BUILDINGORGANISATION121

Structureofthebuiltenvironmentin
SouthAfrica
Chapter1
 Buildingvs CivilEngineering
MustbeseenastwodifferentindustrieswithinSA

Definitions
Architect
BuildingIndustry
QuantitySurveyor(QS)
MainContractor
Engineers Structural,MechanicalandElectrical
Client/Employer
ConstructionIndustry
ConstructionProcess
Subcontractor
Partiestotheconstructionprocess
CivilEngineeringConstructionIndustry
TheCyclicalNatureoftheEconomy
 ProductionProcess
CONVERSIONS/
INPUT PROCESSING OUTPUT

Inputs
Capital
HumanResources
Materials
Entrepreneurship

Processing
Construction Process

Outputs
Completed Facility
 Construction Contracts &Construction
Processes
Construction Contract

An agreement between:
the contractor,which agrees to:
construct
built or civil engineering work
for the client:
at a specified price

YOUBUILDIPAY
 RequirementsforaLegalContract

Consensus
Legality agreement to commit an offence isillegal
Physical possibility
Formalities
Construction contracts can be verbal,but isnot
recommended
Competent parties (contractual capacity)
 Concluding a Construction Contract

Acontract isentered into,when one person makes

an offerand the other accept
NBNB:Distinguish between an offerand an
invitation to negotiate
Inthe construction industry,contractors areinvited
to makean offer to tender
Each tenderers tenderisan offer
On acceptance ofthe offer,a contract isconcluded
 ConcludingaConstructionContract
(continued)
Differenttypesoftenders
Addressed to a limited group oftenderers

or
An openinvitation through the media

Thebasisofacceptanceofatender
The lowest or any tender(offer)will not necessarily
be accepted
 ConcludingaConstructionContract
(continued)
Written agreements arepreferable to verbalcontracts
The QSverifies the priced bill ofquantities
The QSinvestigates the financial statusofthe contractor
Hethen makes a recommmendation to the principal agent
(PA)
The PAscrutinises previous work done bythe contractor,
and makes a recommendation to the client
If the client issatisfied ,an agreement between the parties
is concluded
 ContractDocuments

Contract drawings
Specifications
Priced bills ofquantities
Preliminaries
Agreement
Tenderform (ECData&CEData)
Explanatory letters
Tenderqualifications
 Types ofConstruction Processes
Traditional construction process
Design &Built
Cost reimbursable
Packagetype contracts
Turnkey contracts
Construction management
Acontractual agreement iscompiled according to
the agreed construction process which will be
used for the project
 CONTRACTUALARRANGEMENTS:S.A.BUILDING
INDUSTRY(JBCC)
DomS/C:
DIRECT Bricklayer
CONTRACTS Plasterer
Painter
5 etc
PA
3
1 JBCCPBA

2
E C 4
Nom/Sel S/C:
Agents: Electr.
Arch A/C
QS Lifts
Civ E Sprinklers
M/EE L/scaping
etc etc
1. StdagreementforClient/PrincipalConsultant/PrincipalAgent(PROCSA)
2. StdagreementbetweenClient/Consultants(PROCSA)
3. MBSAdomesticS/Cagreement
4. JBCCN/SS/Cagreement
5. Nospecificagreement.Clienttodecide.
 Traditional construction process

