Construction Law: Types of Contract and Procurement Route

This assignment focuses on the types of contract and procurement route that can be followed in construction projects. It discusses the suitable form of contract and amendments required. The main body covers the use of procurement route in projects and the identification and evaluation of suitable forms of contract.

Construction Law
Advisory Report
1

Executive Summary
This assignment had focused on types of contract and procurement route that can be
followed by client in construction of building, suitable form of contract and amendments that are
required. This project has also described various kinds of procurement route in project. In
Construction these procurement routs helps in process of exchange of goods and services. There
are various kinds of risk involved within a project and each kind of risk is addressed in many
different ways.

Table of Contents
Executive Summary.........................................................................................................................2
I. INTRODUCTION....................................................................................................................1
II. MAIN BODY.......................................................................................................................1
a. Use of procurement route in project.....................................................................................1
b. Identify and evaluate suitable form of contract....................................................................3
III. CONCLUSION.....................................................................................................................6
IV. REFERENCES.....................................................................................................................7

I. INTRODUCTION
In construction sector there are different laws and regulations which are followed. These
laws enable in solving issues and seeking approval from local government. The laws provide a
framework on what type of contract and procurement route is feasible for construction.
Procurement laws is way of seeing that how these rules are applied by court (Mathews & Bross,
2015). Here, the lawyers give advice to buyer and sellers to interpret those rules. In this there are
certain guidelines that is followed. Each country is having different procurement law formed by
government.
This report will describe about types of contract and procurement route that can be followed
by client in construction of building. beside this, it will be discussed about suitable form of
contract and amendments required.
II. MAIN BODY
a. Use of procurement route in project
In construction procurement route refers to process of exchange of goods and services. Basically,
a building is designed by following a specific procedure. By defining the route, it gives an
insight about how building will be constructed. Moreover, it provides a strategy of attaining long
term goals. Initially, procurement route is based on client requirements (Procurement route,
2016). There exists range of routes which is as follows :-
Admeasurement contract – it is type of route that is usually used in civil projects. In this the
rates are provided in contractor tender either in bills or in rates. So, on basis of it, work is carried
out and then it is measured. After that rates are applied to those quantities. Thus, amount paid
varies from original rate (Fewings & Henjewele, 2019)
Construction management – It is a route where construction is carried out in different trade
contractors. They all are known as client and is managed by manager. So, the manager acts an
agent for client and managing work contracts. However, overall process is followed as per
design. It enables in improving durability of project and building.
Design and build- Here, a contractor is responsible for design and construction of building. The
design is provided by client and contractor is responsible for completion of project on time.
Moreover, this route is categorised into two tender process that is single or two stage. Also, most
part of design is finished before appointing contractor. Thus, it helps in avoiding some issues in
design and build. Along with it, there are some other types as well such as PPP, PFI, etc.
1

Emerging cost contract – It is completely based on time and raw materials. Here, contractors
are paid direct cost of project through an estimate. This type of route is followed in railway
contract. From it, along with sub contract, management services are provided.
Lump sum – This contract is traditional one and most commonly used. Here, all things are
specified once in brief manner. Furthermore, overall project is well defined and is sent for
approval. In lump sum changes can not be made. Similarly, price is not fixed but changes can be
made in it through some mechanism. (Brook, 2016)
Management contract – As name depicts the contract is one where there are different work
contractors working and is managed by one contractor. The structure is similar to traditional one.
But difference is there are no risk taken as contractor can reimbursed the amount paid in terms of
additional fee.
Partnering – In this third parties are involved in undertaking contractors. It includes suppliers,
designers, etc. Here, partnering involves several schemes included in payment of fee.
Tender – This route is used when all information is required and price is calculated. Then,
tender is selected on basis of price. Tender is of two types that is single and two stage. In single
tender is directly awarded on basis of price. On other hand in two stage, contractor is appointed
and then price is fixed with it on rest of project.
In current project, the director has decided to use lump sum procurement route. In this
first of all they will have to specify contract in detail and all work ha to be agreed before
proceeding further in project. Here, price as well time of contract is fixed. It means contractor
will have to complete work within 15 months and in £2.5m. So, it is clearly identified that in this
the project is not well defined. It only contains brief overview of apartment with one and two
bedrooms (Anzalone, 2016). Beside this, no info is available regarding room size, floors, built up
and carpet area. Along with it, total amount of one apartment and time required to complete it is
missing. Moreover, in lump sum contract there can occurs many risks as well. it is because the
time and cost fixed and there are only few mechanisms that is used to vary price. In addition,
tender processing is slow and consume more time as compared to others forms of procurement
route. Apart from, it is more costly to prepare tender for project in this route. It is evaluated that
lump sum procurement does not show what types of risk can occur in project. But the main issue
is that price is not fixed. It may vary or change with duration of time and project. There are

