Facilities

Procurement of construction facilities: a case study of design management within a design and construct
organisation
Jim SmithNellie OKeeffeJim GeorgiouPeter E.D. Love

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Introduction

Procurement of
construction facilities:
a case study of design
management within a
design and construct
organisation

The construction industry is a complex,

responsive and volatile one, with its very
essence based on one-off projects and
temporary relationships. It is to be expected
that it carries with it a multitude of complaints
and problems. The fragmentation of the
industry is exacerbated by the insularity of the
professions; the separation of design from
construction; the uniqueness of projects and the
ephemeral nature of the relationships and
project organisation (Masterman, 2002).
Furthermore, the culture of projects is
characterised by a high degree of
differentiation. A project team comprises a
number of groups (usually small) of
independent and specialised professionals all
working in different locations, on specialised
tasks that are all interdependent (Rowlinson
and McDermott, 1999). This problem of
differentiation and specialisation not only exists
in the project relationships, but also in the
project process. A source of criticism is that the
obvious divorce of the design and construction
processes and changes in procurement methods
have sought to bring the two together (Knight et
al., 2002). A necessary prerequisite in the
separation of design and construction, and the
specialisation of the project contributors is the
absolute necessity for rigorous management of
the process whatever the chosen procurement
method (Rowlinson and McDermott, 1999).
With the increasing requirement for designconstruct contractors to balance the cost
management issues and design development
through the various stages, the role of the design
manager as information manager has evolved and
expanded in importance. This paper presents a
case study of design management within a
design-construct organization on a large
residential apartment project. It identifies and
analyses issues concerned with the organization,
responsibilities, relationships and stages of
development in a typical design-construct
project.

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Jim Smith, Nellie O'Keeffe,

Jim Georgiou and Peter E.D. Love
The authors
Jim Smith is a Senior Lecturer at the Faculty of Architecture,
Building and Planning, The University of Melbourne,
Parkville, Victoria, Australia.
Nellie O'Keeffe and Jim Georgiou are at the School of
Architecture and Building, Faculty of Science and
Technology, Deakin University, Geelong, Australia.
Peter E.D. Love is at the We-B Centre, School of
Management Information Systems, Edith Cowan University,
Churchlands, Perth, Australia.
Keywords
Design management, Design, Construction industry,
Procurement, Risk assessment
Abstract
As clients have become more aware and demanding of the
construction industry, they are also becoming less tolerant of
the problems and the risks involved in the delivery of major
projects. Presents a case study of design management
within a design-construct organization on a large residential
apartment project. Identifies and analyses issues concerned
with the organization, responsibilities, relationships and
stages of development in a typical design-construct project.
Electronic access
The Emerald Research Register for this journal is available at
www.emeraldinsight.com/researchregister
The current issue and full text archive of this journal is
available at
www.emeraldinsight.com/0263-2772.htm

Introspection in the construction industry

Facilities
Volume 22 . Number 1/2 . 2004 . pp. 26-34
# Emerald Group Publishing Limited . ISSN 0263-2772
DOI 10.1108/02632770410517924

There have been a number of notable reports

published in the 1990s that have identified the
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Jim Smith, Nellie O'Keeffe, Jim Georgiou and Peter E.D. Love

plight of the construction industry. The Latham

(1994) and Egan (1998) Reports from the UK
and in Australia the recent Australian
Construction Industry Action Agenda, Building
for Growth (DISR, 1999) addressed problems in
the construction industry and areas where
reform is required. Common threads of these
reports are issues relating to the inefficiencies of
traditional procurement methods. The
Comptroller and Auditor General (2001) also
addressed the need to improve the integration
and focus on the construction process and on
meeting the needs of the end user. Table I
combines the key performance indicators and
recommendations of the Egan Report (1998)
with parallel key initiatives identified in Building
for Growth (DISR, 1999).
In Australia, the Australian Procurement and
Construction Council Incorporated (APCC,
1997) published the National Code of Practice
for the Construction Industry in 1997. The
Code represented the expressed principles that
governments, Commonwealth, State and
Territory, agreed should ``underpin the future
development of the construction industry in
Australia''. The principles are aimed at ensuring
the industry is client-focussed, builds better
business relationships, ethical competitive

behaviour, strives for continuous improvement

and best practice, workplace reform, improved
occupational health safety and rehabilitation
(OHS&R) and industrial relations
management. The notion of continuous
improvement and best practice is of particular
interest and is described as being a commitment
to ``effective organisational systems, exceptional
people management policies and practices and
superior time, cost and quality outcomes''
(APCC, 1997). All of these aims should form
the basis for defining the design management
process.

