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FAST-TRACK CONSTRUCTION

WITH CASE STUDIES


Telecom Communication Building
(Novated contract)

Parliament House, Canberra

By:

F.F. Zaidan

BEng (Civil)

Submitted For: Master of Applied Science in


Project Management

CO

ENTS

PREFACE
STATEMENT OF ORIGINALITY
ACKNOWLEDGMENTS
INTRODUCTION

1.0:

1.1: Characteristics of the Construction Process.


1.2: Reason for the Change:
1.3: Client role in the Construction Process.
1.4: Why do we need effective Management:
1.5: Purpose of this Research:

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3
5

LITERATURE REVIEW

2.0:

Kwakye, 1991 "Fast-Track Construction"


Linden, F" Fast-Track Project Management"
Torell, C.A " Fast-Track Construction Save Time and Money"
Robinson, R" Should Fast-Track Be Derailed"
Hinds, J.K " Contract Administration on Fast-Track Projects"
2.6: Hedberg, A.N " Building on the Fast-Track"
2.7: Hirsh, B "A New Fast-Track For Public works"
2.8: Fazio, P etc. "Design Impact of Fast-Track Construction"
2.9: Pott, F.K " Alternative Payment System For Fast-Track projects"
2.10: Waldaby, D" Quality Assurance of The Gateway Project"

2.1:
2.2:
2.3:
2.4:
2.5:

3.0:

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FAST-TRACK CONSTRUCTION
3.1: What is Fast-Tracking.
3.1.1: Traditional and Fast-Track Construction.
3.2: Key factors for effective Fast-Track Construction:
3.2.1: Managing contractor appointed at the early stage:
3.2.2: Role of the architect has changed.
3.2.3: Selection of contractor is based on skills not price:
3.2.4: Capital intensive methods of construction:
3.2.5: Use of steel frames instead of concrete.
3.2.6: Overlapping work packages.
3.2.7: Components are standard and readily available:
3.2.8: Buildability and speed is the key issue.
3.2.9: Working at odd hours.
3.2.10: Client pays for preliminaries.
3.2.11: Variations at construction phase not entertained:
3.2.12: High Calibre staff are employed:
3.3: Effect of the economy on Fast-Track construction:

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3.4: Benefits of Fast-Tracking


3.4.1: Economic of Fast-Tracking
3.4.2: Cost of Fast-Tracking to the Client
3.5: Process of Fast-Tracking:
3.5.1: Organisational structure.
3.5.2: Client role:
3.5.3: Design brief.
3.5.4: Role of project management:
3.5.4.1: Information Management systems
3.5.4.2: Benefits from Information Management

3.5.5: Role of engineering:


3.5.6: Designing for buildability.
3.5.7: Role of the contractor:
3.5.8: Supervision and coordination on site.
3.5.9: Quality Assurance:
3.5.10: Controlling finance:
3.6: Comparisons with Alternative Contract Procurement Systems.
3.6.1: Traditional method.
3.6.2: Construction Management
3.6.3: Design and Build:
3.6.4: Novation Contracts:
3.6.4.1: The Process.
3.6.4.2: Pre-Novation Contractual Pattern.
3.6.4.3: Post Novation Stage:
3.7: Summary of comparative features:
4.0:

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TELECOM MAJOR COMMUNICATIONS BUILDING


4.1: Introduction.
4.2: Project Organisation Structure:
4.3: Project Objectives and Scopes.
4.3.1: Strategic objectives:
4.3.2: Project scope
4.4: Site Constraints.
4.4.1: Site accommodation and access.
4.4.2: Crane location
4.4.3: Shape of the site
4.5: Project Programme:
4.6: Design issues:
4.7: Quality Assurance:

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4.8: Delivery Arrangement.


4.8.1: Delivery objectives
4.8.2: Delivery structure:
4.8.3: Delivery methods:
4.8.4: Selection of Contractor:
4.8.5: Legal relationship.
Contractual Issues.
4.9:
4.10: Client Information System
4.10.1: Overview of Information Management system.
4.11: Risk Management:
4.11: How Construction time was Cut:
4.12: Analysis of Case study:
5.0:

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AUSTRALIAN PARLIAMENT HOUSE, CANBERRA

5.1: Introduction.
5.2: Project Background:
5.3: Organisational Structure:
5.3.1: Project Management Structure:
5.4: Contract Arrangement:
5.4.1: Agreement with the architect
5.4.2: Agreement with the construction manager
5.4.3: Co-ordinated package contracting
5.5: Cost blowout:
5.6: Analysis of Case Study

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6.0: GENERAL CONCLUSION

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7.0: RECOMMENDATION FOR FURTHER WORK.

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8.0: REFERENCES

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9.0: APPENDICES:
9.1:

Appendix A: Telecom Communication Building Pfau Layout

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9.2:

Appendix B: Telecom Project Master Schedule

100

9.3:

Appendix C: Conditions of Contract ( Content Pages)

101

9.4:

Appendix D: Transfloor Banded Floor Slab system

102

9.5:

Appendix E: Parliament House Construction Budget.

103

The purpose of this thesis is to identify the key factors that account for the
success or failure of construction projects, that is, completion on time, to budget, at the
requires standard.

Chapter one explains the characteristics of construction projects and why today's
clients are adopting Fast-Track contracting.

Chapter two discusses the various articles that are most important to Fast-Track
construction.

The main body of this thesis is in chapter three with the key factors for effective

Fast-tracking are discussed in details. Process of Fast-Tracking and the roles and

relationships of various professionals involved on construction projects are also


explained. Finally chapter three compares the alternative procurement system and the
benefit of each system it has to offer to Fast-Tracking.

Chapter four and five illustrates Fast-Tracking of projects with two case
studies:-

Telecom Communication Building, Adelaide (Novated contract).


Australian Parliament House, Canberra (Construction Management type

contract).

Finally both case studies are analysed and the important aspects to the success or
failures of each project are highlighted in details.

STATEMENT OF ORIGIN

11.

This to certify that this research project is entirely the work of the undersigned
unless otherwise acknowledged.

University of South Australia.


School of Building and Planning

Frank

Master of Applie Science in Project Management.


Date: 4/1/1994

ACKNOWLEDGMENTS
I wish to acknowledge the assistance of the following people for the information

they provided and time given in interviews and discussions. Also I owe a debt of
gratitude to my supervisor Mr. Tim 0' Leary for his objective comments, guidance and
encouragement's during the preparation of this thesis:-

Mr. M. Fejar

( Telecom Australia).

Mr. J. Woodside (Connell Wagner).


Mr. T. Redman

(Fletcher construction).

Mr. P. Saleveson ( Fletcher Construction).


Mr. G. Pearson

(Beta Form Construction).

Mr. T. Burke

(Blake Dawson Waldron).

RODUCTION

11# *

1.1: Characteristics of the Construction Process:

The construction industries are large and complex industries: they account for at

least 15 per cent of the gross domestic product, employ over two million people in a
great variety of roles (Hillebrandt, 1977).

.:C

The construction industry is subject to both market forces due to the state of the
economy and government strategies that use the industry to implement policy to direct

the economy. The nation's economy is subject to cyclic changes in demand levels that
oscillate about long term demand levels. Small fluctuations in the demand for the stock

of buildings and works will have very large repercussions on the demand for the
buildings and works created by the industry (B.I.S Shrapnel, 1986).

Each product of the industry may be subject to unique specifications to suit the
client's need and represent a high proportion of the purchaser's income. Furthermore,
the construction product typically has a life that extends over many years, which means
that the stock of products is large in relation to annual output.

The factors affecting the supply of the industry are the availability of inputs for
production, excess capacity and the confidence of the industry to reinvest and expand

or contract their business operations. The size of any one contract can represent a

significant level of output, thus having a greater bearing on the particular firm's
profitability during any given period.

