Traditional

Introduction
Traditional project delivery method is also known as Design-Bid-Build method. Every
agencies owners of the contract come with distinct of design and construction planning of a
project which they have their own separate entities for every project they involved with.
There are three phases involve in traditional method. They are:
1. Design phase
The owner which may be an architect or consulting engineering involve in the project
prepare the design including the drawings needed or the project such as
construction drawing and technical specification. Contractors need all those things
then they may start to bid the construction of the project. Other field of engineers
such as civil engineer, electrical engineer, mechanical engineer and others will also
participate in this phase to ensure the progress in preparing the specifications for
every part of the design is smoothly and well prepared.

2. Tender phase
This is to select contractors who will participate meanwhile a limited numbers of pre-
selected contractors also invited. Each of them need to prepare tender document
contains necessary items such as bills of quantities or other operated bills. Next,
architect will select the best among them who satisfy the requirements.

3. Construction phase
After the contractors had been selected, the bid document that already gained
approval for its construction drawings and technical specifications prohibited to be
altered. The necessary permits needed for the project must be achieved rom all
jurisdiction authorities before the construction processes begin. For any changes
occur during the construction process, the architect need to clarify sketches or
written.

Roles involved in this method are:

1. Owner
Warrants the documents are complete and free from error, but it tend to face any
risk.
Owner is not responsible in negotiating and changes order with the contractors.
2. Architect
Prepare drawing and its details to owner according to owners needs and
satisfactions.
Responsible in choosing the most selected contractor for the construction
project.
Review the progress of the project and do report to the owner.
3. Contractor
Prepare and approach the tender document.

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 Ensure the project progress went through along the schedule, date and
specifications.

4. Engineer
Assist the architect in preparing the drawing including the details according to
their own filed and expertise.
Control and ensure the project smoothly progressed.

5. Skilled worker
Involved in construction phases.

Advantages of Traditional Procurement Method

Easy to manage and to understand due to its simple processes involved in this
method.
Competitive in bidding process but still the fairness controlled to the potential
bidders.
Open chances for new contractors to gain experiences in construction project.
Arguments are prevented since the bids are completely according to complete
and authorised document.
Lead the owners to established reasonable and affordable costs of the project.

Disadvantages of Traditional Procurement Method

Contractors easily take advantages of competitive progress and tend to be unfair.
The design tend to lack of information and input from contractors and
subcontractors.
Changes in the orders are commonly occurred.
Delay claim and other dispute also commonly occurred.

Examples of construction project using traditional method

Western Canadian Oil and Gas Capital

REASON OF CHOOSING THIS METHOD

Clearly, Lump Sum contracting is used by Western Canadian Operating companies

due to the reason that the specifications and plans are completed and the scope of work is
well-defined. The biggest obstacle facing by the Oil and Gas Industry in Western Canada is
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the completion of detailed plans and specifications before bidding so that the construction
can begin. Furthermore, Lump Sum contract has very limited flexibility. Any deviation from
original specification or planning may lead to considerable arguments in terms of cost of
scope changes and this may create adversarial relationship between the operating company
and contractor. However, this type of contract provides little risk in terms of cost to the
operating company and at the same time the risk performance is shifted to the contractor.
This is the main reason why public agencies in Canada and international owner organizations
prefer Lump Sum contract. It is essential to make sure that the plans and specifications given
to the contractor is as complete as possible.

Design - Build
INTRODUCTION

A successful implementation of a building project requires the commitment and

cooperation from many parties such as client or owner, architect, structural engineer,

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quantity surveyor, contractors as well as suppliers. In order to ensure the project can be
carried out efficiently, project delivery methods are vital to establish operational relations,
labors and their contractual as well as the general rules and regulations.

Design - Build is one of the project delivery methods in civil constructions. This type
of project delivery method only involves a single contractor which is under contract to a
client or the owner and will be responsible in project designing as well as the
implementation as an entity. In short, this method requires the owner of contracts with a
single entity to perform design and construction services. This method is preferred by many
of the organization professional due to the following reasons:

Highly demands for excellent quality in the project constructions.

