Project delivery systems for the construction sector in India

KPMG (2010:9) and Love, Skitmore and Earl (2010:220) explain that there are various procurement methods used in construction projects. For this reason, the client needs to understand all the available methods, their advantages and disadvantages to ensure that the project is finalised within the agreed time, cost and quality. Bijoy (n.d:4) further describes construction procurement as activities and techniques utilised to secure construction of a predefined system for an organisation. This includes organising the construction works and allocating risks to different stakeholders involved in a particular project, because of joint funding. In addition, UKESSAYS (2015) reveals that the choice of a particular procurement system fully depends on the type of project, type of ownership, nature of the construction industry in a given country and the maturity of the industry.

Bijoy (n.d:6) further states that design and execution are the main phases of traditional construction procurement in India. Construction projects may use one of the following processes to meet its specified project objectives:

 Sequential technique, phases of the project are carried out consecutively (dependent);

 Parallel technique, phases of the projects are undertaken simultaneously (independent); and

 Staggered technique, phases of the project overlap in order to carry out the project at a much quicker pace (KPMG, 2010:9).

Bijoy (n.d:9) explains that construction procurement systems are divided into the separation and integration of organisation groups. Because of different contractual obligations, these systems are used for different projects with different project objectives. The separation of organisation includes traditional sequences of design and construction, as well as construction management methods (CM method). While integration of organisation refers to a single organisation (Turnkey contract) carrying out both the design and the construction works. This

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method includes Build, Own, Operate and Transfer (BOOT) and Build, Operate and Transfer (BOT) systems, according to Bijoy (n.d:10). In addition, Vadgama et al (2015:6) and KPMG (2010:9) assert that BOOT is an effective procurement system that encompasses both the public and private sector, that allows the private sector to operate the public urban infrastructure facility until such time that the entire project cost has been received by the private firm. UKESSAYS (2015) emphasise that design-build, construction management and management contracting are the most developed and understood construction procurement systems in India.

3.2.3.1 Traditional Designer-Constructor Sequence

The traditional procurement system involves the client appointing a design firm to prepare the designs and the specifications on behalf of the contractor who will be responsible for the construction of public urban infrastructure works (KPMG, 2010:9). The client holds the design firm accountable since there is no contractual relationship between the design team and contractor (The Construction Management Association of America, 2012:7). When the design firm has completed the designs, the client appoints a contractor who will carry out the construction work. The contractor appoints sub-contractors to carry out specific aspects of work. During the construction phase, the design firm further monitors the project implementation by the contractor. (Love, Skitmore and Earl, 2010:231; Sneed, 2012:17).

Risk, especially on cost, is shared between the client and the contractor, since a rate is agreed for each public urban infrastructure operation. Furthermore, the certainty of the ultimate construction amount often depends on the work done by the design firm but provision for additional work and the involvement of the client needs to be adhered to (Bijoy, n.d:4) in this type of system.

3.2.3.2 Construction Management Method (CM Method)

The Construction Management Method is described as a system that is inclusive of a construction manager and other individuals who will carry out planning, design and construction of the public urban infrastructure project in a harmonious manner. This type of procurement system involves:

 Engaging with the client and the design team at the initial phase of the project, also suggesting any improvements on the designs and schedules;

 Analysing changes proposed to the design team with regard to project cost and schedule;

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 Overseeing the development of the project from the initial stages to ensure that project objectives are adhered to at all times;

 Procuring material and equipment for all contractors involved in the project and coordinating monthly payments to contractors and claims; and

 Performing other duties related to the project as directed by the client (Bijoy, n.d:9;

ICRA Management Consulting Service Limited, 2015:2).

The contractual relationships in the Construction Management Method may vary according to what the client is looking for and the risk on cost is split. A contractual relationship may arise whereby the construction manager acts as an advisor only to the client (The Construction Management Association of America, 2012:7). The disadvantage of the system is that the risk only falls on the client and not on other parties. Suppliers are contracted directly for supplying material. However, as much as there is high risk on cost, there is also the possibility of cost reduction since the contractors, who often hire sub-contractors and charge a premium over sub-contractor’s rates, are eliminated from the equation. Unlike other systems, construction management allows the client to be involved (Bijoy, n.d:10).