The shift in procurement methods

The choice of a procurement method is
probably the single most important decision the
client makes, other than the decision to build.
The various procurement methods can be
described, as defined by Masterman (2002),
under three distinct categories:
(1) Separated and co-operative.
(2) Integrated.
(3) Management orientated.
The shift that has occurred over the recent
decades has been away from the conventional

Table I Key drivers for change in the construction industry

Key drivers

The Egan Report (1998)

The recommendations

Building for Growth (DISR, 1999)

Key initiatives

Committed leadership

Teamwork between all parities and

the elimination of confrontation

Information technology and international market

development

A focus on the
customer

Provide the end customer with their

precise needs and at a price that
reflects the product's value

Business improvements

Integrated processes
and teams

For all project members to work as

a team, be involved at the earliest
possible stage and eliminate
competitive tendering

Networks and alliances

A quality-driven
agenda

A subjective issue, but should

include aiming for getting right first
time, every time and exceeding
customer expectations

The environment

A commitment to
people

No-blame culture of mutual

independence, trust and respect, an
environment of sustained
improvement and commitment to
training

Innovation and regulatory reform

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Jim Smith, Nellie O'Keeffe, Jim Georgiou and Peter E.D. Love

The architect, as well as other specialist design

consultants such as structural and services
engineers, are contractually transferred by
novation to the contractor to design, develop
and document the project. The system has its
benefits in the integration of design and
construction and the early involvement of a
contractor for their buildability input
(Akintoye, 1994; Knight et al., 2002).
The design and construct system aids the
``fast-tracking'' process by integrating the design
documentation and construction stages. The
issue of concern in this structure is that the
design process is likely to be managed by a
professional with limited abilities to evaluate
quality and assess design decisions (Sullivan
and Schwager, 1991). However, one of the
disadvantages of the design and construct
system is that budget and schedule often prevail
whilst quality suffers (Gregersen, 1998).
Results from a study in the UK stated that in
the opinion of the clients, quality did not suffer
(Bengard, 1999). This same study also found
that projects using integrated structures often
resulted in better value for money and less
contractual disputes (Bengard, 1999).
The major advantages of design and build are
that all the risks, both financial and period for
completion, are transferred to the design and
build contractor, with the client only dealing
with one organisation, so eliminating the
complexities and frustrations of dealing with a
range of separate organisations. The approach
also overcomes the problem of the separation of
design and construction, so saving overall time
and allowing the design to reflect improved
buildability in the construction solution (Jaggar
et al., 2002). Obviously, the design and build
contractor can ensure that the proposed design
solution reflects its own particular expertise and
resource availability, in terms of developing the
design and construction solution.
There is considerable debate as to the merits
and demerits of the approach and it is fair to say
that many design professionals were unhappy
about the approach, not least because there was
a reduction in their own influence and
independence. However, a valid view put
forward, which undoubtedly design and build
suffered from in the 1980s, was that the quality
of the final building was often inferior and the
role of design was devalued, as the design and

methods characterised by separated design and

construction processes (1) and toward both
integrated and management style structures (2
and 3). This change has been largely client
driven as these alternative systems require the
contractor to accept a high degree of risk
associated with the design development and
construction of the project. Design and build
and its variations have expanded considerably
in the last decade. It has increased dramatically
in the 1990s going from a 10 percent share
during the 1980s up to a 35 percent share of the
construction procurement market, with
management contracting declining to a 10
percent share (Royal Institution of Chartered
Surveyors (RICS), 2000).
Design and build
The original design and construct method of
building procurement had the client enter in a
single contract with one organisation that
integrated the design and construction process
to promote speed, economy of building and
non-adversarial relationships (Gregersen,
1998). The design and construct company
often utilised an ``in house'' design team or they
contracted externally. There are various types
of design build arrangements and Akintoye
(1994) has identified six categories:
(1) traditional (or pure) design and build;
(2) package deal;
(3) design and manage;
(4) design, manage and construct;
(5) novation; and
(6) develop and construct.
However, it is common practice today that the
architect is initially appointed to deliver the
brief and schematic design and is then replaced
with a design and construct contractor led by a
project or construction manager. This is
commonly called novation and results in the
cancellation of one contract (i.e. the creation of
a consultancy agreement between the client and
designer) and the creation of a new contract
(i.e. the same consultancy agreement, but
between the builder and designer (Weatherall,
2000)). One example is after the brief when an
appointed design team establishes initial
schematic design; the project may then be
tendered or negotiated on limited
documentation and a contractor appointed.
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Jim Smith, Nellie O'Keeffe, Jim Georgiou and Peter E.D. Love

or developer/contractor. The need to be able to

balance time, cost and quality constraints
within a value framework is a crucial skill for the
successful project or design manager. A case
study of a commercial project by a developer/
contractor is presented to illustrate the role for a
newly created design manager and the linkage
between this role and to the existing project and
cost managers.