Foreign and global market competition.
Business and government change in perception on delivery system.
Considering financial status can be done as project schedule, budget and
constructability are greatly emphasized throughout the process.
Eliminate adversarial relationships.
Project risks and responsibilities are divided based to the entitys ability.

The process of Design Build Method

In order to ensure the implementation of building project a success, the main key
factor is project delivery system. There are several methods and choosing the right method
will be the key to achieve the specific goal of the project. In this case, the goals may include,
project completion periods, acquisition price and others. Choosing the right project delivery
method is essential before the project begins as there is certain method which only suitable
for a particular project.
Advantages of Design Build Procurement Methods
- Involves only a single entity for both design and construction, accountable for
schedule, cost and performance. Therefore, conflicts between designers and
contractors can be eliminated.
- Saving time for construction by having close coordination between designers and
contractors, fast tracking construction as well as design besides having early
involvement from the contractor
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 - Cost containment can be done by reducing the client or owners exposure to
omissions and design errors.
- Providing cost certainty and earlier schedule.
- Designs and construction alternative methods based on contractors ability as well as
flexibility in the selection of project materials, constructions and designs methods
contribute to innovation and quality improvements.

Disadvantages of Design Build Procurement Methods

- The opportunity for other local construction firms to get project is reduced.
- Higher initial cost will be required due to increasing risk as well as fewer competitors.
- Traditional checks and balances are eliminated. Designer is no longer under any
agencys avocations.
- Affecting the quality of construction as it might be subordinated by cost or schedule
considerations
- Fewer agency will control over final design
- Higher costs needed for procurement purpose.
- Accelerated cash flow may be required if traditional funding can not support fast-
tracking construction.
- Overextend the workforce due to accelerated construction.

Example Of Project Using Design Build Method

The best known example of a design-build project is the construction of Washington
Nationals ballpark in the nations capital. This building had adhered to green-certified
building guidelines. It was completed in less than two years. The opening of this ballpark was
in the year of 2008.

Washington Nationals Ballpark

Reason Of Choosing This Method
- The construction of Washington Nationals Ballpark is completed in two years. It is
faster compared to other sports stadium in United State. This is due to the selection
of design build method. Project management collaboration enables work to be
completed faster with potentially fewer problems.
- Executing efficient and innovative solution by using building information modeling
(BIM) to construct the stadium has high potential of saving cost.
- The outcome has high potential of better quality as this method fulfills performance
needs.
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 - A single contract improves coordination between design and construction. It is
accountable for cost, schedule and performance.
- Design build provide specialized expertise during design, economy in cost and time
as well as maximized value of the finished project.

Turnkey
Introduction

Turnkey is one of the project delivery methods in a contract. It is a combination of

competitive bidding (price based) and negotiated cost-plus (cost based). The competitive
bidding is a contract with price based being submitted by contractor with his bid whereas
the negotiated cost-plus is the actual cost incurred by the contractor are reimbursed
together with a fee to cover overheads and profit. The risk faced by the contractor is higher
than the owner.

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 The turnkey contract is commonly used for construction projects from single
buildings to large-scale developments. The owner of the building is generally left out of the
building process entirely as the developers will handles all decisions and problems which
related to construction. The developer or contractor is separate from the client and the
project will be hand over only after it is fully completed. The developer will complete the
construction and the finishes before turning it over to the building owner. Thus, the
homeowner is offered the chance to select paint colors, carpeting and curtains. Generally,
the client is left out all the decisions and problems related to the construction to the
developer. The specific period of completion of the construction and an agreed price is deal
between the developer or contractor and the client. The relationship between client and the
contractor has to be regulated from the outset so that the both parties are clear about their
own rights and obligations.

This kind of contract is often used in construction of power stations or chemical

plants but now also being seen in other construction type. Besides, this contract has become
popular in employers and financing institutions. However, the turnkey project has its own
advantages and disadvantages.