Clientappointsprofessionalconsultantsandmain
contractor
Maincontractor appoints his own subcontractors
afterthe contract isawarded
Maincontractorappointsselectedand/or
nominatedsubcontractorsafterconsultationwith
PA
Eachpartytotheprocessseparatelyexecuteshis
partoftheentireprocess.
 Traditional construction process
(continued)
PAisresponsible for the management ofthe process
Acontract issigned between the PAand the client
The samewith the main contractor and his sub
contractors
Process culminates ina contract with or withoutbills
ofquantities
 Traditional construction process
(continued)
Standardagreements ofthe Joint Building Contracts
Committee (JBCC)aregenerally used for buildings
General Conditions ofContract for Civil Engineering
Construction (GCC2010)isgenerally used for civil
engineering projects
Two other standard forms ofcontract used inthe
public and privatesectors arethe NewEngineering
Contract (NEC)and the Fdration Internationale des
IngnieursConseils (FIDIC)
Traditional (Conventional)Procurement
Process
TheTraditional(Conventional)ProcurementProcessis
aserialprocessbywhichtheemployer(client)obtains
landfordevelopmentandusuallyappointsas
requiredbytheprojectanarchitect,aQS,consulting
engineersandvariousotherprofessionalstoprepare
documentationfortenderpurposesandtheexecution
oftheconstructionworkbythesuccessfulmain
contractorandhissubcontractors,withaPAactingon
behalfoftheemployer.
 Traditional (Conventional)Procurement
Process (continued)
The client generates an idea,with or withoutthe
assistance ofa QSand/or financial advisor,to assess
the scope ofthe idea
Inthe design phase the idea isconsidered inmore
detailwith the helpofvarious specialists inorderto
have a complete design before tendersarecalled for.
The moredetailed the design,the more accurate the
bills ofquantities and therefore,the tenderprices
The tenderdocuments arenow compiled with the
assistance ofthe QS,architect and engineers
 Traditional (Conventional)Procurement
Process (continued)
Maincontractor and subcontractors submit their tenders
QS,architect and engineers evaluate the tender
documents
Contract isconcluded between the main contractor and
the client
After site handover the construction work iscompleted
bythe main contractor,his subcontractors and other
direct contractors,under the supervision ofthe architect,
engineers,inspectors and (sometimes)a clerk of works
QScompiles monthly payment certificates asthe work
progresses,as well as a final account.The architect signs
and issues the payment certificates for the client to pay
the contractor
 Flowdiagramofthetraditional(conventional)procurementprocess
Employer/client/developer Financialadvisors(quantitysurveyor)

Architect
StructuralEngineer TownandRegionalPlanner
Design Municipalzoning
CivilEngineer
MechanicalEngineer regulationsandother
ElectricalEngineer restrictionsondesign
QuantitySurveyor
LandscapeArchitect
LandSurveyor
Other
QuantitySurveyor
TenderDocuments
Architect
Engineers Subcontractors
Suppliers
Tender MainContractor

QuantitySurveyor
Adjudicationoftender
Architect
Engineers
Concludingcontract
Employer Supervision:
MainContractor Architect
Building/Civilworks Engineers
MainContractor ClerkofWorks
Subcontractors Inspectors
Finalaccount QuantitySurveyor Suppliers

Completedbuilding/civilworks
 Contractualcommitmentsandlinesofauthorityinthe
traditional(conventional)procurementprocess
Employer Architect/Engineer/
PrincipalAgent
QuantitySurveyor

Engineers

Maincontractor EmployeesofMain
Contractor
SupplierstoMain
Contractor Employeesand
Suppliersof
Subcontractors Subcontractors

Linesofauthority Nominated/Selected Employeesand

Subcontractors Suppliersof
Nominated/Selected
Subcontractors
 Contractualcommitmentsandlinesofauthorityinthe
traditional(conventional)procurementprocess