1.2: Reason for the Change:


Undoubtedly management of engineering and construction project has become
more complex over the years. Until the 1960's a client with a need for building works
would usually commission an architect to prepare drawings identifying his requirement.

These drawings would provide the basis for competitive tenders by builders for the
execution of the works.

During the 1970's technical complexities of projects, increased government


regulations, spiraling inflation, and political pressures all contributed to the increased

cost of construction, which resulted in a search for new and innovative procedures to
ensure faster and more economical project completion (Fazio etc, 1988).

Today it has been established that the Traditional project delivery system has
failed in meeting the present challenges facing the client. The client is forced to be
involved in the administration and management of their projects in many instances to

shorten the duration of the project or meeting their requirements. New management
techniques have been developed such as; Design and Build, Fast-Track Construction,
Construction Management and Novation contracts to assist clients in their needs.

Gray and Flanagan, points out :


"with the uncertainty of inflation and interest costs, and the nature of the business
world requiring the client to be very competitive in today's market accelerated
delivery approaches are becoming very attractive."

1.3: Client role in the Construction Process:

There are two types of clients that are involved in the construction process. The
experienced clients are those organisations that carry out construction of new projects

more than once every five years on a regular basis.

The second type are the

inexperienced clients who carry out construction of new projects once every five years
or more.

The architect or the engineer is the key player in direct link with the
inexperienced client, giving advice on the overall management of their projects. On the

other hand experienced clients as a result of the expertise gained in implementing their
own capital programmes over many years, tend to have more expertise in this area of

Construction Management and their opinions are based on past-experience and the
conservative decisions of their in-house experts (Mastennan, 1993).

At the end of June 1983, the National Economic Development Organisation in


the United Kingdom published a report Faster Building for Industry, which attempted
to pinpoint the faults and weaknesses of the UK's building methods. The report found

that the inexperienced client is always at a disadvantage because the advice they get
from the industry usually is impracticable especially on different procurement methods.

Also clients have no means of judging which procurement method they should

adopt. As a result the large majority of clients were heavily dependent on consultants
and contractors.

The Centre for Construction Market Information's Report found that clients
involved in commercial buildings tend to still appoint the architect as their principal
advisers even if they decide to choose a non traditional method.

'3

Hence clearly the architect is still the key player in the eyes of the inexperienced
clients regardless of the method of procurement implemented.

On the other hand the experienced clients that regularly carry out construction
work should have little difficulty in obtaining information from, and dealing with the
construction industry because they have developed a working relationship between the

consultants and contractors that they are fully aware of the method of procurement
they should adopt to suit their needs.

The chartered Institute of Building (CIOB) guide to contractors selection advises


clients that before deciding on their procurement strategy, they must fully investigate all
the options available to them.

However if a client is unable or does not wish to carry out the overall
management of the project then Hewitt, 1985 suggests:

appoint a lead consultant to undertake part of the management


process.
appoint a consultant to assist in establishing the organisational
structure of the project.

have a project manager handling all the management of the project

Finally no matter what type of client, either experienced or inexperienced the


brief must contain the client's primary and secondary objectives in term of functionality,

quality, time and cost (Masterman, 1993).

1.4: Why do we need effective Management?


The complexity of projects is constantly increasing and the need for new
management techniques to satisfy the demanding client of today is becoming more
apparent than ever. (Kwakye, 1991).

The client of this decade is always in active participation in seminars, workshops


to become more efficient in understanding faster methods of construction procurement.

There is increasing sophistication in funding arrangements for construction


projects, requiring a more efficient usage of funds and higher accountability.

Clients are very aware of the life cycle costs from inception to construction.
There is a tendency towards social leveling, as awareness of the need for cooperation
on the part of the traditional professions.

1.5: Purpose of this Research:


There is a growing trend towards the use of alternative strategies in place of
traditional lump sum or (fixed price) building construction contract delivery systems.
These include Construction Management, Project Management, Design and Build and
a host of other closely related variations.

Recently a new method of project delivery has been added to the ranks, namely

Novation. This construction procurement system has already been used on a number
of major projects throughout Australia, and more recently here in Adelaide. Some of

these projects include the southern Grandstand of the Melbourne cricket ground and
the new Telecom building in Hinders Street Adelaide.

The aim of this thesis is to:

Explain the benefits and key factors for effective Fast-Track construction.
Roles and inter-relationship of the key players on a Fast-Track project.
Fully illustrate with two case studies Fast-Track construction:
Telecom Communication Building, Adelaide ( Novated Contract ).
Australian Parliament House, Canberra.

Kwakye, 1991 "Fast-Track Construction"

2.1:

CIOB Occasional Papers


This paper by Kwakye, discusses the nature of Fast-Track construction in which
design and construction functions are overlapped.

Chapter one, defines what is Fast-Tracking and what are the strategic options for

implementing Fast-Track construction. The benefits and economic analysis are also
discussed briefly.

Chapter two and three considers the management process on a Fast-Track


project and the interrelationships between the management contractor and works
contractor.

Chapter four, discusses in depth the process of Fast-Tracking, organisational

structures, client role, planning and programming, quality assurance and fmancial
planning for a Fast-Track project.

Chapter five, illustrates the future role of Fast-Tracking in relation to issues such

as; marketing effect, the level of client's awareness, acceptable and available
standardised form of contracts.

The final section of the report -gives general observations of the techniques and
suggests the type of organisations best Isuited for adopting Fast-Track construction.

2.2:

Linden, F "Fast-Track Project Management"


IEEE - Mexico City- May 1991:

This paper is to present an approach to project management and plant


construction using Fast-Track construction methods. The intention is to analyse why
projects using Fast-Tracking slip behind schedule and overrun cost estimates.

Chapter one, analyses the economic impact on projects as seen from the owner
point of view, suppliers and contractors.

Chapter two, talks about a standard form of project approach and the main
elements of this approach.

Chapter three, discuses in detail the Fast-Track concept based on logical


concepts and is the result of efforts and experiments by a highly motivated small team
of ingenious individuals. It also explains why projects start to slip behind schedule and

how to stop that from happening and how to meet project objectives without
sacrificing quality.

Chapter four, explain the special project partnership that exiSti between
suppliers, contractors and plant operators.

Finally, it examines what key steps are needed to complete a project _using Fast
Tracking on time and within budget.

23: Tore11, C.A "Fast-Track Construction Can Save Time and Money"
Hydrocarbon Processing, April 1989:

This paper emphasises the importance of the construction manager. He should be


involved in the project from inception to completion.

The idea behind Fast-Track contracting is that it does not require completed
design before letting bids for a portion of the work. This process has the advantage of

getting the construction work started sooner than in the traditional method of using
one contractor.

It follows by focusing on Fast-Tracking via multiple contractors rather than a

single general contractor. The benefits and risks of performing a Fast-Track project
and the key to the success of the project is the construction managers ability to manage
risks to get optimum benefits.

The construction manager plays a vital role in the process and he must be a part
of the project from day one, because he brings construction experience to the project
team. The importance of the construction manager in this early planning process is that

he knows what can be done in the field. He can thus make decisions that will benefit

the project as a whole, even though they may place an additional burden on the
engineer.

An additional function of the construction manager in the early phase of the


project is to review specifications and drawings for construc;tility purposes.

2.4:

Robinson, R "Should Fast-Track Be Derailed"


Civil Engineering, January, 1987.
What made Fast-Track so attractive in the first place was the " time is money"

attitude of client's. This paper talks about the role of engineers and project managers
on a Fast-Track project. If Fast-Track is properly done its great, but unfortunately lots
The
of time is spent dealing with problems encountered using Fast-Track construction.
attitude is `" we really do not know what we want but we'll dig a hole and design as we
build, trying to stay ahead of the contractor".