different issues that can occur. Thus, it becomes essential for client to take proper measure and
steps to overcome risk. they are defined below :-
Variation in price – it is most common risk that can arise in this project. Here, price can vary
due to certain circumstances like delay in activity, poor quality of raw material, rise in
transportation cost, etc. Thus, these all can directly impact on rise in price.
Rise in expenses- this risk can occur in preparing tender. Here, client may not be able to prepare
tender in budget. Besides, cost of project may not match with tender.
Slow progress- this is also a risk that can occur in project. It can lead to delay in completion of
contract. Moreover, due to it there may be rise in cost as well.
So, it is advisable that traditional form of procurement route is suitable for this project.
Through this, it will be easy for client to design entire design of one and two bedroom
apartments (Feria-Tinta & Milnes, 2016). All detailed info can be written and available to
contractor. Here, all other routes can not be used because in that fixed cost is not changed.
Furthermore, the risk involved in it is low as compared to other route. Additionally, contractor
agree to undertake project in agreed price. Also, cost saving can be done by contractor. Thus,
project is completed on specified time. Furthermore, this procurement route consists of low risk
as compared to others. Another thing that can be done in this is while preparing tender unit cost
of 1 apartment can be defined. So, it will be easy for contractor to bid.
b. Identify and evaluate suitable form of contract
The civil projects are usually undertaken on basis of particular contract. These contracts
provide framework and determine how disbursement is made. The selection of contract varies on
basis of nature and type of project. it also depends on contractor that what type of contact will be
suitable for project. Each contract include quality, scope, duration, etc. it also serves a legal
binding between two parties as they agree to terms and conditions. So, any breach of terms
results in penalty or compensation (Types of contracts, 2016). The various types of contracts are
as follows :-
Cost plus contract- it is a type of contract in which buyer has to pay specific amount to
contractor. It includes cost of construction, raw materials, other expenses, etc. Also, the info
included in it is limited. The cost is divided as direct and indirect cost. beside it, there are
different variations in it like cost plus fixed percentage, cost plus fixed fee, etc. but in this scope

is not clearly defined as well as more supervision is needed to track project in it. In spite of it
cost plus contract is commonly used (Pelger & Spiess, 2017). The risk included in it is low.
Lump sum contract – In this type of agreement a lump um amount is paid to contractor. Here,
both owner and contractor agree to complete work within specified time and cost. so, the price is
fixed in it. Generally, it is only preferred when scope and schedule is properly defined. But here,
contractor takes more risks as any change in situation leads to rise in price. But to cover it
allowance cost is included as well that is fixed. Penalties are imposed on contractors if
construction is not completed in deadline. However, in this it is not possible or difficult to make
changes.
Unit price contract – This is another type of contract commonly used. Here, contractor identify
price of specific task in overall construction. Then, owner has to agree to pay price of units. So,
on basis of price, agreement is made between them. However, unit prices can be changed as per
variation in scope. So, it makes it easier for owner to reach into agreement. The rates are then
charged within project and estimate is made. Usually, unit price contract is used for public
construction projects. (Trindade, 2017).
Time and material contract – as name suggest, this type of contract involve paying price
according to cost spent on raw materials purchased. The owner and contractor both agree upon a
particular cost. cost is classified in it as direct, indirect, over head, etc. but the contract contains
more risk as owner has to pay more in case of any situation. However, maximum price is
established in it. common use of this contract is when project scope is small.
By analysing above forms of contract and procurement route, it is important for client to
use appropriate one for project. thus, they can opt for unit price contract. This is because it will
enable them to estimate cost of 1 apartment of one and two bedrooms. Therefore, on basis of 1
apartment cost, the remaining can be constructed. Other than this, unit price contract will also
allow in determining time for constructing 1 apartment. Hence, on basis of overall estimate time
is calculated. There are may things included in it as well. Alongside, the council can adjust price
of apartment as per scope. However, work can be started after finalising design. moreover, this
contract is feasible as it contains low risk for the owner. (Milanovic & Wood, 2015).
Furthermore, with unit price contract traditional form of procurement knowns as design
build can be used. In this the design is separate from construction. So, by appointing a contractor
the council can complete project. Here, first of all project can be designed in detail and then