Bijoy (n.d:5) mentions that within the CM method a contractual relationship exists where the construction manager is contracted to the client as well as to other involved parties (designer, sub-contractors). In return, the client enters into a contract with the rest of the parties involved, unlike in the previous relationship where the construction manager was only contracted to the client. Construction managers have greater control of the individuals involved in the project and do not require full participation from the client (Langdon and Rawlinson, 2006).

Furthermore, Minter Ellison (2011) describes how the CM method also encourages a contractual relationship whereby the client only enters into a contract with the construction manager, while the CM enters into a contract with the rest of the parties involved. As much as this relationship may be compared to a turnkey contract, they are different in the sense that the construction manager does the public urban infrastructure work of a turnkey contractor for a service fee, whereas in a turnkey agreement the contractor is committed to a certain fee.

UKESSAYS (2015) reveals that construction management occurs where the client appoints a construction manager to manage, coordinate and monitor the design as well as the construction works. In the system the client is contracted to all the trade contractors and the design team, unlike in management contracting. Therefore, the client appreciates the risk.

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With this type of procurement system on course the client can further exercise a level of involvement in the project and over the contractor selection. Construction management involves the owner, client, architect, engineer, quantity surveyor, construction manager, contractors and sub-contractors (UKESSAY, 2015).

3.2.3.3 Integrated organisations

A turnkey agreement is when clients deputise all duties of a project to external consultants. In such agreements, contractors deliver the complete facility according to the client’s specification at an agreed time, cost and quality. Some contractors are allowed the opportunity to operate the completed facility in exchange for remuneration. In this type of system, the cost on risk is with the contractor (Campbell, 2012; KPMG, 2010:10).

Alternatively, the client may(in-house) prepare designs and continue with the construction work to ensure project success. However, this requires the client to have a number of on-going projects to maintain a large work force. In this type of system, the entire cost on risk lies with the client (Thwala and Mathonsi, 2012:17).

Layton Construction (2016) and El Wardani (2004:14) explain that the design-build method is a procurement system whereby a single entity carries out the design as well as the construction under a single contract. The contractor is known as the builder or design-build contractor. In such a system, the contractor carries the risk, irrespective of the nature of the fault, since the contractor is responsible for the design, planning and control. Moreover, the designer and the contractor can be part of different entities as long as the agreement with both parties is under a single contract with the client (Konchar and Sanvido 1998:440). The design and build method is considered a low-risk system for clients who wish to minimise the risk of cost overruns and design failure. However, risks can occur as a result of rushed designs and where unrealistic time objectives are made (UKESSAYS, 2015). The design and build process involves the owner, client, architect, engineers, quantity surveyors, design and build contractor, consultants and subcontractors, which further ensures that cost and time savings are attained.

3.2.3.4 Management Contracting

As part of the procurement systems used in India, there is also management contracting. This system allows the client to appoint the designers and the management contractor separately.

This requires mutual trust from all the parties involved and is discouraged for inexperienced clients. The significance of this system is that the time needed for the preparation of designs

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and the construction works is relatively shorter, and the participation of the managing contractor is quickly introduced to form part of the professional team responsible for the project (Designing Buildings, 2017). The introduction of the managing contractor, who appoints sub-contractors and manages the works, ensures that the project is finalised in time, thus ensuring returns on the investment. The management contractor is not responsible for any deviations that may occur because of the contractor’s incompetence (UKESSAY, 2015).

Management contracting involves the architect, owner client, engineer, quantity surveyor, sub-contractors, works contractors and management contractor. The main responsibilities of the managing contractor are monitoring performance, coordinating and managing construction works, cost planning and cost control, as well as managing the entire site.