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FABRICATOR/ERECTOR
John Frewen-Lord, a Fellow of
Britain's prestigious Royal
Institution of Chartered Surveyors,
has over 35 years' experience as a
construction cost consultant/quantity surveyor and construction
manager in the UK, South Africa,
the US and Canada. Frewen-Lord
was trained as a quantity surveyor
in the UK, and emigrated to
Canada in 1966, working for the
branch office of a large international firm of contractors. His time
John Frewen-Lord
with this company included two
years in South Africa.
On returning to Canada in 1971, he spent the next four
years with a firm of professional quantity surveyors, which
included one year in Boston, MA. The company's work at
this time included various construction management projects in a joint venture with a major general contractor. The
experience from this was carried over when Mr FrewenLord joined a firm of professional construction managers
responsible for a number of high profile projects in the
Toronto area. During this management work, he became
very experienced in the cost control, scheduling and overall
management of the entire design and construction process,
especially in predicting and controlling construction costs
and cash flow on unusual or difficult projects. In 1980,
Frewen-Lord joined the Canadian Institute of Steel
Construction as Cost Analyst, and was responsible for providing steel-based cost studies and solutions to the construction professions in both Canada and the US. During
this period he initiated the concept of quantifying structural
steel's speed of construction advantage, and used it to win a
number of major projects for the steel industry.
Frewen-Lord set up his own practice in 1987 in Ontario,
Canada, and provided cost planning, cost control, construction
management, codes and standards, expert witness, dispute resolution and education consulting services to the construction industry,
including structural steel, both in Canada and the US. Today he is
currently living in his former homeland, and, after two years as
Construction Economist with the Corus Construction Centre, he is
now president of BusiBuilder Software Limited, whose products
are based on automating the costing, scheduling and cash flow
predictions of various types of buildings.
SUMMARY
Design/Build was once thought of as a flavor-of-themonth phenomenon, but instead has grown until today it
represents nearly 50 percent of all non-residential construction procurement, especially in large or complex commercial and institutional projects. In all types of construction
contract, someone takes on risk, and someone has control,
and different types of construction contract shift this risk
and control between Owner and Contractor. However, an
underlying precept is that he who takes on the risk must also
assume control, and Design/Build permits the steel fabricator/erector to take on risk while still retaining control.
The steel fabricator/erector entering the Design/Build
arena must ensure that he talks the same language as the
Design/Builder, a fundamental part of which must involve
being able to think conceptually, and to think beyond just
the structural steel or even the entire structural frame. This
may require the fabricator to acquire new skills and the software to go with them. In addition, the fabricator/erector
must be able to assess how his risk changes in
Design/Build, how those risks can be quantified, and then
how to include those quantified risks in his bid or proposal.
An example is included in assessing the increased risk, in
actual dollars, compared with a traditional lump sum contract.
This paper also includes various strategies in risk management, as well as supply chain management, all of which
involves assessing how the process of design and construction changes in Design/Build, and then setting down the
parameters for combining the inherent risk and control in a
Design/Build contract in a way that ensures that all players
are aware of the expectations and goals to be achieved
while reaping the rewards. Finally, some discussion is
included on the concept of Partnering what it is and how
it can be used in a Design/Build contract to improve the
overall outcome for everyone, whether owner,
Design/Builder or steel fabricator/erector.
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INTRODUCTION
In any type of business transaction or contract, there are two
main criteria for both parties:
1. To maximize the profit or benefit to be realized, and
2. to minimize the costs involved.
Construction contracts are no different, and every contractor or subcontractor trying to survive in the construction
industry is constantly battling both internal and external
forces to realize these two goals. Get the profit or benefit
to be realized too low, or the costs involved too high, and
you will quickly go out of business.
What makes it even more difficult in the construction
industry is that it is a brutally competitive business, with
razor-thin margins, and a bidding process that essentially
takes no prisoners. Either you win a sufficient number of
bids, or you die.