Robinson goes on to say that the engineer confronted by a client who says the
project must be Fast-Tracked: "Ask' what do you want ?' Get the criteria established

first. Fast track should be done with the production of drawings, not the design
concept." Fast track project cost the design more to produce than the ordinary. If the
client want's Fast-Track, the risks must be clearly understood by him. Also if Fast-

Track is to be successful you need an owner who understands Fast-Tracking,


consultants who are committed to produce, contractors who are also committed and
proud to do the job. Do not do it unless you have experienced staff on board.

110

Hinds, J.K " Contract Administration on Fast-Track Projects"

2.5:

Building and Construction Law, June, 1989.

This article looks at practical ways to increase profits through improved up to


the risk by setting up
date contract administration. It talks about mechanisms to shift

the contract so that the engineer, architect and other parties are responsible to the
builder, hence the owner deals with one party.

Considered in this article, are some of the mechanisms that are being chosen by
the instrumentalities and might be encountered by the contractor which include things
such as:

Design control, i.e. shift the risk so that the design is controlled by the

contractor.
Design should be done in two stages to allow maximum early input
from the owner.
Tender for the building work when the building approval is being

sought, but detailing 30 per cent complete.


all parties must be encouraged to perform and major factors are the
cost of the risk.
The mechanism for time control has to be clearly set out in the -

contract.

Finally owners must decide on the type of project they will undertake, based on
consideration of the advantages and disadvantages to them of the type available. After
this is made they must adhere to the administrative procedures that apply to the type of
project.

2.6:

Hedberg, A.N " Building on the Fast-Track"


Building, June, 1987.

Fast tracking cuts down on lead time and allows the construction team to go to
work as soon as certain aspects of the design are completed. A non Fast-Track project

costing approximately $40 million takes two months to design, four months to do the

working drawings and ten months to build. With Fast-Track you still have your first

two months to design, but after the first month of your working drawings you will
begin construction picking up three months over the non fast-track"method.

Its important to contact the local utility companies early so gas and electrical
services will be available at the same time the HVAC units, electrical switch gear etc.
are delivered to the site.

The article discusses the pitfalls of Fast-Tracking i.e. if you over Fast-Track you

run into problems. Obviously, if you are Fast-Tracking to a point where you have

designed a structural system for a building, bid it out, and the steel is going up, you
cannot suddenly decide you want to drastically change an office layout.

Building a Fast-Track schedule cautions building owners to know their facility is

going to be used so it can be taken into account during design phase. The owner must
provide the building professional with as much information as possible in terms of how

he intends to operate and manage his building. The professional responsibility is then
to interpret the owners needs and make sure they are incorporated into the job.

Finally the article discusses different methods of casting concrete; Jump Form

System, The Flying Form System, i.e. building a concrete table with a system of
aluminum beams and trusses tying the system together. In today's market, maintaining
the competitive edge means doing the job better, and faster than the competition.

'12

2.7:

Hirsh, B "A New Fast-Track For Public works"


Civil Engineering, February 1992

The article explains the main concept behind a new form of Fast-Track contract,

known as " Construction Management / General Contracting " with a guaranteed


maximum price in which a single firm acts as both construction manager and general

contractor. The process has been used on a dozen of projects in Oregon (USA)
including schools, hospitals, office buildings and airport construction.

The benefits of this method is in relation to projects that incorporated technical

complexity, need for accelerated completion and budget limitation requiring a


construction cost guarantee during design.

Finally the article discusses the importance of value engineering and issues such
as site layout, expandability, building configuration, schedule and construction ability

and illustrate the method with a model of the process and the roles of each party on a
particular job.

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2.8:

Fazio, P etc. "Design Impact of Fast-Track Construction"


Construction Management and economics, 1988, Vol. 5, 195 - 208

This paper identifies the potential disadvantages of the Fast-Track technique.


Problem areas are identified which include; additional steel, elevator shaft, interference,
design errors and electrical design changes. The far reaching effects of mistakes during
the early design / engineering phase.

Trouble areas requiring special attention have been recommended i.e. design
errors and omissions, design changes, coordination between design and construction,
coordination between work packages and lack of field work input.

Finally accelerating a project through Fast-Tracking is a major decision and


construction professionals should be aware of its implications. It has also been shown

that unless considerable attention is directed to problem areas especially those related
to design, such a popular technique could result in unexpected delays.

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2.9: Pott, F.K " An Alternative Payment System For Major Fast-Track
Construction projects"
Construction Management and Economics, 1988, Vol. 6,25 -33

This paper describes an alternative payment system for use on major Fast-Track
projects in which the contractor is financially motivated to achieve satisfactory progress

throughout the period together with completion on time.

The system utilises the concept of predetermined payment linked to progress


milestones.

It can be used with bills of quantities or with a priced schedule of

activities.

The Advantages of the system is that contractors are motivated financially to


achieve the final completion date. Also both contractors and clients can ascertain the
project cash flow before contract commences. Finally fewer man hours are required to
prepare monthly payments.

Some disadvantages of the system are also discussed which includes, variations
which are added from the cost centre value and are subject to the same percentage as
originally bid.

A contractor may bid higher percentages in the early stage of the project and may

cause over payment in the early months. Finally when construction progress is in

advance of the programme the contractor can be underpaid, compared to the


conventional approach.

This payment system should thus be considered a real alternative by those clients
where completion on time on a Fast-Track is essential.

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2.10:

Waldaby, A " Quality Assurance of Design and Construction of


The Gateway Arterial Project" March, 1987.
Queensland Division technical papers
The complexity of design and the consequences of failure predicate the detail to

which Quality Assurance should be taken. Assessment and monitoring techniques in the

design office have allowed the project manager to accept confidently the various
documents presented to him by the designers with little further checking.

The article continues by emphas*ing the importance of a Quality Assurance

programme which clearly puts the responsibility for quality assurance on the
contractor. Contractor's responsibilities are set out which includes; promptly detect and

correct non conformance, develop quantity verification manual, update and re-submit
the quality verification manual.

Finally the project managers responsibility are listed which includes; ensure
contractor carries out the work, sight and accept material samples and the contractor
must comply with the requirement of the quality verification manual. Also advantages

to the contractor and the client who are using Quality assurance are mentioned and
finally experience gained on the Arterial Gateway Project.

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FAST-

CK CON MUM

3.1: What is Fast-Tracking:

Essentially, it's the packaged release of drawings in a sequence that relates to


how activities are actually going to proceed on the site. That means you can bid for

the projects before all the working drawings are complete, you finish earthworks,
foundations, steel and concrete drawing's first.

Once they are ready you ship them out for bid and start construction without waiting for the architectural drawings to be completed (Hedberg, 1987).

Burgmann, 1982 defines Fast-Tracking as a:


"System of overlapping the normal sequential phases in design

documentation, tendering and construction so that the total time scale is


not significantly larger than the longest of the individual items

Fast-Track technique requires considerably more attention in order to complete a

project on time and within budget. Ruby (1978) and Sidwell (1983) pointed out two
major challenges in Fast-Track construction;
coordinating the construction work.
providing subcontractors with the information they need for
bidding, which must include a flexible design.

Figure 3.1 (Fazio etc, model) illustrate the difference between the Traditional
method and Fast-Track construction method. Time saving is immediately apparent if its
done properly.

3.1.1: Figure 3.1 showing Traditional and Fast-Track Construction:


( Fazio, etc model )

TRADITIONAL
Construction

Design

ME:=8:35g8MVOMMOM

TIME

( Months )

FAST - TRACK METHOD


ITiume
Construction

Design

Saved

TIME

( Months )

From the above figure it is apparent how Fast-Tracking a project can save time if
its done properly with experienced staff.

3.2: Key factors for effective Fast-Track Construction:

Fast-Tracking a project successfully can be achieved by adopting the


recommended procedures.

