of what could be the budget for the project for which they are applying to be put on the tender list, although more normal for the project team to advise their budget for the project.

There is a whole series of questions to be asked about each designer and contractor who may apply to prequalify to tender for the project before they can be considered as a suitable candidate to fulfill the delivery of the project.

You need to be sure that every qualified designer and contractor on the tender list is one that you, or the client would be comfortable awarding the contract to. It is then a fair competition and tender using market prices to establish the real market value of the tender.

4.1. Contractor Designs & Value Engineering

At the tender stage, some tendering contractors may offer to carry out their own designs, so as to achieve a Value Engineered design, and thus a more competitive tender from them. This is all good practice and results in the best economies for the Employer, Owner, Client or sponsor of the project.

5. Check References, Testimonials And Reviews Before Award

It is very important to check all the criteria for selection of a designer or a contractor including taking up references and checking whether they are prone to making claims against clients and if so for what reasons and whether this occurs frequently. It can be a warning sign and you may not want to engage a contractor who has a track record of making big claims against their client.

6. An Owner Or Employer Should Only Sign A Contract Once It Has Been Reviewed By His Representatives

The Project or Construction Manager will usually handle the overall process of prequalification and tenders and prepare approprate reports with their full fact finds and recommendations to the Owner Employer or Client for their consideration.

Ultimately this contract will protect both you, the Owner, Employer or Client and the contractor, and ensure that everyone is on the same page regarding what has been agreed and the terms and conditions thereof.

7. Construction Contracts

Contracts are an important part of the process of any construction or civil engineering project. A construction contract such as a JCT Contract or NEC Contract provides important protection for all parties and is vital in preventing disputes.  Primarily the contract safeguards against payments and guarantees adequate work, but if a dispute arises, construction contracts can also dictate how the parties move forward to resolve the issue.

Care must be taken to ensure that the construction contract is well-written and incorporates all the necessary content. If the terms are unclear or the contract is ambiguous it can have a negative impact and could be onerous from the start. By formally recording such matters in writing the assumptions and ambiguity are removed. This in turn aids the management of the works, reduces the likelihood of problems occurring later down the line and avoids dispute as to what terms apply.

Our experts can help you by:

• Setting up your construction project to identify, assess, and avoid commercial disaster.
• Carrying out contract reviews for dispute avoidance.
• Advising on the most suitable contract form to be used for your project, pointing out any bespoke content required and construction contract management.
• Undertaking the full preparation, issuing, and negotiation of contract terms.
• Producing bespoke subcontract forms with specific terms and conditions and project-specific requirements.
• Ensuring payment provisions are included in your contract and that they comply with the Construction Act.
• Checking that contract terms are edited or omitted to ensure that a contract is not onerous prior to committing to it.
• Managing and resolving contractual issues quickly, effectively, and commercially should they arise, typically through adjudication and Expert Witness services.

Contract forms differ immensely, standard forms are normally tried, tested and fair to both parties, bespoke contracts should be avoided as they will be the opposite. It is imperative that prior to committing to a contract you fully understand certain elements including:

• The Payment Provisions
• Defects and retention mechanisms
• Set-off clauses
• Design responsibility
• Extension of Time and/or loss and expense
• Condition Precedent
• Acceleration, omission and supplementation
• Termination provisions
• Conclusivity provisions
• The Particulars

8. Which Form Of Construction Contract Should A Client Use?

To ensure that a suitable form of contract is appropriate for the task in hand, it is normal best practice to make use of a standard industry form such as one of the many suites of forms available from the JCT contract, FIDIC,  or NEC contract suites. It is usual to select the correct form of contract that best suits the type of project and procurement strategy. The correct content and appendices must be included to capture the agreement, and the form should only be amended to include any bespoke risk allocation agreed between the parties.

JCT Contract

NEC Contract

FIDIC Contract

AIA Form Of Contract

The country in which the project is located and the local custom and practice may determine which contract to use, or a client may have his own preferences from experience.

9. Contract Administrator/ Project or Construction Manager/Employer’s Agent

To manage and operate the contract efficiently and effectively a suitably qualified and experienced contract administrator, employer’s agent, project manager or construction manager is required to take this responsibility depening upon the chosen procurement strategy. The role involves a multitude of tasks and responsibilities such as:

• Preparing prequalification and contract documents & Inviting and appraising tenders
• Administering the contract terms, notices, design consultants and procedures
• Certifying interim payments and final payments, release of retention etc
• Issuing instructions such as contract variations or directions to start or stop works
• Chairing progress and other meetings and issuing progress and other reports (safety, quality, time and progress, budget cost reports etc).
• Assessing claims such as any extension of time and loss and expense claims from the contractor.
• Managing all site inspections and defect notification and rectification procedures
• Issuing all certificates of sectional and practical completion and later the certificate of making good defects
• Reviewing and agreeing on the final account and issuing the final certificate of payment to the Employer/Owner

Construction disputes may arise and can be costly, risky, and potentially damaging to relationships between all the parties including Main Contractors, Subcontractors, and Building Owners and Employers. Ensuring the correct choice of contract is in place from the start can help to ensure that design and construction projects run smoothly and avoid disputes and claims, so the procurement strategy is a vital consideration.

10. Make Interim Payments

The terms and conditions relating to payment and retentions are set out in the Form Of Contract.

You should not under-pay a contractor nor should you over-pay a contractor. Conform exactly with the contract requirements.

Interim payments may be subject to quality control and payment should not be made for rejected or substandard work.

11. Final Account(s)

The final account implies that all work has been fully completed and handed over into operations, and that all defects have been identified and resolved satisfactorily.

On complex projects this may be several years after the project was initiated.

The main objective is to get beneficial occupation of a building or complex so that revenue may be earned, even if there is some snagging/de-snagging or punch list works still to be completed (ideally it will all have been done early but in reality sometimes these sort of issues hang around longer than would be deesired by the Employer or Owner or Client and even the Operators.

12. Development Management, Contract Organisation And Set Up

Time spent at the beginning of a project and invested in proper consideration of the full scope of the development and how best to organise and arrange the project, and resolving the procurement strategy is never wasted.

If you have a project that you are considering to organise and set up then call Alpus on +447539141257 or +443332241257 schedule a call with Alan on https://calendly.com/alanje or drop an email to alan@alpusgroup.com.