Construction management for property developers – a comprehensive guide

In this comprehensive guide to constrution management for property developers, we explore what construction management is and how to decide if it’s the best procurement route for your development project.

As with most aspects of construction, managing the triple variables (and constraints) of cost, quality and time are at the core of a successful project outcome.

This is especially so when it comes to construction management which uses specialised project management techniques to oversee the planning, design, and construction of a project, from its beginning to its end. As such, robust systems, procedures, and efficient decision-making in the procurement of goods and services will have a positive impact on financial viability, timely delivery, and appropriate quality, as well as health and safety.  

An early consideration for many developers is whether to use trade contractors rather than appointing a management contractor to then appoint works contractors. This article will consider what is involved in procuring trade contractors and how careful planning and management can minimise the risk of expensive and disruptive mistakes as well as ensure that best value is achieved.

However, we will not deal with the procurement by public contracting authorities for the purposes of procurement and tendering in line with Official Journal of the European Union (OJEU) regulations.

Construction management vs management contractor

We will begin with some definitions to highlight the key differences: 

Construction Manager – The construction manager is responsible for procuring and managing trade contractors who complete the construction works and are appointed directly by the employer. The construction manager is also appointed by the employer under a management appointment and may also be responsible for project/design management together with cost planning and control, depending on the terms of appointment. 

Trade contractors – This refers to companies or tradespeople whose services the construction manager procures on behalf of the employer, to perform specific packages of work as part of the overall project. Examples of specific packages are; design, demolition and site clearance, groundworks, mechanical & electrical engineering, offsite manufacture, site installation, and internal fit-out. The construction manager manages the trade contractors who in turn each have individual contracts with the employer.

Management contractor – They have the principal contract with the employer meaning the client only has one contract to administer. Management contractors will then contract directly with the various works contractors depending upon the work and packages required.

Works contractors – These are companies or people who the management contractor procures in agreement with the Architect or contractor administrator to carry out the items of works identified in the project cost plan.

Main Contractor – Main contractors are appointed directly by the employer under a traditional, or design and build, contract to either design and construction or just construct a development. Main contractors will then contract directly with sub-contractors to complete the construction, depending on their in-house capability and capacity.

Subcontractors – These are companies or individuals who the main contractor (trade or works) procures to perform specifically defined tasks as part of the overall project. 

In addition to the above, you may have come across the name Principal Contractor and wondered where this fits into things. Principal Contractor is a term used under the CDM Regulations for the key contractor responsible for coordinating the construction phase with regards to health and safety on projects involving more than one contractor. It is generally expected that the construction manager, management contractor or main contractor assumes the role of Principal Contractor, but this is not a hard and fast rule.

We will now work through the key tasks and briefly explain the requirements.

Establishing the trade packages 

Ideally the development project would have a project manager who determines the scope of the project by producing a work breakdown structure that establishes the deliverables, tasks and subtasks that will make up the trade packages. Unfortunately, not all development projects employ a project manager or produce a work breakdown structure. Therefore, trade packages will need to be identified from the initial designs and specifications. The construction manager can create a list of trade packages by drafting a series of execution method statements detailing the work activities, or by producing an outline scope of the works, which can later be adapted for the trade contractor to price.

Examples of trade packages include drainage, electrical installations, roofing, plastering, and so on. The exact packages will depend on the specific project. 

Setting trade package budgets

Construction management procurement is dependent upon an agreed cost plan for the project. This should be broken down into individual trade packages with an allocated budget for each of the trades. Hopefully, the cost plan has been produced by a cost consultant in an elemental format which will allow the construction manager to represent the costs as trade packages. The employer or cost consultant can then review and approve. A project cost plan is a cost-control measure that is put in place to ensure the project does not exceed the overall agreed budget or the individual trade package allocations. In construction management, due to the concurrent nature of design and construction, it is not uncommon for a trade package to come in over or above its allocated budget. These overspends or underspends can be redistributed to the remaining trade packages, where required, with the employer’s or cost consultant’s approval. Regular and detailed cost monitoring and reporting are needed to give the employer sufficient visibility as it is imperative to keep delivery within the overall project budget.

