1. Traditional Contract 

Lump Sum Basis 

This method often prioritizes profit recovery and maximization, potentially at the cost of achieving the client's intended outcomes. As a result, it does not provide a strong foundation for building mutual trust between project stakeholders. 

SAFETY 

• Clients must ensure standards are clearly specified at selection 

• Reliant on the competency of trade contractors 

• Lack of transparency in subcontractor selection/qualification 

QUALITY 

• Any efficiency gains are held by the main contractor 

• Contractors may cut corners or use lower-quality materials to protect their profit margin 

• Desire to innovate or share innovation is stifled. No benefit in sharing with client 

• Little influence of trade contractors' work 

TIME 

• Little opportunity for overlap design with construction 

• Client design needs to be complete to avoid change 

COST 

• Any efficiencies increase the main contractor’s profit 

• Change is an opportunity to recover margins lost at tender 

• The cost estimate agreed on is only as good as the design 

• Significant client resources become required to manage interfaces and to assure performance 

• Multiple contracts and interfaces due to separate designers and main contractor 

GENERAL 

• Suitable if client has no in-house capability 

• Unsuitable option for complex and dynamic work 

• This option can become an expensive way of sharing information with trade contractors. Essentially, if the client is involved in some way from a self-delivery perspective, the main contractor becomes someone that performs transactions. 

• Little visibility of trade contractors. No ability to work with them – mutual communication with the client is difficult due to commercial sensitivities 

2. Design and Construction (D&C) 

Lump Sum Basis 

Although comparable to the traditional procurement method, this approach frequently incentivises the contractor to prioritise profit recovery and maximisation, potentially to the detriment of the client’s intended outcomes. Consequently, it does not constitute a sound foundation for fostering mutual trust between the contracting parties. 

SAFETY 

• Clients must ensure standards are clearly specified at selection 

• Reliant on the competency of trade contractors 

• Lack of transparency in subcontractor selection/qualification 

QUALITY 

• Any efficiency gains are held by the main contractor 

• Contractors may cut corners or use lower-quality materials to protect their profit margin 

• Desire to innovate or share innovation is stifled. No benefit in sharing with client 

• Little influence of trade contractors' work 

TIME 

• Can often be seen as an opportunity to pass the risk to the contractor and save on time in the design stage. 

• Complete client design requirements/ performance specification needed to avoid change. 

COST 

• Any efficiencies increase D&C's profit 

• Change is an opportunity to recover margins lost at tender 

• Cost estimate and lump sum only as good as the design requirements/ performance specification 

• One contract to place/manage 

• Substantial client involvement is required to oversee design deliverables, manage interface coordination, and ensure the performance of both designers and constructors. 

GENERAL 

• The client needs to understand the core business of the D&C contractor at the prequalification stage. Often, the contractor comes from either a design or a constructing background, rarely both, so strengths and weakness needs to be understood. Typically, the construction team may be an external resource function.  

• Needs very clear scope description to transfer any risk 

• Suitable if client has no in-house capability 

• Unsuitable option for complex and dynamic work 

• This option can become an expensive way of sharing information with trade contractors. Essentially, if the client is involved in some way from a self-delivery perspective, the main contractor becomes someone that performs transactions. 

• Little visibility of trade contractors. No ability to work with them – mutual communication with client difficult due to commercial sensitivities 

• Consistent monitoring is required to ensure the original concept of the project is maintained. 

• Efficiency can be gained via this method if the design team are releasing the right level of information to the construction team. 

3. Engineering, Procurement and Construction (EPC) 

Lump Sum Basis 

This approach shares many of the same attributes and constraints as the Design and Construction method discussed previously, including comparable risks related to the prioritisation of profit maximisation and the challenge of fostering trust between contractual parties. 

