Introducing Management Contracting

Introducing Management Contracting

Management Contracting differs from that of other more traditional procurement methods in that the management contractor is appointed to manage the construction of the project rather than simply build it.

The Contractor is usually selected in competition, early in the programme on the basis of a tender fee for pre-commencement services and construction services during and after the project as well as a lump sum or guaranteed maximum for site staffing and facilities. As well as price, the experience and past performance of the Management Contractor is a major factor in the selection process.

The Management Contractor is responsible for the management of the Works which is divided into separate trade and specialist packages which are tendered by trade contractors. The selected trade-contractors are taken on by the Management Contractor who is responsible for managing them and in particular their ability to meet quality and programme targets.

Management Contracting is appropriate for large, complex projects where an early start is required. This is achieved by overlapping design, preparation of tender documents and construction.

Management Contracting has the following advantages:

It lends itself well to complex construction projects as construction can start before design work is completed. It is important, however, that the design of each trade package is complete prior to tendering of that package.

It allows flexibility for change as the works are tendered progressively. There is a reduced risk of claims affecting other packages in the event that major changes are made.

It importantly allows an early start to be made on site before design is well advanced.

It creates a less adversarial relationship between Management Contractor and Employer.

It is possible to incorporate Design and Build and Performance Specified Works as required.

Management Contracting has the following disadvantages:

There is no contract sum is established at commencement of the works, the Employer relies upon the Quantity Surveyor’s estimate. This is, however, endorsed by the Management Contractor initially and subsequently firm costs are established progressively during the course of the works.

It can lead to duplication of resources between trade-contractors and the Management Contractor and therefore higher tenders than would be the case under a more traditional procurement route.

The Employer has to accept a greater degree of risk because he has financial responsibility for the default of sub-contractors.

MALCONLAW 2010

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2 responses to “Introducing Management Contracting

  1. Pingback: Articles on procurement added to Site 4th December 2011 | Malaysian Construction and Contract Law

  2. Pingback: Procurement in Construction | Malaysian Construction and Contract Law

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