Scheduling the procurement of trade contractors

Using the project programme, which should list all trade contracts identified in the cost plan for the project, the construction manager produces a tender events schedule. This will show the earliest start dates, and anticipated finish dates, for each of the trade packages. A well-prepared tender events schedule will include:

• a unique trade contract reference number, 
• trade package descriptions, 
• required issue date for design information, 
• date to produce the tender pricing document, 
• mobilisation period, 
• latest date to place order, and 
• trade contractor design periods. 

The construction manager, in consultation with the employer and professional team, will produce a list of suitable contractors from whom tenders may be invited for each trade contract.

Selecting trade contractors 

Each construction management organisation, development company or procurement team will have their own approach to selecting trade contractors suitable for their construction project. Whatever the method used to selected trade contractors, most will include the following criteria:

• Experience – It is important that the companies or people being identified as potential candidates for the project have the necessary experience and knowledge.  They will have delivered similar products and services of comparable nature, scope, and value. Although there will be a degree of flexibility, the trade contractors under consideration should broadly meet these criteria.  
• Reputation – It is important that the trade contractor has a good reputation in their geographical area as well as the specific sector the work relates to. It is important to identify and discount any trade contractors that have a poor health and safety record, are overly contractual, involved in litigation or have a previous history of disputes and arbitration, or are known for bad quality workmanship.
• Accountability -High performing teams and successful construction management projects are reliant on a level of accountability from trade contractors. It is therefore important to select trade contractors that can demonstrate a good level of accountability on similar projects and can take responsibility for their contract works. In construction management there is a greater onus on trade contractors to manage design and construction interfaces with each other. 
• Processes – Trade contractors that have robust internal policies, processes and procedures are more likely to maintain a good standard of control and management throughout the contract. This will give the employer and Construction manager a greater level of assurance that quality expectations will be met, and a good level of health & safety will be set and maintained. 

Many organisations have internal supply-chain databases comprising trade contractors and suppliers, which have been established, developed, and maintained over a long period of time. If you do not have an internal supply-chain database of pre-qualified suitable trade contractors, or lack the resource or time to undertake your own procurement, there are a couple of options that you might want to consider: 

• PAS91 – A good starting point for selecting suitable trade contractors is the adoption PAS91, which is a standardised pre-qualification questionnaire which has been developed to reduce the need for trade contractors to complete a variety of different pre-qualification questionnaires for different, and in some cases, the same employers. There is a lot of time wasted and inefficiencies in construction procurement, so a recognised and established approach like PAS91 will lessen duplication. 
• SSIP – A robust approach to health and safety should be a priority when procuring trade contractors. Safety schemes in procurement (SSIP) is the mutual recognition scheme for occupational health and safety standards particularly in the construction industry. SSIP also assists in lessening duplication through acknowledgement of health and safety pre-qualification schemes, which saves time, effort and cost. There are many SSIP members including some recognisable names such as Acclaim, Achilles, CHAS and Safe Contractor. 
• Common Assessment Standard – For further efficiencies, opt for a recognised assessment body such as Achilles, CHAS or Constructionline. Achilles describes the common assessment standard as “a set of pre-qualification questions designed to stop multiple accreditations across the construction industry and standardise the current pre-qualification offering, benefiting both buyers and suppliers”.

Assessing options and conditions 

There are many things to think about when tendering for a trade package. It is easy to become overwhelmed and not know where to start but it is even easier not to give enough thought to the matter and just place a trade contract based on a price. Before we delve into the options, considerations and conditions, it is important to remember to keep any requirements proportionate to the size, value and complexity of the trade contract works. 