Employer Architect

QuantitySurveyor

Engineers

Maincontractor EmployeesofMain
Contractor

SupplierstoMain
Contractor Employeesand
Suppliersof
Subcontractors
Subcontractors
Nominated/Selected
Employeesand
Contractual Subcontractors
Suppliersof
commitments Nominated/Selected
Subcontractors
 Advantages and disadvantages to the
traditional procurement process
Contracts with bills ofquantities:
Bills ofQuantities aredocuments inwhich all the labour and
materials needed to construct a building,or other facility,are
accurately given inprescribed units according to a standard method
and in which the circumstances under which the work isto be
executed arefully described
Advantages:
Working drawings and specifications areusually completed
before bills ofquantities areproduced and tendersarecalled for
Competitive tendersarebased on identical information.
Differences intenderprices will indicate the efficiency ofthe
various tenderers
 Advantages and disadvantages to the
traditional procurement process
(continued)
Advantages:
The correctness ofthe quantities inthe bills ofquantities is
the clients risk
Rates inthe bills ofquantities serve asreliable basisfor cost
adjustments resulting from variations inthe contract
Monthly payments aremade to the contractor on the basisof
the amount of work completed and the rates inthe bills of
quantities
Final accounts areeasy to settle asrates that areused to
calculate the cost ofvariations arealready known inthe
tenderstage
Costs aresaved because the bills ofquantities arecompiled by
the QSonly
Contractors generally prefer to tenderfor projects with bills of
quantities asthis provides a sound basisfor tenderevaluation
 Advantages and disadvantages to the
traditional procurement process
(continued)
Advantages:
Projects with bills ofquantities generally attract a
sufficient number of competitive tenderers due to the
reduced amount of work involved for each individual
tenderer
Priced bills ofquantities provide good information for
financial analysis and cost control for all parties involved
Disadvantages:
It isnot absolutelycertain what the final costs will be.
Quantities given inthe bills ofquantities asprovisional
may differ from the final measurement
It takes time to prepare bills ofquantities and involves
visibleQScosts
 Construction contracts with Provisional
Bills ofQuantities
Advantages:
All the advantages for the accurate bills ofquantities are
alsoapplicable to provisional bills ofquantities
Disadvantages:
Tenderinformation isbased on incomplete working
drawings and specifications.The final quantities may differ
substancially from the quantities inthe bills ofquantities
Projects based on provisional bills ofquantities are
characterised bynumerous variations
The client,professional consultants and tenderers are
subject to time restraints,communication gapsand rapid
decision making,which increase risks to all and the
possibility to makemistakes
 Construction Contracts with Scheduleof
Rates
Advantages:
Tenderscan be called for at a very early stage and basic rates are
available to determine the costs while the work isinprogress.
Variations arealsobased on predetermined rates
All other tenderdocumentation can still be ofa high standard
Disadvantages:
Properfinancial analysis and cost control aredifficult due to the
lack ofcompleted working drawings,specifications and
quantities
Numerous adjustments may occur with the preliminary bills of
quantities asdesign isnt thoroughly planned during tender
stage
Time limits,communication gapsand quick decision making
causesmistakes to be made and the risk increases for all parties
 Lump Sum Contracts Contracts without
bills ofquantities
Advantages:
Working drawings and specifications arecompleted before
tendersareinvited and the procurement process isbased
on complete documentation,except for bills ofquantities
The employer isusually certain what the final cost will be
before the building operations start asthe successful
tendererisresponsible for both the quantities and rates.
Monetary allowances,however,can influence the final
cost
Tenderers prepare their own contractorsquantities
which may result ina time saving.The client alsodoes not
have to appoint and pay for a QS
Monetary allowances can be included inthe specification
and consequently will be included in the tenders
 Lump Sum Contracts Contracts without
bills ofquantities (continued)
Disadvantages:
Nocontractual basisfor the adjustment ofcosts if
variations occur
Nosimple basisfor monthly payments or cost control
Tenderers must prepare their own builders quantities to
determine their tenderprice.This cost iseventually
reflected intenderersoverhead costs
MBSAs rule that members wont tenderincompetition
for a project >R500000or for dwelling houses >500m2
irrespective ofprice withoutbills ofquantities
 Cost PlusContracts (cost reimbursable)
Advantages:
The quickest possible way ofgetting construction work started
Disadvantages:
Littleincentive for the contractor to keepcosts aslow as possible,
especially where the plusiscoupled to the costasa %
Defining and application ofcostand pluselements
problematic
Final costs aretypically higher than that for other contracts
Difficult to separatethe cost involved incorrecting mistakes
incurred bythe contractor from actual project costs
Final costs arenot known before completion,which inhibits
decision making
Accurate financial analysis and control isalmost impossible for
any ofthe parties
Contract documentation isseldom comprehensive and complete
 Packaged,designandbuild and turnkey
procurement processes
Package processes areoffered bythe coordinator
usually a main contractor to a potential client at a
specific price that includes all professional services and
a construction contract and sometimes alsothe site,
equipment and commissioning ofthe facility

Contract documentation isnot necessarily

comprehensive and complete

BOT: Build Operate Transfer

BOOT: Build Own Operate Transfer
BOTT: Build Operate TrainTransfer
ROTT: Repair Operate TrainTransfer
 The package procurement process
Advantages:
Asimple solution to meetthe clients requirements
Client isfreed from the responsibility ofappointing various
professional consultants and entering into numerous contracts
Process isvery rapid.Communication channels areshort and
concentrate on management activities
Somepackages,especially those producing housing and industrial
buildings,may be to the financial advantage ofclients
(guaranteed returns and/or collateral assistance)
Incasessuchasindividualhousing,packagesthatofferatotal
serviceevenincludingfinancearesometimestheonlypossible
solutionfortheemployersproblems,whichheoftencannot
handleonafragmentedbasis
Wherefinancingformspartofthepackageitisfrequentlythe
onlyandmosteffectivewaybywhichtheclientcanobtain
financing.Contractorsprovidevarioustypesofguaranteesto
financialinstitutionswhichundertaketoprovidefinancing
 The package procurement process
(continued)
Disadvantages:
The disadvantages ofcontracts withoutbills ofquantities
alsoapply here
The client stands contractually on his own.Hemay find
himself inan unenviable position if problems doarise
Legal costs and expert advice insuch cases areexpensive
It isdifficult to determine whether the client is getting the
best value for his money asthere areno comparative
prices
The contractual relationship between the client and the
contractor depends on good faith
Flowdiagramofapackageprocurementprocess
Maincontractor/
Compilerof
package