3.2.1: Managing contractor appointed at the early stage:

Appointing the contractor at the design stage gives the design team expert
guidance on buildability. It also provides information on how to simplify the detailing

of sections prior to construction, as well as providing information on the availability of


plant and materials and recommending advance procurements when necessary.

3.2.2: Role of the architect has changed:

In a Design and Build contract the architect is no longer in a contractual


arrangement with the client His duties are confined to designing, specifications and
obtaining consents.

3.2.3: Selection of contractor is based on skills not price:

Selection is based on ability of the contractor to make technical contribution to


the team, and be able to work within a tight budget and fixed price. Traditionally the
selection of the contractor is based on the lowest tender price.

3.2.4: Capital intensive methods of construction:

Fast-Tracking usually applies to complex projects. Efficient transportation of

material and operations on site is crucial. The use of pre-fabricated components is


strongly recommended and the use of appropriate plant and machinery is a must for the
project to be successful.

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3.2.5: Use of steel frames instead of concrete:

Steel frame construction is often preferred to reinforced in situ concrete for


speed, although steel is apparently more expensive.

However with the general

adoption of tower cranes and computer aided design, steel frame usage is on the rise
for reasons of speed of erection, reduced site labour requirements, prefabrication and
easy site modification if necessary.

3.2.6: Overlapping work packages:

The construction is broken into a series of work packages. The Fast-Track


method condenses these packages as much as possible.

3.2.7: Components are standard and readily available:

The use of components that are manufactured on a regular basis and are not in
high demand is encouraged. If contemplating using non standard components, extra
time must be allowed for fabrication and delivery.

3.2.8: Buildability and speed is the key issue:

The project must be built in the fastest possible way, avoiding factors that
negatively affect the productivity process. The construction sequence is planned to
permit uninterrupted site labour wastage with fewer problems and be able to go on
from one trade to the next smoothly and efficiently ( Kwakye, 1991).

20

3.2.9: Working at odd hours:

The removal of waste from the site and the distribution of materials to work

place is to take place at night and public holidays with the approval of the local
authority. This ensures the site is clean and safe for the next shift's work, also enables
operatives to start work promptly at each shift.

3.2.10: Client pays for preliminaries:

The client covers all preliminary costs resulting from the employment of
management and works contractor.

For the management contractor, the cost of

provision of site resources is similar to the normal level of preliminaries found with
lump sum contracts under traditional methods (Gardiner and Theobald, 1988).

3.2.11: Variations at construction phase not entertained:

Keep variations to a minimum as they consume not only money, but slow down

the tempo of site operations. Identify ambiguities and eliminate th


design stage. The client_must be

the

chlnge his

mind during construction.

3.2.12: High Calibre staff are employed:

The client objective is to complete a building on time and within budget.


Employing the best available staff and having experienced participants who are well
aware of the demands of the system is crucial in achieving the client needs.

Although this can add extra costs to the client, in the long run it will be beneficial
because he achieves his objectives quicker.

21-

3.3: Effect of the economy on Fast-Track construction:

Fast-Track construction clearly thrives in a booming economy that give rise to an

increased level of construction activity as buildings are in demand. Due to the lack of

spare capacity in buildings the only way to increase production is by further capital
spending.

Also in a booming economy, capital expenditure is enormous, because hospitals,

schools and prisons are in demand. There is a need to build at a faster rate in order to

open up for special occasions or simply the beginning of semester in the case of
building a university.

When the economy is in a recession and surplus building accommodation exits,

there will be no need to build fast. Also the economy that is reviving from recession
will not need further capital investment in order to increase production because spare
capacity already exists in it (Kwakye, 1991).

When the economy overheats, government tries to slow it down by, reducing
public spending and hold off major construction projects.

22'

3.4: Benefits of Fast-Tracking:

Clients of the 1990's detect that Fast-Tracking acquire financial benefits but also
costs more, especially in fees, inefficiencies and extra claims.

According to Kwakye, 1991 the following factors make Fast-Tracking a desirable


proposition for most clients:

Rapid utilisation of capital:


Available capital held by the client is converted into usable office space which is
a safer form of investment - a hedge against inflation.

Return on capital employed:


Fast-Track construction enables the client to get returns from sale or rent of his
building earlier than in the Traditional method of construction.

Avoidance of market uncertainties:


By bringing his project on stream at an earlier date, an owner can minimise the
effect of long term market uncertainty or cyclical effects. The developer also

needs a Fast-Track programme especially if he has pre-let the building prior to

construction.

Hence it is better to use a Fast-Track construction contract to projects-that need

to be open at a certain date, or in the case of a retailing complex 'fmish construction


before the Christmas period. For industrial buildings there is a distinct advantage to
being in production while the competition is still designing or building.

23

3.4.1: Economics of Fast-Tracking:


Given that all buildings could be built faster, it is necessary to determine the
implications of building faster than the normal method of construction. Tricky (1983)

suggests that there is an optimum time for completion related to the rate of return,
which is not necessarily the optimum time for minimising construction costs. Figure
3.2 illustrates what happens to costs when a works contractor operates at any level of
efficiency other than "A" at which he can optimise operating cost.
A = Optimum time/cost

B=

Cost

Crash programme
Uneconomical working
Resources
Extended programme
with possible delays
and disruptions plus
increased overheads.

Time

Figure 3.2 Cost / Time Relationship

Therefore, if a client feels that speed is important, it is necessary to carry out an

approximate cost/benefit analysis based on early letting or leasing of the completed

building as compared to the higher costs, risks and loss of financial control to be
incurred in Fast-Tracking (Kwakye,1991).

Kwakye goes on to say, that clients can save money if they adopt the following:

Negotiate on a firm / fixed price basis without fluctuation clauses


Less interest is paid on site acquisition costs.
Reducing time related preliminaries

3.4.2: Costs of Fast Tracking to the Client:

Adopting a Fast-Track programme can achieve a potential savings, especially in

time-related preliminaries, early occupation and sale of the building. Other costs of
Fast-Tracking are:
Price of labour increases as the working days increases.

Works contractor works at less than optimum productivity.


Extra costs of management are paid by the client
Costs of heavy penalties are allowed in the tender price
Client pays extra interest charges.

Additional fees incurred by the design team are paid by the client

Client pays for insurance cover for the contractors in the form of
higher tender price.

.25

3.5: Process of Fast-Tracking:


3.5.1: Organisational structure:

Clearly the work packages approach, transfer most of the risk to the client. The
client awareness of these risks that make the process of selecting the project team very

The fielding of an efficient project team minimises the risks by

important.

simplification of individual work packages requirements, reduction of procurement


time and bringing forward the financial returns (Kwakye, 1991).

A simplified Organisational structure is illustrated below:

ICLIENT

PROJECT
MANAGER
ARCHITECT

DESIGN
CONSIiLTANT

CONSTRUCTION
MANAGER

Contractual Links
Mangerial Links

Figure 3.3 Simplified Organisational Structure

Taking the Westmead Hospital (NSW) to illustrate this concept:

A major builder was appointed as construction manager and his duties were to

manage the whole construction, from purchasing to fitting out on site, provide all
common site facilities, input to tendering and documentation programme. All contracts

let were sub-contracted to the construction manager and usually let after competitive
tendering.

The advantage of this is that the construction manger did not carry a contractual

risk but acted as a member of the professional team. The construction manager was
also represented in the design team as a building consultant. In this role he influenced
design and programming to suit site procedures.

The architect responsibility is limited to scheme design, the obtaining of


permission and of approval of detail design work submitted to him (Burgmann, 1981).

3.5.2: Client role:

The client required for a Fast-Track project must be an experienced client who
has a good knowledge of construction and must understand the risks and benefits it has
to offer.

They must appreciate the risks, and understand how far reaching the risk can be.

They must be able to play their part in managing those risks.