The list below outlines questions to ask when compiling a trade package along with some examples of factors to consider to address the questions:

Point to consider	Including
Is trade contractor design required?	Designer experience, CDM, employer’s requirements, design interfaces with designers and other trade contractors, professional indemnity insurance, collateral warranties, etc.
How are the works to be tendered described?	Drawings and specification, drawings and a scope of works, drawings, specifications, and a bill of quantities.
What is the basis of the price required?	Lump sum, re-measurement, cost plus, or guaranteed maximum price.
What pricing document will be produced?	Priced specification, priced work schedules, priced bill of quantities, a schedule of rates, or a schedule of daywork rates.
What form of contract is required?	JCT trade contract, bespoke form of trade contract, specific trade industry contract i.e., NFDC for demolition, or a detailed letter with terms and conditions.
When are trade contract works due to start and finish?	Master programme, earliest start date, latest start date, earliest finish date, latest start date, critical path, dependencies, etc.
What attendances are required?	Site office, plant, access, equipment, trade contractor working supervisor, loading and unloading materials, protection of works, skips and waste, setting out, task lighting, power leads, etc.
What risk allocation is required?	Design risk, time risk, cost risk, resource risk, specific change in regulation and legislation risk, utilities and incoming services risk, performance risk, etc.

Tendering the trade contract 

The tender process and procedures for a trade contract are too vast to cover adequately in this article. The list below covers items that should be considered when tendering a Trade Contract:

• Tender strategy – single stage, two stage, or negotiation
• ITT or tender enquiry document 
• Description of the project and work to be tendered
• Tender programme
• Tender questions and clarifications
• Conditions of tendering
• Form of tender
• Tender requirements 
• Tender deliverables
• Tender award criteria
• Project information
• Trade contract terms and conditions
• Attendances 
• Pricing document
• Tender evaluation
• Interview 
• Negotiation

Administration, management and supervision 

Once a trade contractor has been selected, the construction manager is responsible for management, supervision, and administration of the trade contract. There are many things the construction manager must do to ensure the trade contract fulfil their obligations to the employer: 

• Execution of the trade contract including bonds, warranties and insurances
• Provide drawings and design information for the purposes of construction
• Issue notice to commence
• Issue instructions and directions in writing
• Review applications for payment, undertake valuations and issue payment certificates to the employer and trade contractor 
• Manage and advise on CIS 
• Review trade contractor designs and/or working drawings and seek approvals
• Issue practical completion certificates
• Monitor compliance with CDM Regulations
• Review variations, issue Construction manager’s instructions, and report and advise on cost and time implications
• Carry out quality inspections, supervise making good of defects, and issue certificates of making good 
• Managing commissioning, testing and witnessing of plant equipment and materials
• Check and approve technical specifications and drawings for as constructed information
• Management and coordinate the work of Trade Contractors
• Conduct regular meetings with trade contractors
• Consult with trade contractors and prepare ‘short period’ programmes
• Manage drawings and information schedules to release information to trade contractors 
• Prepare interim and final statements of account for each trade contractor 

Summary

Construction management is a highly flexible procurement route that places the employer firmly in the driving seat of the project. Offering an alternative to the most commonly used methods of delivering construction projects – traditional contract or design and build contract – construction management allows complex and demanding projects to start far quicker than traditionally tendered projects.

While there are clear benefits to this option, as can be seen from this article, there are still a considerable number of considerations and a sizeable amount of work involved, and it is not without its risks. However, if the construction management approach appeals to you, but you have concerns as to whether you have the time, skills, or experience, then appointing a professional construction manager can help overcome these challenges. 

Evolution5’s professional consultants can provide a full construction management service allowing you to take advantage of this flexible procurement route whilst giving you peace of mind that expensive mistakes will be minimised, and the best value achieved, while allowing you to focus on what you do best.

How Evolution5 can help

Evolution5 is a professional consultancy offering quantity surveying, project management, principal designer, employer’s agent, and contract administration services for projects across London and the South East.

To discuss how we can help with your project, click the button below or call 023 8040 5073.