But the two goals above are not mutually exclusivein
fact (except in Utopia), you cannot have the first without
the second (although achieving the second will not necessarily guarantee the first). But both make each party to the
contract very self-centered, looking out only for himself,
and ready to distrust the other. Small wonder then that, in
a highly complex process that constructs highly complex
buildings and structures, simplistic contractual models have
been found to be less than satisfactory over the long haul,
with contract extras, claims and all too often litigation being
the order of the day. Few contractors have avoided going to
court, and in some countries (e.g. the UK), there are even
special construction courts, using judges highly trained in
the construction process. With the exception of perhaps
family or traffic courts, no other industry or aspect of our
lives warrants its own judicial process.
Consequently, both Owners and contractors have, in all
too many instances, said: Ive had enoughthere has to be
a better way. One of the better ways is the use of a
Design/Build type of contract. It CAN be betterfor both
parties to the contract but it is not always the panacea that
it is touted as being. Nonetheless, it has emerged relatively
recently as being one of the most used types of contract in
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structural engineers for foundations and other structural work not part of the steel frame, all of whom will
take the design from the 25 percent stage through to
completion.
The fabricator/erector is responsible for the entire
structural frame, including structural steel, steel deck,
concrete toppings on the deck, fire protection, and
interfacing with the rest of the building.
The fabricator/erector has established with the
design/builder, ahead of the bid, such key criteria as
loadings, column grid layout and fire protection ratings.
The fabricator/erector has established ahead of the bid
his required access to site, equipment requirements,
who provides protection and safety, and the inclusion
(preferably) or exclusion of, for example, loose steel
items.
Labor conditions are favorable and material prices are
stable, with no expected shortages or other difficulties.
The expected structural duration is 6 months, including lead time.
Table 1, at the end of this paper, is a relatively simple
calculation that illustrates the principles involved. (There
are much more mathematically sophisticated ways of calculating these risks, but these are rarely justified in a purely economics-based risk assessment.) What this calculation
shows is that the Net Risk for the structural work for the
performing arts center is just under $100 000, or 4 percent
of the $2.5 million contract. This amount is what needs to
be added to the bid or proposal (over and above the fabricators normal profit margins) to cover the risks in this
design/build contract for those items the fabricator has less
than total control.
If these risk items dont happen, then the fabricator is 4
percent better off. If, on the other hand, things go more
wrong than the risk calculations anticipated, then the profit
will be lessor even a loss incurred. This of course is simply a part of the process of being in business. But at least
the fabricator will be better offperhaps much better off
than if the risks were ignored or simply guessed at.
Having calculated the potential risksand it must be
emphasized that these are only the potential risks, the costs
of which may or may not be incurredthe fabricator/erector must now undertake a formal risk management program
to at the very least control them, and if possible, reduce
them. The risk management program, in a design/build situation, cannot be implemented entirely in isolation, but
must be done in conjunction with the design/builder, as well
as any subcontractors to the steel fabricator/erector (e.g. a
specialist contractor who will supply and place the concrete
on the steel deck, or a fire protection applicator).
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extent, and that all parties ensure that lines of communication are openup and down.
For this to happen, the Design/Builder must have ongoing dialoguecollectively and individuallywith all the
players. That means that the steel fabricator/erector must
be an integral part of these discussionsinitiating them if
necessaryand ensure that his status in the Design/Build
contract is not diminished or eroded. The discussions must
encompass the following points:
Continuing assessment of the goals to be achieved.
A confirmation of the commitment for all parties to
work to the same goals.
Establishing where each of the major subcontractors
contract and scope of work starts and ends, including
schedule and any soft costs, such as safety or equipment.
How problems are going to be dealt with and solved.
Where the lines of communication start and end, and
what route they take.
Any special expectations that both the Design/Builder
and the major subcontractors may have, and an honest
assessment of whether those expectations can be realistically met.
Should the unthinkable happen, and (as the Brits
would say) it all goes pear-shaped, how the parties
will resolve the issues, for the good of the project as a
whole, but especially for the good of the building
owner, who, at the end of the day, pays all the bills.
The Design/Builder should of course be taking the initiative in all of thisit is his supply chain that needs to be
managed. The fabricator/erector must buy into this process,
else it will fail. If the Design/Builder however has something of a less than fully robust process in place, the fabricator should take the initiative and demand it.
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