It is really simply to lost within all the variety of terms, definitions and concepts available in the field of construction business and construction project management. We would like to share the information we have with the hope that this can help one of the colleagues starting their way in the field of managing construction projects.

CONTRACT STRATEGY

The definition of the Contract Strategy for the implementation of the construction project is one of the most important stages of Project Management. In particular, this stage is an integral part of the development of the Project Development Plan (Project Development / Definition or Project Execution Plan)

The key task of the Contract Strategy is the optimal structuring and organization of works on the implementation of design, construction and project management services in order to implement the project in the most efficient manner and in accordance with the project characteristics, requirements, objectives and interests of the Project Owners and Investors and with minimal risks for them. This structuring involves the identification and distribution of risks between those project participants who are most capable of managing these risks in order to fulfill the basic requirements of Investors and Project Owners.

In fact, the implementation of any project, regardless of its scale, includes four main elements:
• Engineering (Design)
• Organization of procurement
• Construction
• Project management

Therefore, during the implementation of the project, the Client (the Owner, Investor or the Project Customer) must determine how the data of the services and work will be realized and within what commercial and contractual terms.

The Services and works can be provided either individually or within the same package, or grouped into separate packages in a combination. Since there are only four elements of services and works, the number of possible combinations is very limited. However, the number of options, as well as under what commercial and contractual terms, these services and work can be grouped, almost unlimited.

At the earliest stage of the whole process, decisions must be made on how and in what compositions, under what specific contractual and commercial conditions, the services and work on the project implementation will be organized. As you know, the whole project implementation process can be broken down into certain stages in order to strengthen management control. The sequence of these stages is usually called the Life Cycle of the Project (Projct Life Cycle).

The ways of the particular structuring of the stages of designing, organizing and carrying out procurement, construction and project management are called.

PROJECT DELIVERY METHODS

In international practice, it is used to base on a number of such approaches as:
• Only Supply of Equipment (Supply of Equipment)
• Only Engineering and Consulting (Engineering and Consulting)
• Only Construction (Construction Contract)
• Engineering – Procurement – Construction (Engineering – Procurement – Construction: EPC)
• Engineering – Procurement – Construction Management (EPCM)
• Contract for Project Management (PMC)
• Program Management
Separately, it is worth mentioning other fairly common approaches to the implementation of projects, closely intertwined with the above-mentioned approaches such as EPC and EPCM, which also often leads to misunderstandings:
• Design and Build (Design-and-Build)
• Design – Tender – Construction (Design-Bid-Build)

At the earliest stage of the whole process, decisions must be made on how and in what compositions, under what specific contractual and commercial conditions, the services and work on the project implementation will be organized. As you know, the whole project implementation process can be broken down into certain stages in order to strengthen management control. The sequence of these stages is usually called the Life Cycle of the Project.

CONTRACT TYPES

Forms of contractual relationships can fundamentally differ depending on the nature of the contract, for example, for the implementation of design work or construction. However, in the generally accepted practice, payment for services under such contracts can be built on the following principles:

1. By the principle of cost compensation (reimbursable or unit price contract)
2. Fixed Fee.
3. By the principle of Cost Compensation plus Fixed Fees (Cost plus Fixed Fee);
4. By the principle of Cost Compensation plus Fixed remuneration with a Guaranteed Maximum Price (GMP);
5. Unchanged price: (Fixed Cost or Lump sum contract).
6. Unchangeable (lump-sum) price: the cost of developing project documentation and services for a tender (Lump sum);
7. Estimated approximate cost of services, attracted third-party (specialized) organizations (Provisional sums);
8. Compensation of costs in the implementation of construction management (Reimbursable);
9. Other estimated costs.

OUR EXPERIENCE

TEBIN team has wide experience in outsourcing engineering and consulting services for Eastern, Central and Western Europe. Extensive experience in project management with multidisciplinary and multinational teams. Implementation of large-scale international engineering and consulting EPCM projects, with investments of about 500 million euros.

SHARING EXPERIENCE AND APPROACHES IS OUR GOAL

Any project must be correctly predicted and calculated in advance. In the case of large multidisciplinary projects, the correct use of time and resources, optimization of all costs and the rational use of time-money is critical and important.

In the attached table, we tried to systematize all of mentioned

SHARING EXPERIENCE AND APPROACHES IS OUR GOAL

Any project must be correctly predicted and calculated in advance. In the case of large multidisciplinary projects, the correct use of time and resources, optimization of all costs and the rational use of time-money is critical and important.

In the attached table, we tried to systematize all of mentioned
Author: Andrey Sosnovsky
MANAGING PARTNER

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TEBIN uses the methods of contract strategy in our projects, and we are ready to share our experience and best approaches.