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Project delivery system
" Terminology Engineer/Engineering : Those who produce the designs of projects (this does not imply to architect), Contractor : Construction contractors, "
Project delivery system
Project delivery system is an organization which assigns specific responsibilities and authorities to people and organizations, and which defines relationships of the various elements in the construction of a project. There are four (4) basic project delivery systems:

1. The engineering-contractor (E-C) system in which responsibility for engineering, materials acquisition and construction are assigned to one responsible organization. Sometimes E-C is referred to as "turn key system". Owner will usually that there is no overall project manager that can speak for both engineering and construction.

Advantages:
1) One responsible contract for the owner with materials acquisition and construction closely coordinated with engineering,
2) Moderate owner participation,
3) Improved construction completion date over the E+C system, and
4) Improved costs and quality by liaison utilization without contractual problems and delay of project completion.

Disadvantages:
1) Inability to establish form project cost in the early stages of construction,
2) More problems in labor relations for a large national operator as opposed to a local contractor, 3) Only fair "checks and balances" on the E-C apply in contrast with separate contracts for engineering and construction, and
4) The problem of controlling project cost, particularly in monitoring accumulated cost as construction progresses and projecting final cost from monitoring effort.

2. The engineering-plus-contractor (E+C) system is used in which engineering is assigned to one organization and after all engineering is completed. Material acquisition and construction are assigned to another organization. During the period when engineering is in progress, there is a direct relationship between the owner and the engineer. At that time, no contractor is involved, when engineering is completed and a construction contract is in effect, there will be direct and responsible relationships between the owner and the contractor and between the engineer and the contractor, the relationship between the owner and the engineer will still be maintained.

Advantages:
1) An accepted historically supports system with legal and contract precedents well established,
2) Provision of good checks and balances between the owner, engineer and contractor, and
3) Determination of project cost before construction contracts are let.

Disadvantages:
1) Construction expertise does not benefit design (minimal E-C liaison),
2) The longest project completion time,
3) Maximum owner participation, and
4) Greater coordinating and administrative costs on the part of the owner in most cases.

3. The professional construction manager (CM) system in which a competent construction manager with no vested interests in design or construction brings the practical construction viewpoint to bear during the design phase and using phased construction, provide overall management for all construction elements, professional construction manager as a focal point for the relationships of the three (3) basic elements, these relationships persist during the entire life of the project, the professional construction manager has had an important role in the development and presentation of the engineering design on the basis of his contribution to construction practicability, suitability and cost, and will also have strong voice in the interpretation of engineering design as well as provide an excellent control in times of rapidly changing costs and economic uncertainty,

Advantages:
1) Application of special construction skills with no conflict of interest (excellent E-C liaison),
2) Moderate owner participation,
3) Independent evaluation of costs, schedules and construction performance,
4) Good coordination of engineering and construction,
5) Minimal time for project completion,
6) Best system to construct a project during a period of rapidly changing costs and economic uncertainty, and
7) Can be applied for any project delivery system if function is clearly defined.

Disadvantages:
1) Usually no firm project cost establishment in the early stages of construction,
2) Another layer of responsibility and administrative cost,
3) Forcing of the owner or his agent into the position of referee in settling differences between construction elements, and
4) Lack of fiscal responsibility on part of professional construction manager.

4. The professional specification (PS) system is used when a lump-sum contract is placed with one organization that provides a complete "turnkey project". This includes engineering, materials and construction on the basis of a performance-type specification. In this system, the engineer is chosen by the contractor on the basis of his special knowledge and experience relating to the project and to the construction methods to be used, thus, there is a direct relationship to the construction and engineering but "none" between the owner and engineer.

Advantages:
1) Lowest possible cost and excellent time of completion,
2) Determination of project cost before construction contract is let,
3) Minimum owner participation,
4) One responsible contract for the entire project, and
5) Provides economical variation in details of construction without affecting performance of finished project.

Disadvantages:
1) Details of construction sometimes causing personal dissatisfaction,
2) Unsatisfactory or barely satisfactory completed project performance may be occurred,
3) Limited chance for owner to select most acceptable details of construction or equipment, and 4) Limited application except for highly specialized or standard designs.
Note: Two (2) special systems will not be examined herein which are
1) The owner-engineered and owner-constructed system,
2) The owner-engineered and contractor-constructed system

Method for system application to projects
To select a system for the construction project, the project characteristics and environment should first be determined completely in detail, i.e. site condition, compromises which are acceptable in order to attain the most important of these elements, etc. Then, system which most nearly "fits" the project should be used.

The term "environment of projects" may include the followings:
1) Limited personnel in some skilled trades,
2) Termination of labor agreements within the project life,
3) Shortages or extended deliveries for equipment and materials,
4) New materials of construction requiring special skills in fabrication and erection,
5) Remoteness from labor supply area, and
6) Other factors.

In addition to the factors examined previously, the "construction contract" is of utmost importance in the successful utilization of any construction system. It should be sufficient for and suitable to the system being used and its conditions should be acceptable at the project site.

Kenath (1976) recommended four (4) conditions that may necessary in any construction contract, regardless of the system involved are:
1) Clear and complete delineation of the owner's requirements and "all" the contractor's obligations,
2) Clear and complete definition of the responsibilities and authorities assigned to the contract parties and their representatives,
3) Compatibility of contract conditions and construction site conditions,
4) Through checking of the experience and capabilities of a contractor, a performance bond is not a substitute.

Four (4) basic type of construction contracts
1. Lump-sum contract
Lump sum contract is sometimes referred to as "fixed cost contract" which the contract price can be stated as a total sum of the project. This is based on the estimates of costs (by the contractor) and addition to cover profit and risk. It is assumed that the contract work will be undertaken for that price. It is the contractor's responsibility to estimate costs carefully, and ensure that construction costs on site are well calculated for prompt payments.

This method can be applied only in case that the scope of work is clearly defined. In other words, design drawings and all the related documents such as specification are completed and available. In practice, this method is suitable for the project which construction period is relatively short (say ? 1 year).
Price = Cost + Markup (profit, tax, overhead, risk)

2. Time-materials contract
The contractor undertakes the job, the owner pays for construction costs and "adds" a fee for management by the contractor. It is necessary to have a reputable and efficient contractor who will undertake detailed accounting for this contract. The contract type is very good when work must be started early of time is the critical issue and for construction of specialized projects.

Time-materials contract, is sometimes referred to as "cost plus contracts" comprise four (4) different categories:
2.1 Cost plus fixed fee,
Price = Cost + Specified amount of fee,

2.2 Cost plus fluctuate fee
Price = Cost + Amount of fee depending on fluctuation of construction cost,

2.3 Cost plus percentage fixed fee,
Price = Cost + Percent fixed fee,

2.4 Cost plus percentage fluctuate fee
Price = Cost + Percent fixed fee.

3. Guaranteed-maximum-price contract
The contractor agrees to undertake the project for a fixed price (X) and also gives a guarantee that a ceiling price will not be exceeded unless the owner makes further additions to the work. Good management by the contractor is crucial to successful application of this type of contract.

In guaranteed-maximum-price contract, the owner gets savings while the contractor takes the risk.

Price = Fixed price with a guarantee that a ceiling price will not be exceeded unless the owner makes further additions to the work.

4. Management contract
A contractor takes over the responsibility of management for a contract. He/she may or may not execute part of the work himself/herself but has overall responsibility to plan and supervise construction work, approve changes, budget and control the execution of the project.

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