Page 19 - Civil Engineering Project Management, Fourth Edition

Civil Engineering Project Management
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charge of the project can work in partnership with the contractor to devise
the cheapest means of overcoming problems. The main disadvantage for a pro-
moter is that he carries all the risk of cost overruns, while the contractor is
assured of his profit and fees. Where the works can be reasonably well defined,
it may be best to use a measurement type of contract with a contingency sum
allowed for any changes found necessary.
Sometimes a target cost is set under a cost reimbursement contract, the con-
tractor sharing in any savings or excesses on the target cost. This gives the
contractor an incentive to be efficient; but problems can arise if the target has
to be altered because the work found necessary differs from that expected (see
Section 3.1(e)).
Design and build contracts

These contracts are useful to a promoter who wishes to delegate the whole
process of design and construction, or for whom gaining the output of a project
is of more importance than the details of design. They also suit promoters who
would not expect to be involved in construction work, such as health or educa-
tion authorities. D&B contracts can offer a price advantage because the con-
tractor can reduce his costs by using easy-to-construct, standard, or previously
used designs which suit his usual methods of construction and existing plant.
Adisadvantage to some promoters is that they lose control over the designs
for which they are paying and may thus not get works wholly to their liking.
Such contracts should only be used where there is little risk of the promoter’s
requirements changing during construction.
Since the contractor is taking on more risks including those of design and
buildability, prices will usually be higher than for a measurement contract. Any
attempt to achieve a short completion time for a project by use of such condi-
tions may also lead to increased prices and possible overruns of time, as not all
of the processes of design and construction can overlap.

1.4 Growing use of design, build and operate contracts

Design, build and operate (DBO) contracts were increasingly used in the
1980s onwards by government departments in the UK who saw a benefit in
not shouldering all the complications of building and operating a new facility,
but in passing this out to the commercial sector. Such contracts have the
added advantage that if a contractor has to operate the works he has built for
a number of years, he has a financial incentive to use good quality design and
materials to minimize his expenditure on operation and maintenance.
There are several variations of DBO contracts. ABOT ‘build, operate, transfer’
contract usually implies the client pays for the works as they are constructed