How Contract Types Affect Construction Product Specifications

Understanding the form of contract types used to mobilise a construction project is key for building product manufacturers’ specification strategies.

When you initially learn of a building project the first thing to do is to establish the type of contract that is to be used. This can inform your whole construction product specification strategy, improving the chance of success. This is because it determines who the ultimate decision-maker is for product selection.

There are three main forms of contract; Traditional, Design & Build (D&B) and Management. In addition, there are a number of other forms which are being trialled to encourage new ways of working. Each requires the product manufacturer to adopt a different specification strategy.

 

Traditional Contract
Probably the most widely used, the Traditional Contract was first adopted in the second half of the nineteenth century. The architect leads in terms of defining the client’s needs, then develops a complete design and prepares a set of tender documents against which main contractors can bid. The intention is that each contractor will have the same level of information, which will be sufficient for them to put together a complete bid. Each contractor’s proposal will deliver the same building allowing selection to be based around cost, timescales and competence of the contractor to deliver the work.

The architect will define most products using a descriptive or proprietary specification which is the opportunity for the manufacturer to be involved. Throughout the project the architect will have to approve any design changes and will have final say on the products used. So, the architect should be the main (but not only) focus for the product manufacturer’s sales effort.

 

Design & Build
The Design and Build contract started to be used in the 1960’s. At the time Local Authorities were building a lot of high-rise residential blocks of repetitive design. It made no sense to involve architects in re-designing every time. So a number of contractors worked on a design and build basis, designing and building the high-rise blocks. This method of construction is now widely used throughout the industry.

Typically, the process starts in much the same way as a Traditional Contract, with an appraisal and strategic briefing. At this point it is important for the client to define what they want in any key area. The client may appoint an architect, or a quantity surveyor to undertake this. If the client has a good familiarity with the building process they may develop this in-house. The earlier a D&B contractor becomes involved the more they can use their experience to influence the design. Once the outline design has been developed the D&B contractor will be appointed and detailed design will start.

The design is still undertaken by architects and engineers, but they are employed by the D&B contractor who may have approved product lists. They will also tend to define products using a performance specification, leaving it to the sub-contractor to make the final product choice.

The architect is still an important influencer, deciding the performance requirements needed for the project. But the final choice rests with the sub-contractor’s team; Buyer, Project Manager and Contracts Manager. The product manufacturer’s sales effort needs to be directed at all of these decision-makers.

 

Management
Management Contracting started in the late 1970’s and is more suited to complex projects where the client understands the construction process. It draws on the contractor’s expertise, in particular specialist sub-contractors who will be responsible for developing solutions to often complex design challenges. This may involve the product manufacturer as well. The architect and engineer are still responsible for the design, but the project benefits from the practical experience of the contractors.

We also have Construction Management which might be considered as a Traditional Contract with the addition of a construction specialist to add that practical construction expertise. But the Construction Manager is working in the best interest of the client and will ensure that all savings are to the benefit of the project and not directed to the contractor’s bottom line.

With both of these forms of contract there is the opportunity for the manufacturer to contribute their expertise, which requires a good understanding of the client’s needs. It also requires engagement with many decision-makers within the project team.

 

New forms of Procurement
In 2012 the Government’s Construction Task Group proposed the adoption of new forms of procurement and following some trial projects, guidance was published on three new forms of procurement. Since then a number of projects have been undertaken using these. The most popular are Two Stage Open Book, Integrated Project Insurance and Cost Led Procurement. In all cases the structure of the contract is intended to encourage greater cooperation between the design and contracting teams, drawing on their varied expertise and skills to deliver a cost-effective project to the client’s benefit.

As with Management, there is the opportunity for the product manufacturer to be a part of this. But it does require an understanding of who makes up the project team and their roles.

Without an understanding of the type of contract selected for a project the product manufacturer risks misunderstanding how much influence the architect has and failing to engage with other key decision-makers. Time invested understanding the form of contract at the early stage of a project will be repaid with an effective sales strategy.

To learn more about implementing a specification sales strategy see our Learning Resources which offer publications, eLearning, Open Courses and in-house training around this subject.