Management contracting

Introduction

Management contracting procurement method is using in large and complex projects. By using this procurement, method client can reduce their risk and transfer management responsibilities to several contractors. 

In some cases client might be appoint one contractor as management contractor.

First of all. The project will be divided into several packages by client, and few management contractors will be appointed for each package. In most of the cases, this appointment will be made at the design stage. The main intention of appointing management contractors at the design stage is to involve them in design development.

Most Important:- Young professional should know that management contracting, and construction management is two different things. 

In this method, the client will only communicate with management contractors. It is their (management contractors) responsibility that they should communicate all suppliers and sub-contractors and manage the project progress. The client will only have an agreement with Management contractors. Mostly This contract agreement will cover both pre-contract activities and post contract activities (which the client wishes, management contractor to carry out and participate).

Management contractor will reimburse whatever the cost based on the agreement. Payment terms in these agreements can be cost plus percentage fee, cost plus fixed price or target cost.

Management Contracting

Task and services provided by management contractor at pre-contract stage (if appointed at the contract stage)

  • Participate and advise, of the project design & possible developments
  • Recommending subcontract appointments and consultant appointments
  • Checking and involving in feasibility studies
  • Supports for approvals
  • Advising on production process and materials

Task and services provided by the management contract at the post-contract stage

  • Supervising construction process maintaining site progress
  • Managing subcontractors and suppliers
  • Arrangement of site accommodations and welfare facilities
  • Setting out of the project
  • Coordination of site test and commissioning

Advantages of management contracting

  • Clients risk is minimal & requirement number of the number of staff as consultants is minimum compare to project scale.\
  • Contractors will involve in the early stage of the project. And management contractors will give their opinion and inputs to reduce project risks
  • Management contracts of opinions and inputs regarding the material and design will ensure design flexibility.
  • Most importantly, If one management contractor fails, others can deliver their best output, and the project will move forward.

Disadvantages of management contracting

  • Contractors can intentionally escalate project cost by giving costly inputs such as high-end material and specs.
  • Since client appointing several contractors as management contractors, price competition will be low.
  • Clients have to depend on management contractors success and will not have control of the project progress.

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