They must pay up and look away if things go wrong because they are aware of
the implications that Fast-Tracking produces.

27

The direct commitment of the client is one of the crucial determinants of success.
The regular meetings meant all trade contracting firms felt involved and as though their

work was equal to any other. It provided an overview of the project to otherwise
blinkered trades, giving insight into other problems. The regular and prompt cash flow
enhanced this general positive attitude (Dodd, 1990).

According to Kwakye, the client function in Fast-Tracking includes the following:

Initial development decision and the acceptance of the development and


marketing risks.

Appointment of the project manager and other construction professionals.


Provision of procurement of financing; payment of fees and sums due under

construction contract.
Approval of outline and scheme design.
Development of project brief.

Approval of expenditure estimates and supplementary request.

Also the client should study the expenditure schedule and make funds available as

required. The active client may demand that his professional's advisers determine an
optimum utilisation of his funds in order to minimise time.

3.5.3: Design brief:

The most important legal document is the design brief and it is the key to a
successful project. A good brief sets out; the functional requirement of the building,

how the building will look, the budget allocated and the programme.

In special

circumstances where the client needs a high quality of workmanship the brief must
contain a clause emphasising the importance.

It is crucial that the client defines in plain English his requirements, in terms of
time, cost and quality.

Such a brief assists the achievement of objectives by minimising changes of mind


by the client during the construction phase and the resultant of variations.

3.5.4: Role of project management:

In order to achieve a successful project using Fast-Track,

the project

management team should be:


Lean

Powerful

Down to earth
Practical
Knowledgeable

Selection of the project manager is one of the most important process. His
decision must have a non reversible impact on the outcome of the project's execution.

He should have absolute responsibility and authority over the project with unlimited

access to the highest level in the organisation.

Most of all he must be able to

communicate and consult with all the parties involved.

29

The project manager for Fast-Track contracting should have absolute and direct
control - over activities such as administration, engineering, procurement and
construction (Linden, 1991).

The various project disciplines must report directly to him and the project
-manager must set up close contact with the project's originator.

Linden suggests that the project should start without delay with the following
areas:
Purchase order to main supplier and secondary suppliers.
Engineering reviews.

Involvement of suppliers and sub-suppliers in engineering


Civil design for early activities.

Electrical design and control logic.

Construction procedures on most critical items.


Manufacturing and engineering.

The project manager with the assistance of his team must work around long
delivery items by borrowing, lending or purchasing from spare part's stock or simply
deciding to change the size and dimensions of the existing elements.

A genuine interest from the manufacturer's side is imperative. While from the

owner's side, this additional effort should result in an appreciation that does not
necessarily have to be financial or directly connected to concept under review.

30

3.5.4.1: Information management systems:

The success of any project depends on many contributing factors. One of the

major factors is the ability to implement a comprehensive and practical project


management information system early on in the project.

Information management

plays a major role in determining how successful project team are in meeting the client's

performance objectives of time, cost and quality (Atkin, 1990).

Significant benefits can be derived from applying cost and schedule control
techniques on a Fast-Tracked project. Tight controls with suitable monitoring reports

are required to spot deviations from the plan quickly and to forecast the probable
results of any deviations.

The objectives of the PMIS is to provide a common vehicle of communication


for the project team upon which problems can be identified early and resolved right at
the job site level before they become critical (Petrossian etc, 1989)

3.5.4.1.1: Real Time Project Management:

With an on-line real time distribution of information, CLIENT provides


management with the ability to implement a pro-active system, enabling forecasting,

trend reporting and problem prevention rather than reacting to problems that have
occurred.

31

3.5.4.1.2: Benefits for Fast-Tracking:

The system is used to provide control of the activities and their related resources,
cash flow requirements, etc. and can incorporate the following features:Multiple networks per project.
Networks may be analysed in sections.

Milestones dates may be recorded for each activity

Early and late start and finished dates are calculated together with float

According to Petrossian The major elements of the PMIS (project management


information system) consists of:
Planning and scheduling system.

Cost control.
Subcontractor control / change order management system.
CADD applications.

(1) Planning and scheduling:


Planning and scheduling objectives are:

Provide a management tool which will make the most efficient


use of human, physical and financial resources.

Provide a systematic documentation programme for potential


claims.

(2) Cost control:


Cost control is a very important facet of project management By definition, cost

control is the application of procedures to minimise cost in relation to budget. There


are three basic elements of cost control.
Establish the optimum condition - the plan (budget).
Measure deviation from the optimum.

Take corrective action in order to minimise this variance.

/
32

Sub-contract control and change order system:


The administration of sub-contracts and change order management requires the
implementation of systems and procedures to process potential changes. Recognising

this importance the Walsh company developed the sub-contract management system
(SCS), a microcomputer database management system designed on dBASE 3+ that will

assist project management team to organise, process and track the numerous subcontracts and changes in the project

CADD Applications:

Adopting an AutoCAD program is very important because of its tremendous


number of features, the depth of capabilities within each one, its vast installed user base

and add-on support. The programming features allows the user to customise his own

applications, e.g. symbols libraries.

Another nice feature about AutoCAD is its

capability to act as a data-base for various labeled components of a drawing and use
the data-base to generate a bill of materials.

3.5.4.2: Benefits from information management of projects:

Standardisation of project control and reporting procedures across different


projects.
Ability to keep the client better informed than hitherto, increasing

confidence and enhancing the prospects for further work.


Reduced administration costs through the automation, even elimination, of
drawing transmittal slips.

Decreased likelihood of building from superseded drawings.


Ability to base future management decisions on comprehensive data-base.
Improved quality of decisions through informed, timely briefings on all

levels of management

,33

3.5.5: Role of engineering:

The consultant engineer must make sure that whatever he designs can be build.

He needs direct contact with manufacturer's, contractors and suppliers.

Strong

emphasis is on construction procedures, material, space and weight limitations.

The best place to produce drawings are at the construction site, with the big
advantage of having experienced construction personnel involved. It is also essential in

Fast-Tracking that both design and construction proceed at the same pace. The
difficulty is, that a complete set of drawings is not available at this stage.

3.5.6: Designing for buiklability:

The elimination of non-productive site processes and the increase in efficiency of


site management is the key to buildability.

Bishop (1985) explains the key factors in determining the productivity of operatives
that includes:

Repetitive work sequences, these generate a fast working rhythin and


allow operatives to learn and use short cuts.
The balance between repetitive tasks and those that demand an unusually
high degree of selection and measurement, the latter reduce productivity

Tasks that call for exceptional care, i.e., large areas of plastering
unbroken by any feature and subject to grazing light
Tasks that fall outside the competence of the local labour force.

In order to simplify the design and produce a repetitive cycle Bishop 1985
recommends the following:

Simple forms.

Design with relatively few technically different activities.


Designs employing readily replaceable resources.

Extensive and similar work places in lieu of many small work places
Designs defming tasks which may be tackled and completed
independently of other tasks.

In applying these principles (Macpherson, 1987) suggests simple ideas that cut
construction time used on the Broadgate project are:
Sub-contractors were brought in as early as possible so that their
contribution could be maximised.

Trade contractors were taken to the United States to help them


understand the production levels and techniques used there.
Steel work erection made use of a number of time saving ideas- holding

down bolts were grouted in solid prior to frame erection.


Steel was picked up two pieces at a time and shake down decks for
--

loading steel on the building at upper levels on the back shift were
employed.

Columns were fabricated in three- storey heights and metal staircases are
delivered with concrete treads already filled.

Well marked steel from the works helped for quick and easy identification
at site.

Curtain walling was assembled at Bristol ( 7.5 m x 3.5 m panels )


including aluminium, glass and granite.

Toilets were totally pre- fabricated with all fixtures and fittings down to
the last mirror and paper towel dispenser.
35

3.5.7: Role of the contractor:

The management contractor contributes to schematic design, programming and


buildability studies. He organises all tendering and supervises construction on the basis
of documents prepared by the architect, engineer and quantity surveyor.

