Building Strong Foundations: Construction Procurement Issues

13 July 2020

Building Strong Foundations | A Construction Law blog series

Blog 1 of 7 | Introduction

For a party about to undertake a Construction Project there are a range of key decisions to be made well in advance of any spades going in the ground.

Many of these decisions will have an enormous impact on how the project is managed, how payments are made, what protection the Employer receives and ultimately how much risk each party is taking on as part of the project.

I have briefly set out below six main headings to consider, each of which will then be the subject of a more detailed blog in this series on pre-procurement construction issues.

1. Procurement: how will you be procuring the works?

What will be the organisational structure behind the project and which professionals will need to be involved?

Many construction projects in the U.K. utilise the Design & Build (D&B) structure. This structure is when the Employer (the party who wants the work carried out) signs a contract with a single main contractor, who then employs the designers such as architect and engineer as well as sub-contractors who carry out the work on site. This structure allows the Employer to liaise with a single party in relation to the works, with this single party being responsible for any problems with the design or construction of the building further down the line (known as single point responsibility).

The other popular route is the traditional method of procurement which can be summarised as design, bid build. The Employer works with designers (usually an architect and a structural engineer) to create a design for the project. Once the design is finished then a contractor will be appointed to build the project for a certain price. The designers will take responsibility for any issues with the design and the contractor for any issues with the build, so there is no single point responsibility.

There are many other alternative structures available, from construction management to management contracting, design build and operate contracts and partnering arrangements.

 

2. Construction Method: do you have a construction method in mind?

Each project is different in how it is designed and executed, depending on what the project requirements are.

Constructing a building from scratch may entail use of a large steel frame for a building such as a warehouse, distribution centre or sports stadium, with concrete foundations and simple metal walls depending on the specification.

Many new housing developments utilise wooden frames as their base, and whilst traditional bricks and mortar construction is increasingly expensive this method is still in use.

Some developments will use cladding to change the appearance of buildings, with many wooden frame housing developments being clad in bricks or limestone depending on the developer’s desired aesthetic.

Infrastructure projects such as power plants and motorways will have their own specialist requirements and will be designed in close partnership with sector specific engineers to ensure that appropriate methods are used.

Alternative methods of construction are also available, with kit built houses and modular units being used for developments such a student blocks and local authority housing.

Some projects will be simple fit-outs, where an open plan office is being refurbished or converted into an office with more meeting rooms and private spaces. No heavy machinery or earth moving is required for this work, but the contract to carry out these works will still be a construction contract.

 

3. The Site: planning, ownership, ground conditions

Before you start, you will need to ask yourself questions including: do you already own the site? What is access like? Are there any planning issues? Will other parties be affected by the work, if so do you have the requisite permits and consents in place? Are there any party wall issues?

Ground conditions – have you had any survey work done? If the land is contaminated then you may be responsible for rectifying this, which could add substantial costs to any construction project. If the ground conditions are unsuitable for the project which you wish to build, the project may have to be redesigned or cancelled entirely. In city centre locations rights of light may be an issue, which should be considered well in advance of planning a high rise building.

 

4. Approvals and Design: what is in place?

Do you need planning permission/building regulations approval? Has your scheme design been approved? Approval of the full design is unlikely, but any outline permission (particularly if it was obtained by someone else) should be carefully checked to ensure it allows the Employer to achieve their desired end product.

Have you priced the design? If so have you priced every single item or are you paying for a watertight shell which will then be fitted out? Has the pre-construction health & safety plan been considered?

 

5. Funding: to borrow or not to borrow?

Will you be funding the works yourself or will there be a bank or other financier involved? Funders will each have their own requirements in relation to document wording, monitoring and insurance. These processes will take additional time and will incur costs to the borrower which should be factored into the project.

If you are receiving finance, will advance payments be required and can these be arranged in time?

 

6. Starting on Site: how soon does this need to happen?

Do you want to start works immediately? Have they already started? If the works are already underway or need to be started as soon as possible then an interim documents such as a pre-construction services agreement or letter of intent can offer the employer some protection whilst the full building contract is negotiated.

Is the pressure on the works time related, budget related or quality related? If time is the issue then programme is key, if the works need to be completed to a certain cost or a high standard and timing is flexible then more time can be taken negotiating the design, specification and contract documents to ensure that these goals are met.

 

 

Further information

If you require legal advice or would like to further discuss any of the issues raised in this blog,  please contact the Construction team.

About the author

George Dale is an Associate in the Real Estate & Construction. George specialises in construction law and his practice focuses on a variety of transactional construction work. George has worked for a range of clients including developers, landlords, tenants and contractors, ranging in size from individuals and SME’s to large national retailers.

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We welcome views and opinions about the issues raised in this blog. Should you require specific advice in relation to personal circumstances, please use the form on the contact page.

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