tender is prepared. By developing design, it becomes easy to determine quality and cost of
project. The tenders can be distributed and various contractors are allowed to bid for it. so, by
evaluating them on basis price and time, council can select right contractor. Then, accordingly
agreement can be made between both parties. Furthermore, this procurement route consists of
low risk as compared to others. Another thing that can be done in this is while preparing tender
unit cost of 1 apartment can be defined. So, it will be easy for contractor to bid. Moreover, they
will get insight about entire design and cost of project. there are number of standard contracts,
agreements, warranties, etc. included in construction contract. For this Joint contract tribunal can
be followed. Through it, track record between Sheffield council and contractor is maintained.
The standard form contract can be used to minimise time and cost of negotiating contract. So, the
council can easily negotiate with contractor (Chern, 2019). The amendments followed in it are
Housing grant in which date of payment is set. Notice must be issued prior to payment date.
Steps to address risks involved in project
It is essential for client to take certain steps to mitigate risk. this will enable in solving
issues easily.
For variation in costs-
In order address this risk the client can take several steps.
 He must prepare detailed direct and indirect cost and then estimate final price.
 Also, additional price must be estimated and then add it in tender.
 It is really important to analyze the current data from the construction filling line which
will help in determining of overfill and underfill taking place.
 another step is to plan in advance and need to forecast revenue and actual revenue which
can be two different things due to proper planning variations can be avoided.
 Checking of figures of construction as often as possible.
 Monitoring of sub-contractor behavior as variation can trigger at any time, so monitoring
can help in honoring of contracts.
 Being prepared for the late costs as it can help in prevention of loss.
 Do not presume that variations can deliver a profit for this it important that variations are
notified and passed to client as soon as possible.
 Implementation of control and tracking charts of the construction site.
Rise in expenses- the steps are as follows :

 In tender modifications can be made so that it is used easily.
 There must be proper monitoring of tender expenses. For this cost must be measured with
budget. (Kampschroer & Kampschroer, 2017)
 So, client is required to take help of expert in case of this risk. A budget can be estimated
for it and a back up plan for tender is provided to overcome this risk.
Slow progress- the steps taken are :-
 Client can prepare schedule and work for long hours in order to maintain progress.
 Also, a back up schedule can be implemented to work as per plan.
 The client can also categories activities on basis of priority. From that only prioritized
task can be completed. it will result in overcoming that risk.
III. CONCLUSION
From report it is concluded that procurement laws and regulations in construction sector
provide framework to undertake a contract. There are different types or procurement routes
available such as partnering, tender, lump sum, management contract, etc. in current project,
traditional procurement route is suitable. In this overall design is developed and then
construction is done. Moreover, there are different types of contracts in construction like unit
price, lump sum, cost plus, etc. in present project, unit price contract is suitable. Here, unit price
of 1 apartment is determined and then others are considered.

IV. REFERENCES
Books and journals
Anzalone, R. D. (2016). The Advisory Council on Historic Preservation at 50. In Forum
Journal (Vol. 31, No. 1, pp. 46-54). National Trust for Historic Preservation.
Brook, M. (2016). Estimating and tendering for construction work. Routledge.
Chern, C. (2019). The law of construction disputes. Informa Law from Routledge.
Feria-Tinta, M., & Milnes, S. C. (2016). The Rise of Environmental Law in International Dispute
Resolution: The Inter-American Court of Human Rights Issues a Landmark Advisory
Opinion on the Environment and Human Rights. Yearbook of International
Environmental Law, 27, 64-81.
Fewings, P., & Henjewele, C. (2019). Construction project management: an integrated
approach. Routledge.
Kampschroer, K., & Kampschroer, D. M. (2017). Green Building Advisory Committee Advice
Letter: High-Performance Building Adoption Task Group.
Mathews, B., & Bross, D. C. (Eds.). (2015). Mandatory reporting laws and the identification of
severe child abuse and neglect (Vol. 4). New York, NY: Springer.
Milanovic, M., & Wood, M. (Eds.). (2015). The law and politics of the Kosovo advisory opinion.
OUP Oxford.
Pelger, C., & Spiess, N. (2017). On the IASB’s construction of legitimacy–the case of the agenda
consultation project. Accounting and Business Research, 47(1), 64-90.
Trindade, A. A. C. (2017). Judge Antônio A. Cançado Trindade. the Construction of a
Humanized International Law: A Collection of Individual Opinions (2013-2016) (Vol. 3).
Brill.
Online
Procurement route, 2016. [online] Available through :
<https://www.designingbuildings.co.uk/wiki/Procurement_route>
Types of contracts, 2016. [online] Available through : <https://esub.com/4-types-construction-
contracts/>