Advantages of Turnkey Procurement Method

1. The developer still owns the building until the project is completed so the developer
has the financial motivation to complete the project as quickly and efficiently as
possible.
2. It provide more time for an owner to seek financing and investors before he is
required to pay for a completed project.
3. Inexperienced owner can save the time for making difficult construction decisions
and can leaving these decisions for the developer.
4. It can accelerate the work in the project since the construction can begin even before
the design process is completed.
5. It can reduce the possible to change orders
6. Client can receive a definite price more rapidly
7. The developer will provide performance guarantee for the client not only the project
completion guarantee but also expected performance.
Disadvantages of Turnkey Procurement Method
1. The contractor may pay a higher cost for the project due to degree of the risk
between contractors as the bidders will propose different concepts, it may increase
the difficulty for the contractors to compare the prices and choose the best proposal.
2. Lack of control from the client to prevent over design and construction decisions
which mean that once the project is completed , it may not suit for clients needs.
3. The client may feel regret as not having input for the design and construction.
4. When a developer has some financial long-term interest in the project, it may
encourage the developer to make construction decisions based on the long-term
needs of the project, rather than short-term decisions needed to complete the
project.

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Example of the Project using Turnkey Contract

Turn-key Contracts for the Realisation of Capital Works Project Principally for Public Sector
Healthcare Facilities prepared by Tony Gibbs (November 2008)

Reasons:

1. Cost considerations
For turnkey contract, the project cost is fixed before the detailed design is well
advanced. There is potential for overall costs due to the knowledge and
experience of the contractor in the early stage of design. There will also reduction
in claims for extras as the overall project cost is fixed.

2. Faster overall schedule

The project will be established in an early stage. Turnkey contract will fixed the
overall schedule in the early stage. The problems of project overruns from
communication problems between the designers and builders, design errors,
design omissions can be minimized.

3. Increase the innovation

Unique and advance design and construction process can be more easily insert in
the projects as the designer and builder are cooperate together in the project.
Hence, through the knowledge of the contractor can foster creativity and
innovation in the project.

4. Owners capability
Turnkey contract may provide a degree of comfort when the project is outside of
the owners experience and technical resources as the designers and constructor
will monitor the work.
Build-Operate-Transfer (BOT)
INTRODUCTION

Build-Operate-Transfer (BOT) is a public private partnership where a private entity is

given a privilege from government to build and construct a facility. Besides that, it also
responsible for finance, design, operate and maintain the facility for a span of time granted
by government which known as Concession period. The ownership of the BOT project is then
transferred back to the government at the end of the specified concession period.
BOT is a type of project financing. The main points of BOT project are:

1. The granters to the project focus mainly at the earnings of the project as the source
from which loan repayments will be made. Their credit assessment is only based on
the project not on the credit worthiness of the borrowing entity.

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 2. The security taken by the granter is mostly constricted to the project assets. Like,
project financing is frequently mentioned to as a limited recourse financing. This is
because granters are given only a limited recourse against the borrower.

Most of the mechanism of project finance like BOT is a complex structure including multiple,
inter-dependent agreements among the various parties. The concession agreement between
the government and the concessionaire is consider as the centre of a BOT project.

The chart below shows the typical BOT contractual structure:

Principle
Government Concession
Agreement
SPONSORS Limited CONTRACTOR
Concession Facility
Shareholders Agreement Equity Construction Agreement
Dividends
Equity
Construction Cost
CONCESSIONAIRE
Dept Consortium
Operation fees
LENDERS
Lenders Agreement Facility OPERATOR
Dept
Operation Agreement
Repayment

OFF-TAKERS/END USERS Fees

Government

Concession
Agreement

Raw Supply Off-take Users of

Material Contract Product
Supplier Contract 9
Concession
Loan Shareholders Company Operation Construction
Banks Contractors
Investors
Agreement Agreement Operator
Contract Contract
Advantages of BOT Procurement Method

BOT utilize the investment of private sector instead of public sector. Private sector
invest directly in the project, thereby help public sector to diminish debt, budget and
budget deficit and their role.
The project risk such as financing risk, design and construction risk, operation and
maintenance risk and revenue risk are totally transferred from government sector to
private sector.
BOT help in transferring technical knowledge by introducing international contractors
or expert in host countries.
Transferring technology, the coaching of local crew and the improvement of national
capital markets.
Private parties are more efficient because it is presumably more experts at
infrastructure who could provide the high quality standard, more innovative design,
greater infrastructure solution and techniques faster the project completion.
BOT project invent business opportunities for local private firms and invent
employment avenue sector. In addition, it also helps in attract substantial foreign
direct investment.

