Home > Resources > Contracting approaches for infrastructure projects
PUBLIC AND PRIVATE
DECISION-MAKERS
There are many possible approaches to carrying out an infrastructure project.
The Infrastructure Council’s expertise can be used to help select the best approach for each project.
- Different contracting approaches for infrastructure projects
Approaches
Description
Advantages
Disadvantages
Stipulated Price Contract
Design
Bid
Build
Description
The client or project owner hires the architect to provide design services and prepare construction documents issued for competitive bidding purposes.
The construction contract is awarded to the lowest bidder.
The architect then administers the construction contract.
Advantages
- Clear roles assigned to each party.Clear roles assigned to each party.
- Process is generally transparent.
- Direct professional relationship between the client, the building user and the architect.
- Price is known before work begins.
Disadvantages
- Separating design and construction can be risky.
- The contractor is unknown when the construction documents are prepared.
Construction
Management
Description
For the public body or its authorized representative, the construction of the infrastructure is entrusted to several contractors after all the detailed plans and specifications of the various lots have been completed.
In addition, a construction manager is hired as a consultant who is generally involved in the design process by providing advice on constructability, cost estimating, scheduling, bidding, coordination of contract negotiations and award, timing for purchase of critical materials, cost control, and coordination of construction activities.
Advantages
- Direct contractual relationship with the client.
- Direct contractual relationship with the client.
- Construction advice during the design process.
- The opportunity to call bids sequentially, thus saving time by permitting a start on construction before all documentation has been completed («fast track»).
- Careful monitoring of costs and schedule.
Disadvantages
- Added costs and time in selection of an additional consultant.Added costs and time in selection of an additional consultant.
- The professional relationship between architect and owner, and between architect and contractor now includes a third party, sometimes complicating direct communication.
Design-
Build
Description
Under the design-build approach, a single firm provides design and construction services to the client.
The design-build management method can be very efficient.
The firm takes on the design and construction of the work and assumes the risks related to costs and schedules. It also guarantees quality of the work.
In addition, a cost-plus contract can also be used. The builder works to reduce costs during construction. Cost savings benefit the client, who pays only the actual cost of construction, plus the design-build fee.
Advantages
- Functional program (statement of client’s requirements) and client decisions are committed early.
- Cost-benefit analysis is undertaken at the beginning of the process.
- Immediate feedback is received from the contractor on design options.
- Streamlined process can increase efficiency.
- Team approach is reinforced.
- Ideal for fast-tracking a project.
Disadvantages
- Responsibility for design approvals shifts from the client to the design-builder.
- Cost is determined before the design is complete.
- Communication between the architect and the project owner or building users may be restricted.
- High risk to the architect for preparing the proposal, which may or may not be successful.
Public
Private
Partnership
Description
PPPs occur when the private sector works with a government body or public agency and provides funding and/or xpertise to offer and deliver public services.
PPPs are normally used for large-scale projects and may involve the financing, design, construction and, in many cases, the management and operation of facilities.
Advantages
- Uses the efficiencies and expertise of the private sector for public sector projects.
- Allows projects to be financed in ways which may not be possible through public methods (e.g. debentures, taxation) and may not be accounted for as a capital expenditure.
- Single point responsibility.
- Architects can develop long-term relationships with ongoing consortia (project entities).
- Project carried out in less time than traditional public sector contracting approaches.
Disadvantages
- Potential lack of communication between the architect and the owner or building users.
- Building users have less control over the process and its outcomes.
- Sometimes more difficult to obtain professional liability insurance.
- Difficult for small architectural practices to compete in this market.
Project Management
Description
In project management, the client usually hires a “project manager” from the pre-design phase to manage the entire project and hire all the necessary professionals: architect, engineers and other consultants.
The same three phases can be followed as in the traditional process (design, bid and build), or use a sequential tendering process to speed up construction.
Advantages
- A well-informed client is better able to make good decisions on cost vs. quality issues.
- Design quality may be superior when the architect can benefit from the experience of a project manager.
Disadvantages
- PROHIBITED by most provincial associations: this is namely the case in Ontario, for example (where OAA Regulation 42(55) allows it only if it’s under a design-build contract), as well as in Quebec and British Columbia.
- Unless the architect can maintain a direct relationship with the client, the client is less able to have control over quality of construction.
Turnkey Development
Description
A contract in which the contractor agrees on a fixed amount of money to take care of an entire project, releasing the owner from interactions in the process.
The contract includes the design of the plans and the complete execution of the work, up to the delivery of a product that meets the needs and performance of the contract.
This method can be combined with the design-build or developer proposal approach.
Advantages
- Performance takes precedence.
- Management is simplified because the client deals with only one supplier for the design and completion of the project.
- A single supplier assumes most of the risks. The latter must complete the construction project as agreed, on time and within budget. In the event of a problem, the client deals with one person only.
- Quickly establishes a reduced fixed price or even eliminates the risk of cost overruns.
- Other advantages such as quick turnaround time. Considerable time is saved simply because the client doesn’t have to worry about plans, specifications and tenders from multiple contractors.
Disadvantages
- Client loses much of the control they would otherwise have over the project and its progress.
- Supplier assumes more risks and may increase their bid price to take this into account.
- If the supplier encounters unforeseen difficulties during the project, there would be an incentive to cut back on the project’s lifespan, reliability or ease of maintenance in a context where the client is not in the best position to supervise the work.
- In case of major difficulties, the supplier’s solvency becomes critical.
Integrated Project
(IPDA: INTEGRATED PROJECT DELIVERY ALLIANCE)
Description
Collaboration is the cornerstone of this approach: owner, designer and contractor work together to reduce losses.
Decisions are made jointly and, more importantly, for the benefit of the project rather than the parties to the contract: both risks and profits are shared.
A contracting approach that integrates people, systems, structures and business practices into a process that harnesses the talents and knowledge of all participants to optimize project results, increase value to the owner, reduce waste and maximize efficiency in all phases of design, manufacturing and construction.
The Integrated Project Delivery (IPD) model seeks to align the business interests of all parties by linking individual success to project success to promote efficiency, open communication, information sharing and joint problem solving.
Advantages
- Improves cost, time, quality and other project risks.Improves cost, time, quality and other project risks.
- Increases efficiency, reduces waste and avoids disagreements.
- IPD supports CSR by establishing a platform where success is measured by much more than just cost and schedule.
Disadvantages
- This approach requires a structure that supports collaboration and allows for information sharing. Data modelling tools such as BIM can be very useful in this context.
- IPD structures are not appropriate for all projects and potential stakeholders.