4. Engineering, Procurement and Construction Management (EPCM) 

Construction Management Fixed Fee, Reimbursable 

Although this approach offers a comparatively stronger foundation for mutual trust than the previously discussed strategies, it remains less than ideal due to the non-client role inherent in Construction Management. Time-based reimbursement structures for Construction Management may undermine incentives to optimise the project schedule. Additionally, when trade contractors are engaged under lump sum agreements, several of the risks identified in earlier strategies persist. 

SAFETY 

• Clients must ensure standards are clearly specified at selection 

• Client must ensure that standards are passed via the main contractor to the subcontractor 

• Full transparency in trade contractor selection 

QUALITY 

• Efficiency gains kept by the trade contractors 

• Desire to innovate or share innovation is stifled. No benefit in sharing with client 

• More visibility and control of trade contractors' work 

TIME 

• Opportunities exist to overlap design with construction 

• Complete client design requirements/ performance specification needed to avoid change 

COST 

• Changes are treated as opportunities to recover profit by the trade contractors 

• Cost estimate and lump sum only as good as the design specification 

• Many contracts to place/manage 

• Significant client resources to manage the design output, interfaces and to assure designers' and construction performance 

GENERAL 

• The construction manager needs to be an excellent planner and manager of design, construction and change 

• Trade contractors generally enjoy a closer relationship with the client creating more trust and focus on a successful outcome 

• The client needs to understand the core business of the EPCM contractor at the prequalification stage. Often, the contractor comes from either a design or a constructing background, rarely both, so strengths and weakness needs to be understood. Typically, the construction team may be an external resource function.  

• Needs clear scope description to transfer any risk, but this can be a gradual process as the trade packages of work are let 

• Suitable if client has no in-house capability 

• More suitable option for complex and dynamic work as the client has more visibility (and control) of the design, the CM and trade contractors 

• Ability to work with trade contractors is increased, improving the mutual communication with client's team 

• Efficiency can be gained via this method if the design team are releasing the right level of information to the construction team. 

5. Collaborative Contract 

Fixed Profit and Overhead, Reimbursable vs Target Costs 

This strategy is based on the principle of collective risk and reward sharing, focusing on safety, quality, schedule, and cost outcomes. To maximise the effectiveness of this approach, subcontractors engaged by trade contractors should also participate in similarly transparent risk-sharing arrangements, ensuring alignment of interests throughout the entire project team. 

SAFETY 

• Clients must ensure standards are clearly specified at selection 

• Full transparency in trade contractor selection 

• Enhanced safety culture through shared responsibility 

QUALITY 

• Innovation encouraged and shared with the client 

• Efficiency gains benefit the entire team 

• High visibility and control of trade contractors' work 

• Quality improvements driven by collective objectives 

TIME 

• Opportunities to overlap design with construction 

• Flexible design requirements allow for optimisation 

• Strong driver to optimise the schedule through collaborative planning 

• Early involvement of all parties reduces programme risk 

COST 

• Focus on minimising the effects of change on time and cost 

• Transparent cost management with shared financial objectives 

• Cost certainty improved through collaborative target setting 

• Reduced client resources required for contract management due to aligned objectives 

GENERAL 

• Entire team is formed on the basis of mutual trust and mutual reliance 

• No focus on profit or margin recovery – just minimising the impact on the client's requirements 

• CM needs to be an excellent planner and manager of design, construction and change 

• Trade contractors are involved early to influence the efficiency, effectiveness and coordination of the design 

• Design of each element of the work is undertaken by the correct party 

• Significant resources required during the early stages of the work (due diligence and selection), but less than those required in the latter stages of traditional and D&C work  

• Risk is shared across the team and identified very early 

• Client forms the broad CM team (design, construction, procurement, project controls, logistics, client technical). Individuals should be in-house and supplemented from outside, operating as individuals in the team 

• The most suitable option, the more complex and dynamic the work is. The team are driven to manage any change in the most client-effective way 

• No contractor hierarchy – equality across the team at the level needed to execute the work 

• Client requires effective construction management processes and systems for your business.