In today's economic climate most projects are proceeding along the Fast-Track

approach, but with the added clause in the contract fixed price and time. Hence it is
imperative that the contractor must proceed as fast as possible because delays cost's
money, which the contractor cannot afford to lose.

3.5.8: Supervision and coordination on site:

The management contractor produces and regularly updates a status schedule for
all the work packages. The contractor's responsibility is to pass on any changes that he
makes to the rest of the team as soon as possible.

During construction the management contractor provides on and off site


supervision of the works contractor, programming and resource management's.

3.5.9: Quality Assurance:

Depending on the project, the client preferably would require the highest level of
control. The significance of the project, the costs of rectification of failures, and or the
risks to the public caused by failure during construction.

The responsibility for assuring quality involves all employees, contractors,


suppliers' architects and owners. (Bilker, 1988).

However the quality assurance programme should commence at the brief and
design phases and continue throughout the project.

(Griffith, 1987) suggest that designing for quality should compromise:

rationalisation of design to a simplified constructional approach.


the careful preparation of design details and specifications.

clearly specified quality levels in contract documentation and, during the


construction phase.
provide information concerning quality continuously throughout the

project
inspection of all materials and components delivered to site.
testing of materials and of work done for quality levels.

prompt notification of work not meeting with the contract requirement.

Finally assessment and monitoring the quality assurance technique in the design

office, allows the project manager to accept confidently the various documents
presented to him by the designers with little further checking (Waldby, 1987).

37

3.5.10: Controlling finance:

Initially at the birth of the project, the quantity surveyor usually prepares an initial

project budget. The management contractor then assigns a specific budget for each of
the work packages in the cost plan.

The tender price is to match the initial budget of the work packages if the
contractor is to be successful in winning the bid. The client representative must infonn
the client at least monthly on the budget status taking into account the following:

Additional costs or savings during the design phase in the tender sum.
Total value of all authorised variations with a summary of the principal
items.

Estimated cost effects of current and anticipated delays.


Estimate of value of anticipated variations.
Expenditure of contingency sum.

The quantity surveyor as part of his normal duties will be responsible for interim

valuation and final accounts.

He will also have delegated responsibility for

ascertainment and settlement of all contractual claims.

Other cost management techniques suggested by the Business Council Of Australia are:
Overall design and construction budget controlled by the client
representative.
Separate zones with definite budget.

Negotiation of overall contracts with major suppliers to ensure best


rates on building 'materials.

Strict reporting requirements.


Clear defined scope of work and interface.

38,

3.6: Comparisons with Alternative Contract Procurement Systems:


3.6.1:

Traditional method:

The functional and contractual relationships between project participants for the

traditional procurement system are as shown in Fig. 3.4 and 3.5 below. In this system
the design and construction are distinctly separated with little or no overlap. The client

appoints the architect to undertake the design and as chief of the design team
coordinating other consultant's work. Only when full documentation is ready will the
tender be called and contractor selected. The following diagrams illustrate this method

CLIENT

ARCHITECT

QS

ENGINEER

DESIGN PHASE

CONTRACTOR

FIG. 3.4

CONSTRUCTION PHASE

TRADITIONAL PROCUREMENT SYSTEM FUNCTIONAL RELATIONSHIP

ICLIENT

FIG. 3.5

TRADITIONAL PROCUREMENT SYSTEM


CONTRACTUAL RELATIONSHIP

The architect usually undertakes supervision of construction on behalf of the

client as contract superintendent.

The roles and responsibilities of the various

participants in this arrangement are well defined and have been the traditional roles of
the respective professions.

The type of contract used is normally lump sum although other types such as cost

plus and target cost may be used as well. The mode of contractor selection is usually
open competitive, while selective and direct nomination (through negotiation) are other
variations of this type of procurement system.

3.6.2:

Construction Management
The functional and contractual relationships between project participants for the

Construction Management procurement system are as shown in Fig. 3.6 and 3.7 below.

ICLIENT
'ARCHITECT

CONSTRUCTION

MANAGER

'CONSULTANTS

DESIGN PHASE

TRADE

CONSTRUCTION
PHASE

CONTRACTOR

FIG. 3.6

CONSTRUCTION MANAGEMENT PROCUREMENT SYSTEM


FUNCTIONAL RELATIONSHIP

CLIENT

CONSTRUCTION
MANAGER

CONSULTANTS

TRADE
CONTRACTORS

FIG. 3.7

CONSTRUCTION MANAGEMENT PROCUREMENT SYSTEM


CONTRACTUAL RELATIONSHIP

41-

In this arrangement, an independent management contractor is engaged by the


client on a fee basis to provide construction expertise during the design stage as well as

managing the construction works on his behalf. The success of this method will
depend largely on the professional skill of the management contractor. On the other
hand, the client has more flexibility but he must give prompt decisions at all times.

The usual mode of contractor selection adopted for this procurement system is

selective tendering though open competitive tendering and direct negotiation are
sometimes used. The type of contract used varies from client to client. For example,
SACON uses contracts with bills of quantities, whereas other clients prefer not too.

3.6.3:

Design and Build:


The functional and contractual relationship for this procurement system have the

same structure as shown in Fig. 3.8 below.


CLIENT

DESIGN AND BUILD CONTRACTOR

1SUB -CONTRACTORS

FIG. 3.8 DESIGN AND BUILD PROCUREMENT SYSTEM


FUNCTIONAL AND CONTRACTUAL RELATIONSHIP

This arrangement provides a single point of responsibility for the elements of the

design and construction. The client has only one contractual relationship i.e. with the
design and build of the project. However the client loses some control over design.

The designers on the other hand have no management responsibility and are now

answerable to the contractor. To a certain extent they have to accept the contractor's
terms and conditions.

3.6.4: Novation Contracts:

The word" Novation "is currently being used across a wide range of contracts
and in a variety of industry sectors therefore, is difficult to determine an all-embracing
definition. Essentially, Novation refers to the process when a contract between two

parties is replaced with a new contract between one of the original parties and a third

party, thereby terminating the original contract. This process is carried out upon all
three parties reaching an agreement to the process and the conditions of the transfer.

The following description is suggested to reflect what is seen to be the essential


elements of this method when applied to building contracts:-

"A novation contract is a form of Design and Construct agreement, in which the
proprietor initially employs the consultant team to carry out design and documentation

to the extent that the client's needs and intent are clearly identified and documented.

On the basis of these documents, tenders are called and a building contractor is
selected.

The proprietor then novates the consultant agreements to the contractor who
takes responsibility for the project to completion (Howden, etc 1991).

3.6.4.1: The Process:

At the outset of the project, the client and the design consultants must enter into

a contract under which the original agreements between the client and design
consultants will be replaced by new contracts between the contractor and the design
consultants at the time of establishing the building contract between the client and the

contractor.

Initially, the functions of the design consultants are, firstly, to assist the client in

developing a project brief which describes the desired function of the project and the
quality performance that will be expected in relation to budget estimates and projected

time scheduling for completion of the building process. Once the brief has been
completed to the satisfaction of the client, the design consultants will proceed to the
second stage of the design development phase, i.e. preliminary design.

Preliminary design is developed to an advanced stage on some or all facets of the


project to a predetermined level defined in the client-consultant agreement, after which

tenders are called on the basis of the partially completed documents. The primary
consideration regarding the extent to which documentation is completed is to ensure
that the client needs and intent are clearly, identified, i.e. to an extent of "legal clarity".

Upon selection of the contractor, a building contract is established that includes


the transfer or Novation of the consultant's agreement previously made with the client

to the contractor. Thus, the design consultant essentially becomes a subcontractor to


the main building contractor.