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build contractors ``shaped'' the design to suit

their particular methods of construction. More
recent views from clients noted above indicate
that they were satisfied with the quality of their
completed design build projects.
Whole life issues
The design and construct approach can have
positive benefits when exploring the potential
for choosing materials, components, service
installations and details that are not only
buildable and provide direct cost and time
benefits to the contractor (and passed on to the
purchaser), but have sound whole life
characteristics. In particular, in a market where
purchasers or clients demand these
characteristics in the completed buildings (such
as low energy consumption, durable materials
and components, sustainable features) then the
design and construct contractor will respond by
ensuring these issues are given prominence,
possibly to the extent that these features may be
identified as providing a market advantage or
distinction over rivals.
However, adopting and integrating a whole
life approach into the design does not come
without development risks such as: the
increased costs they bring may not be recouped
in the purchase price, or materials, plant and
equipment may not match predicted
performance standards, or the majority of
purchasers may adopt a short-term approach to
purchase, investment and design decisions.
Nevertheless, in the design and construct
environment these competing pressures stand a
better chance of being managed for the benefit
of a greater number of internal and external
stakeholders, including the community.

Role of the facilities manager

The facilities manager (FM) acting as an
informed client could play a constructive role in
bridging the gap between the commercial
imperatives of the provider of the facilities (the
design and construct contractor) and the needs
and requirements of the client and users. This
role of the FM as an intermediary between
users and providers is an important one in the
type of projects described in the case study
(private residential apartments development) as
well as those in the commercial, government
and corporate sectors. An experienced FM (or
property manager) for a private apartment
development can provide significant user,
building quality, functional use and
performance feedback to the design and
construct contractor. In this way the final
building(s) will match the needs of the users
and client more closely.
However, the exigencies of project
completion and budget compliance may hinder
such an integrated approach. Nonetheless, an
enlightened design and construct contractor
should gain the knowledge and expertise of a
FM to gain and maintain a competitive edge
over rival developments in the residential
market. Management of this tension between
user needs and project resources should be seen
as part of the design and construct approach.

The need for a design manager

The developments in the construction industry,
the continuing specialisation of professions and
the rising application of alternative
procurement methods have all contributed to
the gap between design and management, but
they have also emphasised the need for a design
professional with management and
technological skills. The management of the
process should ensure a successful and
deliverable project (Allinson, 1997). Design
management plays a critical role in commercial
development projects sponsored by a developer

Case study
The case study is an apartment development
project, focusing on the post feasibility approval
stage during the early design development
stages in a company referred to as Company A.
Case study organisation
The project is a large-scale private apartment
development in the Central Business District of
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Jim Smith, Nellie O'Keeffe, Jim Georgiou and Peter E.D. Love

architectural drawings, structural drawings,

services operations briefs and initial
documentation. Selective tenders were called
and on award of the tender, the design
consultants including architect, structural and
services engineers were contractually
transferred by novation to the management of
Company A. It was then the responsibility of
the contractor to complete the design, specify
and document the project and produce
construction drawings.
The concern with this system of procurement
is that in most cases the project manager may
not realise their limitations in understanding the
design process and are too focussed on the cost
and construction scheduling parameters of the
project (Sullivan and Schwager, 1991). It is also
likely that they are not able effectively to
evaluate quality and make informed design
decisions. However, the benefit of this structure
is that during the painstaking processes of
specifying and documenting the project, the
client (via the project manager) has a single
source of contact.

Melbourne, Australia. The project value is

approximately A$85 million with 450
apartments for eventual sale. The vision and
marketing for the project were clear from the
outset; affordable, modern, architectural style
living appealing to young successful singles and
couples without children. The apartments vary
in size, but are predominantly two bedrooms of
approximately 70 square metres total apartment
area, as well as single bedroom, three bedroom
and studio style apartments also available. The
focus throughout the feasibility and design
process was to maintain the architectural
quality whilst maintaining budget compliance,
being cost effective as well as retaining valuable
features. The benchmark for quality was
outlined at the outset of the project and
remained ``the brief'' through the early
feasibility and budget establishment stages.
That is, quality had to be above the market
``budget'' standard used by many developers in
the market. However, the standard aimed to be
below the higher quality, but more expensive
market superior standard provided by only a
few developers. This presented Company A
with an opportunity provided by this perceived
``gap'' in the market and that this developer
chose to fill. The development proved
successful in the marketing with close to 70
percent of the apartments sold ``off the plan'' in
the first few days of sale.