Disadvantages of BOT Procurement Method

BOT project is a very complicated method in term of technical and financial issues. It
requires high rank or status experts and consultants.
BOT not suitable for smaller projects because the transaction costs are high (about 5
to 10% of the total project).
Contrast benefit between private and public sector.
The success of BOT project depends on the successful raising of necessary finance.
BOT projects only success when large amount of revenue are generated during
operation stages.

Summaries of table:

Cost
Public Duration for
Risk Involvement Investment Efficiency
support period end
BOT user

90% by Vital Long term Less public 70-100% by High Medium-

private project involvement private High
sector sector

Example Build-Operate-Transfer (BOT) Project:

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North-South Expressway (NSE)

Table below show the detail of NSE project:

Project Description : Construction of 500 km of new alignment and

rehabilitation of 370 km of existing highway facilities
(originally build by government)

Construction Period : Formed at 1986 and completed at 1994

Project length/Capacity : 870 km / 4 to 6 lanes

Total cost at construction : 3192

(million USD)

Total Cost per kilometer at : 3.7

construction (million USD)
(including land acquisition cost for both private and
government sector built portion and operation and
maintenance cost for both portion

Concession Period : 48 years

The reason for NSE using BOT method could be:

An opportunity to provide a private standard against which the efficiency of identical

public sector projects can be measured and the associated chance to improve public
management of infrastructure facilities.
Utilization of private firms financing to supply new sources of capital which reduces
public debt and direct spending and which may enhance the host country credit
rating.
The project risk and burden were allocated to the private sector.
The participating of private sponsors and experienced commercial lenders ensures an
in-depth review and it is an bonus sign of project feasibility.

PROJECT CONSTRUCTION MANAGEMENT (PCM)

INTRODUCTION OF PCM

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 There are a lot of methods of project delivery in our industry. The project
construction management (PCM) is one of the delivery methods in a contracting strategy.
Generally, PCM happened when the client is in contract with a Construction Manager. The
Construction Manager only work for the clients interest and play a role as a Consultant
toward their client. The Construction also paid with their fee basis and involve with the
project more closely. Basically, the Construction Manager will engage to control most of the
project. For instance, the Construction Manager will handle the projects design, budgeting
estimation and a bid procurement process. Besides that, Construction Manager also plays a
role as a contractor in the construction project. In this case, they will often guarantee a fixed
cost for the project and also will meet the subcontractor to do some negotiation process. A
Construction Manager also has a responsible to underwrite delay caused by scheduling
problems and cost overruns. To avoid problems with poor quality work, this method can be
used. While relying on the Construction Managers capability and skill, the owner shares
some of the risks for the cost and the project construction.

ADVANTAGES AND DISADVANTAGES OF PCM

All the delivery methods have their own advantages and disadvantages including PCM.

ADVANTAGES DISADVANTAGES

The construction cost can be The duplication of some supervision

identified and been estimate during
the design phase. The construction
cost, completion schedule and
quality work will be predict to
maximize owners value.
The design decision can be made in
the basis of complete information.
Value engineering can be done at this
time by CM.
Facilities financial planning and
potential delay for redesign can be
avoid.
The construction schedule is been
and contractors mark-ups can occur
during the construction process.
Pay - In large companies or in a bigger
area, most of the CM will request for
a significant payment.
May expose owner to change the
order is the project is not fully design
in the beginning of the construction
The CM can break the construction

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 control during the process to make document down into bidding
sure the designs are integrated with packages.
construction phase requirements.
No addition owner personnel needed
because it is single prime
responsibility construction.

