Services | Project construction phase

There are mainly two different procedures for contracting of the construction works namely turnkey or general contracts.

 

Under a turnkey ( FIDIC orange book ) ( http://www.fidic.org/ )contract the contractor shall take the full responsibility for the proper function of the product. The Client shall only produce sketch deisgn and leave the detailed design to the contractor.

 

The tendering process for a turnkey contract takes less time than for a general contract since the tendering documents can be produced prior to the completion of the detailed design, but the evaluation of the tenders is more complicated and time consuming than for a general contract. Furthermore the construction can not commence before the contractor has produced his detailed design so the total project time will most likely be the same for both types of contract.

 

A turnkey contract requires less project management from the Client since the contractor has the full responsibility. The price from the contractor will include costs for project management which will not be the case for general contracts.

 

One advantage with the turnkey contract is that the contractor will take the full resposibility for the implementation but on the other hand the Client will have very limited possibilities to have an influence on the development during the construction phase, including the design phase controlled by the turnkey contractor. Any changes introduced by the Client will be very costly.

 

Under a general ( FIDIC red book ) ( http://www.fidic.org/ ) contract the tenders shall be based on a detailed design produced by the Client. The tendering process for a general contract may, but not necessarily, take more time than for a turnkey contract but on the other hand construction can commence immediately upon award of the contract.

 

A project under a general contract will require more project management from the Client but this form of contract normally offers stronger competition and accordingly lower prices.

 

A general contract normally also allows for more local contractors to compete for the construction works than when a turnkey contract is implemented.
One major advantage for the Client using the general contract is that he will have a continuous control of the development and that he can introduce changes to meet new demands without any significant changes of costs, unless there is a significant change of standard and quality.

 

The cost for the Client’s project management is approximately 3-5 % of the construction costs for a turnkey contract and 4-7% for a general contract depending on the nature of the particular project.
Hifab has extensive experience of project management under both forms of contract.

 

It is always advisable to make an evaluation of every project in order to chose the most beneficial form of contract.
The evaluation should be based on such criteria as quality, project time, total costs, risk factor, organization of the Client, responsibility of the contractor etc.

 

Hifab has been handling this kind of evaluation processes for a large number of projects.