Weakness in the company

In the past, the project manager was responsible
for all facets of the development and
construction of the project including design
documentation and construction management.
The project manager was assisted by services,
structure and finishes managers (see Figure 1).
However, a single reporting source on all
aspects of design and cost has not always
benefited the client, contractor or the project.
Projects have been organised in a very ``flat''
structure with numerous lines of responsibility
reporting directly to the project manager. The
larger projects would have over half a dozen
separate factions directly beneath the project
manager, including the above stated managers,
structure coordinators, documentation
managers, tendering coordinators, contract
administration, project administration and
occupation health safety and rehabilitation
(OHS&R). In practice, this structure has
proved to be an inefficient and ineffective form
of management on many projects.
With the dominance of design and construct
contracts, the management of the design and
development of projects is essential to enable
successful procurement and fast tracking.

Contracts and procurement methods

Company A at any given time has at least a
dozen projects running simultaneously between
the two largest states of Australia. Currently,
there is less than 30 percent of projects
structured under a traditional system where the
architect acts as contract administrator and
agent to the client and the design is completely
developed, documented and tendered once
construction is commenced. The prevailing
method of procurement is a hybrid of
conventional and design and construct
contracts. Novation and project management
procurement arrangements now account for
over 65 percent of the company's projects.
The case study is a typical construction
project in Company A and Figure 1 is indicative
of the organisation of design-construct in this
company. The schematic designs were prepared
for the client by consultants and included
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Figure 1 Typical hybrid organisational structure of projects at company A

Figure 2 PDDM structure parallel reporting and responsibilities

identify reporting responsibilities, define role

requirements and most importantly, satisfy
budget requirements. The PDDM in this case
study created a parallel structure alongside the
construction project manager which led to the
diffusing of lines of authority (see Figure 3a-c).
Collective leadership is more likely to fail in a
parallel management structure as it creates
confusion and ambiguity in responsibility and
authority. Allinson (1997) describes the project
organisation as a Web spreading from the
central core function of project management.
Surrounding the core are the various
professional teams, each with their own project
management function (see Figure 3a). The
outcome of parallel project management, i.e.
the project manager and the PDDM, is that
each spins their Webs. The worst-case scenario
may be the two never meet (Figure 3b).
However, in the case of this project the two
met, overlapped (Figure 3c) and chaos was
created.
The project not only was fast-tracking the
design development and construction, but
also faced problems with the establishment
and implementation of the new PDDM
process. The PDDM structure was successful
in the design management aspect of balancing
the means and ends, that is, the product of
architecture and design with the process of
management. The failure, however, was
largely due to the parallel management
structure that was created and the underlying
effect was that while the design was being

However, its weakness is in the management of

design and cost during design development and
the lack of understanding of how to achieve
good design, to the expected quality and within
budget parameters. The weakness is aggravated
by the perception of the design cost control
function having the single focus on ``cost
cutting'' and not on value implementation.
The project design development manager
(PDDM)
Project A was initially expected to develop over
three distinct phases: feasibility, design
development and construction. It was realised
from the outset that the period of design
development would prove the most crucial. The
company, already proficient in the management
of construction, was to embark on the
management of design and development for the
first time. The role of the PDDM was to lead
the design team, manage the design consultants
and interact and advise the developer in relation
to design decisions. The appointed PDDM was
an architect. The structure and organisation for
the case study project is given in Figure 2.
The project organisational structure in the case
study failed to adequately understand and
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Figure 3

Figure 4 DCM structure tiered reporting and responsibilities

managed, cost and program were not. It was

not until documents were being issued for
construction that the project management
team were aware of the non-budget compliant
status of the design. While a remedial action
plan was established in the form of a design
cost review process, it was realised that the
implementation of a new process would be
required to prevent the problem occurring
again in the future.
The company's response
The common criteria for measuring and
evaluating a project's objectives and
performance are known as the triangle of cost,
time and quality. It would therefore be suitable
to structure the project management team in a
similar model: project manager (all factors and
especially time), design cost manager (cost) and
design manager (quality). See Figure 4 for the
company's response to managing these three
key areas. To maintain the necessary single
source of responsibility, the overall leadership
would be maintained by the project manager,
assisted by a design cost manager and design
manager.
The project manager's (PM) role would
remain involved in all facets of the project,
particularly relating to programming (time),
construction and personnel issues during the
design development process. The design
manager (DM) and design cost manager
(DCM) would report directly to the project
manager. The design manager's focus would be
the management of the design program, in
relation to scheduling, time, project briefs and
quality benchmarks as well as inter-agency co
ordination. The DM would also chair the
design workshops between the client,