4'5

3.6.4.2: Pre-Novation Contractual Pattern:


The client initiates the project by commissioning design consultants to develop

of the
the project brief and commence design work. The terms of the engagement
consultants are given by means of a contract established between the client and the
consultant. The role of the design consultants is to complete the designs to a stage
where all the requirements of the client are defined, drawn and specified to about 50

per cent of the overall design in order to ensure that the client's requirements are
adequately described to a level of legal clarity.

Once documentation is completed to a stage that legal clarity has been achieved,

the client is in a position to call for tenders from contractors operating in the building
establishing a building contract with a contractor to

industry for the purpose of

undertake the building process. The contractual arrangements at this stage are shown
in Fig. 3.9 below.

Contract

Design

Consultant

IPrincipal
Contract

1Contractor

Contract

Sub-Contractor

Sub-Contractor

Fig. 3.9 Pre-Novation Contractual Pattern

46

3.6.4.3: Post Novation Stage:

The contract between the client and the design consultants is novated to the
contractor upon awarding of the building contract as shown in Fig 3.10 below. Thus,
after Novation the consultants are paid by the contractor instead of the

client, and their

first point of loyalty is to the contractor.

Contract
Principal

Contract

Quantity
Surveyor

Project
Manager

Contractor

Contract

ISub-Contractor

Sub-Contractor

ConsulWit
IDesign

Fig. 3.10 Post-Novation Contractual Pattern

Hence, the contractor has become the designer and is now completely
responsible for all of the design work as well as the construction.

47

The involvement of the contractor in the detailed design phase allows the
contractor to implement changes to the design that suit his particular construction
practices and equipment or modify the design to suit the availability of material or
skilled workforce. The contractor is required to keep the Client infornied on design
matters while still maintaining prime responsibility of meeting the performance criteria
set down in the design brief.

After novation, restrictions apply on direct communication between the client and

the design consultants. The importance of this depends on the closeness of the
working relationships with the design consultants, and the importance of control over
the final stages of design.

By including the appropriate terms in a Novation contract, the client can retain
the right to monitor and comment on the design process. However, the client needs to

be careful not to do anything inconsistent with the contractors responsibility for the
design. This means that the client should not do anything that could be perceived as an
acceptance of responsibility for the design.

As the contractor

is contractually responsible

to complete the design,

consideration should be given to professional indemnity insurance to -cover that


responsibility. On the other hand, the client must warrant the design in that it complies

with all codes and regulation current at the time of Novation and must accept post-

Novation changes to such codes and regulations as variations.

Responsibility for

authority fees must be clearly noted by the client if he wishes to transfer these costs to
the contractor.

3.7: Summary of comparative features:


From the above comparison, it is apparent that each procurement system has its

own advantages and disadvantages. The contingency theories of organisation assert


that no single organisational structure can fit any organisation and situation (Mintzberg,
1979). Similarly in the arrangement of organisational structure for project delivery,

there is no single best procurement system that can satisfy the different needs of the
client in term of criteria such as time, cost, certainty, quality, flexibility, control and risk

avoidance. The fact is, some of these criteria are contradictory to each other. For
example to ensure certainty, it is likely that flexibility has to be sacrificed.

Table 3.1 is a summary of the comparative features of the Traditional,


Construction Management, Design and Build and Novation procurement systems from

the client's view point. Design and Build and Novation are particularly well suited to

Fast-Track procurement systems because construction overlaps with design by early


involvement of the contractor.

Thus, it is essential that the contract procurement system is selected to suit the
specific client needs, performance requirements and project characteristics.

Table 3.1:

Features and Suitability of Major Project delivery Arrangements.

Time

of Some saving
of Saving
project time of time due to
consuming
made
is
shortest
to
due
project time possible by partial
Most

time Capable
achieving

having
in
overlap
goes parallel design and
with design. construction.
phases and no Construction Time-saving

sequential
and
design
construction

because
t
consruction

construction

know-how

know-how

during design contractor in

available

Quality

o
overlap
and
design
construction

phases.
is solutions are Contractors
by
input
themselves

input in the stage.


design phase.

Quality

Novation

Construction Design &


Build

Traditional

Quality

design stage.

modify design

to save time.

Client has no Client

has

standard and
standard is set selection of control over some controlll
over design
design
by the client trade
and very much contractors is details and details an
the selection of selection of
his within
within
client's
subsubcontrol.
control.
contractors. contractors.

Certainty Risks of claim No certainty


for extension of cost and
of time and
is time as trade
variation
Hence packages are
high.

There

is subject to

many factors
such as no
design
changes and
errors.

absolute

is
.

of certainty o
and
time and cost time
(provided no cost if no
certainty

of tendered
time and cost
certainty

is There

as changes
project made)
the
as
and
design
progresses.
Control and construction
ns
management responsibility
single
is
is crucial.
point.

changes
made

betause
there is little
Provisions
for extension
and
variations.

Table 3.1 Continues:

Traditional

nt
Flexibility

Client

control
design

Novation

Design &
Build

Construction

has Client has no Client has some


has Client
control over
control over control
over
over
and
design
and design but high
but can
change design

changes made the scope and has


design as the room
afterward of
construction

tender

will

proceeds

little premium

for making

making

upset time and without losing changes


cost plans.

for
changes

during
construction.

time and cost during


control.

construction.

Risk

Risk is shared Client bears Contractor Contractor bears


bears most almost all the risk.
between client
most of the of the risk
and
risk.
contractor.

Complexity

and Client should


Roles
responsibilities have
construction
well
experience,
established
to Cooperation
Familiar
clients, very important
most
success
and
Complexity
hinged
on the
increases with

must

Some

Client

functional
contractual
relationship.
point
Single

be sure what
he wants at
the start. The

responsibility.

Novation
design

of

Client need not contract must


clearly
be experienced be
spelt
out.
the number of ability of the but must be
clear what he
nominated sub- construction
wants.
manager.
contractors.
the
contractor is
responsible for
design,
the
good

Buildability No input of The availability As


of construction
construction
know-how in
know-how in the
design
stage
generally
the design may
improves
result in poor

buildability.

buildability.

buildability
likely.

is

Buildability is
achieved

by

making

the

contractor
responsible for
the design.

51

Novation
Design &
Construction
Build
Mana ement
Usually single Either single Usually multiNormally
multiple stage and not
stage. stage selective, or
single

Traditional

Tendering

Can be open

stage, however too complex.


evaluation is
difficult due to
different

competitive,
or
selective
nomination,

designs.

SUITABILITY:

Important but
Client's
Experience

Essential.

Not essential.

Important.

not essentiaL

Performance Fixed
Requirement price.

tender Speed

minimum risk

quality,

in Large
Normal
Project
complex.
Characteristics complexity
and size.

and Certainty and Certainty

and

Simple,
size.

and

no risk

to
Any Medium
large, simple to

complex.

MMUNICATIONS BUILDING
4.0: TELECOM
ADELAIDE, FLINDERS STREET.
CASE STUDY 1:
4.1: Introduction:
The Telecom Major Communication Building (MCB) was conceived about two

years ago to provide additional floor space to accommodate Telecom switching and
transmission equipment's. The proposed site that is strategically located within the

central business district was selected because of its proximity to most of the
commercial customers. The gross site area is approximately 6260 square metres and
the MCB covers about 2730 square metres with 42 metres frontage at Hinders Street.

Most of the information in this report is provided by the Telecom Project


Director, Mr. Max Fejer, during discussions with him last month. Included in this case

study are the project objectives, site constraints, design issues, delivery arrangements,
contractual and legal issues, project programme and risk management.