Professionalserviceswithoutexecutive
Design
powers

Employer Financing

Buildingor MainContractor
otherfacility Subcontractor
Suppliers

Completedbuildingor
otherfacility
Contractualcommitmentsandlinesofauthorityinthe
packageprocurementprocess

Employer Architect
PrivateConsultantsor
QuantitySurveyor Consultantsemployedbythe
MainContractor
Engineers
Maincontractor
EmployeesofMain
Contractor

SupplierstoMain
Contractor
Contractual Employeesand
commitments Subcontractors Suppliersof
Subcontractors
Contractualcommitmentsandlinesofauthorityinthe
packageprocurementprocess

Employer Architect/Engineer PrivateConsultantsorConsultants

employedbytheMainContractor
QuantitySurveyor

Engineers

EmployeesofMain
MainContractor Contractor

SupplierstoMain
Contractor Employeesand
Suppliersof
Linesofauthority Subcontractors Subcontractors
 ProjectManagement and Construction
Management
ProjectManagement
Aprocurement process for which the client appoints an
agentor employee at a professional feeor a salary to
manage the whole process for the erection ofa building
or other facility insuch a way the clients requirements
regarding time,cost and quality aremet
Construction management
Aprocurement process for which the client appoints a
manager at a professional feeor salary to manage the
construction work on site from beginningto endbyusing
specialist contractors
Contractualcommitmentsandlinesofauthorityinthe
projectmanagementprocurementprocess
Employer Architect

QuantitySurveyor
ProjectManager
Engineers

Maincontractor EmployeesofMain
Contractor

SupplierstoMain
Contractor Employeesand
Suppliersof
Subcontractors
Subcontractors
Contractual Nominated/Selected
Employeesand
commitments Subcontractors
Suppliersof
Nominated/Selected
Subcontractors
Contractualcommitmentsandlinesofauthorityinthe
projectmanagementprocurementprocess

Employer Architect

QuantitySurveyor
Project
Manager/
PrincipalAgent Engineers

EmployeesofMain
Maincontractor
Contractor

SuppliersofMain
Contractor Employeesand
Suppliersof
Subcontractors Subcontractors
Linesofauthority
Nominated/Selected Employeesand
Subcontractors Suppliersof
Nominated/Selected
Subcontractors
Contractualcommitmentsandlinesofauthorityinthe
constructionmanagementprocurementprocess

Employer Architect

ProjectManager/ Quantitysurveyor
PrincipalAgent

ConstructionManager Engineers

SpecialistContractors EmployeesandSuppliersof
SpecialistContractors
Linesofauthority
Contractualcommitmentsandlinesofauthorityinthe
constructionmanagementprocurementprocess

Employer Architect

ProjectManager Quantitysurveyor

ConstructionManager Engineers

SpecialistContractors EmployeesandSuppliersof
SpecialistContractors

Contractualcommitments
 Advantages ofProjectManagement
Total development cost may be lower certain traditional
professional services or main contractor not required.Central
management with unity ofauthority increases efficiency and
effectiveness
Technical,financial and programming skills ofthe project
manager areutilised fully from the conceptual stage
Clients direct involvement isreduced to a minimum
Managed fast trackconstruction where design,
documentation and construction work takeplace concurrently,
ispossible
Consultants have no dual responsibility
There isgreater specialisation with less fragmentation
Efficient time,cost and quality control can be applied on a
formal basis
The advantages ofgood management areto the benefit ofall
parties,especially to the client
 DisadvantagesofProjectManagement

The client has an additional commitment with respect to

professional fees,which isnot necessarily compensated
for byvisible or proven savings
The client entersinto a greater number ofcontractual
commitments with potentially moreproblems
The consultants have less direct contact with the client