consultants and contractor. The DCMs'

concerns, however, are in the particular field of
cost control in the design development process.
The contract administrator would remain the
facilitator of the cost control and reporting
process during construction. All other
management personnel, such as services,
finishes and structure managers, would report
directly to the project manager during the
construction process. Interaction between
these managers, the design manager and the
design cost manager would be required during
the design development process. To avoid the
``chaos affect'' that the PDDM structure caused
(see Figure 3c), all management personnel
would remain directly accountable to the
project manager.
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Conclusions

In terms of the implications for facilities

management the case study illustrates that
facilities managers working on behalf of their
clients and users may be able to work
productively with the design and construct
contractor to achieve better definition of the
project characteristics valued by the client such
as:
.
project certainty in cost and time;
.
delivery of a project design quality to match
the needs of the market, the client and the
users;
.
integrated design in terms of buildability,
quality, ease of repair and replacement;
.
whole life issues incorporated into a well
balanced and integrated design;
.
investment decisions on whole life design
decisions are equated with savings in
outgoings or increases in income from the
adopted approach;
.
project performance is considered
holistically within the design, construction
and user (FM) teams.

In the case of future development projects, it is

suggested that the benchmark for the project be
clearly communicated and officially issued to
the senior project management team. This may
be in terms of an industry standard such as the
Property Council of Australia (PCA) rating for
an office development, or a Sustainable Energy
Design Association (SEDA) rating for the
outcome of services and facade design, or by
referring to an existing project or market
benchmark. The company is seriously
considering adopting a standard format for
producing project briefs for all future
development projects. It is suggested that the
main objectives, intentions and quality
expectations for the project are stated, probably
utilising performance terms to give the project
team more flexibility in its interpretation (Smith
and Love, 2001). This would also assist in
calculating a more accurate feasibility budget,
especially if the benchmark can be compared to
another project constructed by the company
where data is available.
In relation to the management of the
development project the anticipated lines of
reporting and responsibility in the design cost
management structure should have the
following characteristics:
.
The project manager (PM) would remain
the overall project leader, manager and
interface between design, cost, program,
buildability, construction and user (FM)
requirements.
.
The design manager (DM) would be
responsible for issuing all documentation,
new and revised. The DM would be
required to facilitate communication
between design consultants and to ensure
consultants work within the boundaries of
the project brief and quality requirements.
The DM is responsible to and reports
directly to the project manager.
.
The design cost manager (DCM) would be
responsible for verifying that the design
development is in accordance with
approved project budgets, project brief and
quality requirements in conjunction with
the design manager. The DCM is
responsible to and reports directly to the
project manager.

References
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construction contractors' views'', Construction
Management and Economics, Vol. 12 No. 2.
Allinson, K. (1997), Getting There by Design: An Architect's
Guide to Design and Project Management,
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Australian Procurement & Construction Council Inc. (APCC)
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(DOLAC) (1997), The National Code of Practice for the
Construction Industry, report from the Meeting of
Procurement and Construction Ministers, Perth.
Bengard, M. (1999), ``The future of design-build'',
Engineered Systems, Vol. 16 No. 12, p. 60.
Comptroller and Auditor General (2001), Modernising
Construction, HC 87 Session 2000-2001, HMSO,
London.
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Building Design Cost Management, Blackwell Science,
Oxford.

33

Procurement of construction facilities

Facilities
Volume 22 . Number 1/2 . 2004 . 26-34

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Jim Smith, Nellie O'Keeffe, Jim Georgiou and Peter E.D. Love

Sullivan, R. and Schwager, L. (1991), ``Project management

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Procurement and Contractual Arrangements in the UK
Construction Industry, Department of the
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Rowlinson, S. and McDermott, P. (Eds) (1999), Procurement
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practice'', Architecture California, Vol. 13 No. 3,

p. 31.
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BUILD, Building Research Association (BRANZ),

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Further reading
Smith, J. (1998), Building Cost Planning for the Design Team,
Deakin University Press, Geelong.
Smith, J. and Love, P.E.D. (2000), Building Cost Planning in

Action, Deakin University Press, Barwood.

34

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