EXAMPLE OF PROJECT THAT USE PCM AS DELIVERY METHOD

Terminal Reservoir No. 3, San Juan Capistrano, CA

The City of San Juan Capistrano had chosen RBF Consulting (RBF) to provide the construction
management, inspection and also the survey services for the citys Terminal Reservoir No.3
Project. The project is located near to the top of the reservoir which experienced structural
damage due to differential settlement. Some of the RBF duties are attending design review
meetings, prepare the constructability reviews; administer the contract; manage the
construction, work inspection and schedule review. Besides that, they also play a role to
monitor the traffic control and the safety of site.

REASON WHY THEY USE PCM

The most significant reason why use PCM is the client does not need to do anything
during the construction as CM will do the rest to run the project smoothly. Besides that, the
comprehensive management also will be applied to the project. This process will begin in

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the early of the project planning and continue until the project is complete. This
management also turns three different of works to one work. For example, it turns planning,
design and construction in one which bring to the good quality and less usage of cost and
time. The continuously monitoring of the schedule and cost of the project bring to the most
effective way when changes and new information need to be evaluated and corrected.

References

Project delivery method handbooks. State of Alaska - Department of Education & Early
Development Education Support Services / Facilities. November 2004 Edition.
https://www.eed.state.ak.us/facilities/publications/project_delivery_handbook.pdf

Understanding project delivery method. Harvey W.Verman of Bodman PLC.

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http://corporate.findlaw.com/law-library/understanding-project-delivery-methods.html

Innovative Project Delivery Methods for Infrastructure. An International Perspective. Pekka

Pakkala. http://alk.tiehallinto.fi/julkaisut/pdf/pakkalae5.pdf

https://www.engineereducators.com/docs/designMaterials.pdf

http://www.vtt.fi/inf/pdf/publications/2001/P452.pdf

http://www.fefpa.org/pdf/summer2007/Pros-Cons-handout.pdf

http://www.wisegeek.org/what-is-a-turnkey-contract.htm

https://consultations.rics.org/consult.ti/comparative.construction/view?objectId=2425300

http://www.lavery.ca/DATA/PUBLICATION/523_en~v~turnkey-contracts-the-client-s-
perspective.pdf

http://www.whitecase.com/files/Publication/35f7b242-4e7d-41ee-ab30-
ceb8d86ecfe9/Presentation/PublicationAttachment/de9b846f-1bcb-4a93-bc2e-
d47dd40fce5d/article_turnkey_contracts_janfeb04.pdf

http://books.google.com.my/books?
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Public Private Partnerships in Malaysia. Retrieved October 1, 2014, from

http://www.pwc.com/my/en/assets/services/ppp-projects-in-malaysia.pdf

Build-Operate-Transfer (BOT) and Build-Own-Operate-Transfer (BOOT). Retrieved

October 1, 2014, from http://www.outsourcing-law.com/sourcing-models/build-operate-
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Build-Operate-Transfer (BOT). Retrieved October 2, 2014, from

http://www.chinaboqi.com/BoQiBusinessDevelopment/CompanyBusinessModels/BuildOper
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Concessions, Build-Operate-Transfer (BOT) and Design-Build-Operate (DBO) Projects.

Retrieved October 2, 2014, from http://ppp.worldbank.org/public-private-
partnership/agreements/concessions-bots-dbos
Malaysias BOT method implementation for highway development projects. Retrieved
October 2, 2014, from http://r-cube.ritsumei.ac.jp/bitstream/10367/3922/1/51210007.pdf

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Understanding Project Delivery Methods, By Harvey W. Berman of Bodman PLC ,Published:
2008-03-26 http://www.ehow.com/info_8049318_types-project-methods.html

Types of Project Methods,By Julie Davoren, eHow Contributor, last updated August 30, 2014
http://www.ehow.com/info_8049318_types-project-methods.html

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http://www.isba.org/sections/construction/newsletter/2011/05/constructionprojectdelivery
methodsw

Construction management http://rbf.com/projects/projects.asp?id=627

Why use a Construction Manager?

http://www.wsconstructionmanagement.com/about/why.aspx

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