Tender for the construction of Telecom MCB is on a fixed sum basis. A


Novation contract of $40 million was awarded to Fletcher Jennings Pty Ltd for a
contract period from March 1992 to December 1994. The main membeis of the
project team are:
Project Manager: Telecom Property Services
Project Administrator: Savant Pty Ltd
Main Contractor: Fletcher Jennings Pty Ltd
Quantity Surveyor: Rider Hunt Adelaide Pty Ltd

Architect: Hassell Architects Pty Ltd


Structural Engineer: Connell Wagner Pty Ltd

'53

4.2: Project Organisation Structure:

Project
Management
Committee

Policy

Project Managemen
Team

Project
Management

Telecom

Project Director
Project Staff

Quantity
Surveyor

Project
Consultant

Service
Engineer

Structural
Engineer

Other
Consultants

Design

Le

43: Project Objectives and Scopes:

4.3.1: Strategic objectives:

Flinders MCB must be able to accommodate important regional network


equipment, integrated and specialised products used by Telecom corporate and
business customers.

The MCB must also be able to accommodate the Network Management Centre

(NMC) and the Customer Network Service Centre (CNSC). The NMC and CNSC
provide traffic control and performance monitoring of the Telecom network.

The combined facilities at Flinders MCB must be:

Flexible and able to cater for current and future telecommunication switching and
transmission equipment needs

Robust and reliable; all dynamic plant and equipment serving network dependent
functions must not have any single point of failure
Designed for optimum energy efficiency and low operating and maintenance costs
Capable of sustaining a post disaster function

Secure enough to preclude unauthorised entry

55

4.3.2: Project scope

The fundamental purpose of the MCB is to house Telecom switching and


transmission equipment. These equipment and their associated cabling will be supplied
and installed by Telecom after completion of the contract.
The equipment is similar to a major computer installation, with equipment housed

in cabinets which are grouped into suites. The existing design solution proposes that
telecommunication switching and transmission equipment initially be located on the
second, the third and the fourth floors.

Specific exclusions from the contractor's scope of work are:

Telecommunication switching and transmission equipment and associated cabling

All Telecom UPS and DC power equipment (batteries and rectifiers) used to drive
telecommunication switching and transmission equipment
Telephone and telecommunication cabling

4.4: Site Constraints:

4.4.1: Site accommodation and access.

Unlike most central business district projects where buildings areas cover the

total site, the MCB under construction for this site does not cover the entire area.
Hence, there was no special constraints to be taken care of.

The site had sufficient access from both sides of Roper Street and Flinders Street.

Despite the generous site availability -- with total gross area approximately 6260
square metres -- the Contractor chose to accommodate its management staff off site.
When the basement was constructed, it was used for site accommodation. This was a
calculated move by the contractor.

(A layout plan of the construction site is shown in Appendix A.)

4.4.2: Crane location

Due to the availability of space along side the boundary, the city council insisted
that the crane stay inside the boundary.

4.4.3: Shape of the site

Initially, Telecom owned the corner piece of land in 1940s. From 1950s to 1980s,

it progressively acquired the adjacent land as opportunities arose. However, a few of

these attempts were unsuccessful. This resulted in the site having an odd shape.
Perhaps it is the only site constraint because it imposed some restriction on the layout
of the building.

4.5: Project Programme:


The project was started on July 1990 and contractually it should be completed by

December 1994. Currently, the construction work is about 90 per cent completed.

The Contractor has anticipated completion of all major building work (excluding
installation of switching and other telecommunication equipment) by the end of
September 1993, so they are ahead of schedule. However, there will be a substantial
time required to commission the equipment

(The project master schedule is shown in Appendix B).

4.6: Design issues:


Telecom MCB was designed to cater for additional space required to
accommodate the telecommunication equipment. Therefore, the major design issue
should be functionality of the building.

Other design issues involved are:

The building has to conform to stringent performance requirement in order to


assure the telecommunication facilities operate in uninterrupted mode.

The building should be able to survive a post disaster earthquake of 6 to 7 on the


Richter scale, and operate independently with its own power and water supply for
5 days.

The building requires substantial electrical supply, mainly to cater for the
requirement of maintaining temperature in equipment rooms.

The arrangement of the building is also important to minimise the cost of cables.

The building was designed for an economic life of 50 years.

All mechanical and electrical facilities were designed with spare capacities for
contingent reasons.

58

4.7: Quality Assurance:


Unlike other Novation contracts, this project has a unique and a detailed
procedure for approval of quality. First, at tender stage itself, the Contractor was
informed of the quality requirement

He is required under the contract to have quality plans and full time Quality
Assurance Manager, besides Design Manager and Building Services Manager. The sub-

contractors are required to fill out inspection test plans. At each witness and inspection

point, the relevant parties need to sign documents that signify there is approval of the
quality before work can proceed to the next stage.

The approval process adopted ensures that the Client (through his Project
Manager) is part of the approval process although he is not responsible for such
approval. However, the Client holds the right of objection or rejection as well as the
right to be informed.

_59

4.8: Delivery Arrangement:

Telecom has chosen the project delivery arrangement. The important features of
this arrangement are:
Certainty of time and cost.

Total risk transfers to the Contractor.

4.8.1: Delivery objectives

This contract form is selected in order to achieve the following objectives:

to deliver a quality facility which meets the end user requirements, on time and
at a fixed price

to set up a delivery system which gives Telecom total control over the process

pre-Novation and which gives total responsibility to the contractor postNovation but with Telecom retaining a continuing overview and control with
respect to the contractor meeting the design intent

to gain a commitment by the contractor, consultants, sub-contractors and


suppliers to an agreed quality assurance system

to set-up a delivery system and project culture whereby all participants adopt
an outcome oriented, non-adversative approach

60

4.8.2: Delivery structure:

Basically, the delivery arrangement is divided into two stages: pre-Novation and
post-Novation. Details of the project delivery structure is shown in figure 4.1

PROJECT DELIVERY STRUCTURE


DESIGN STAGE PRE NOVATION
TPT

& ENG.

ESIGN CONSULT
IDARCH

POST NOVATION

TPT
LEGEND

MANAGERIAL LINK

P/A
-

- - CONTRACTUAL LINK

TPT:Telecom Project Team


QS: Quantity Surveyor
P/A:. Project Planner/

ARCH. & ENG.

Administrator
BLD: Builder

DESIGN CONSULT

61

4.8.3: Delivery methods:

Telecom with the assistance of it's Project Consultant, has selected a team of
Design Consultant to clearly der= Telecom's design brief for the project.

It is envisaged that at this point the Design Consultant will have developed and

completed the design through concept, schematic and design development stages.
Telecom will then invite competitive lump sum tenders from pre-qualified contractors.

The tender will clearly establish that the successful contractor accepts
responsibility for the design work prior to and beyond the point of tender selection as

well as the requirement to deliver the project on time, at fixed cost and to an agreed
standard of quality.

4.8.4: Selection of Contractor:

To ensure that the right contractor is selected, the selection of contractor is


carried out in three stages: First, a call of registration of interest attracted twelve
interested contractors.

These were evaluated and reduced into four, based on their capability and past

performance record. Then these selected contractors were invited to tender for the
project and finally, the subsequent selection of the successful contractor was based on
price.

62

4.8.5: Legal relationship:

During the period prior to finalising the tender i.e., pre-contract phase, the
Design Consultant will be engaged by Telecom and directed by Telecom with the
assistance of its Project Consultant.

After the tender is finalised i.e., post-contract phase, the successful tenderer will

take over responsibility for the work of the Design Consultant and manage the postcontract documentation as defmed in their terms of engagement.

This, coupled with the fact that the contractor takes responsibility for all previous

and future design work, achieves Telecom's objective of a single line responsibility for
design and construction.

The Contractor's tender price will include the Design Consultant's fees for
construction documentation on the basis originally agreed with Telecom.

Any services required by the Contractor of the Design Consultant's beyond the
services listed in the agreement must be separately negotiated. After the appointment of

the Contractor, Telecom's role (with the assistance of the Project Consultant and
Quantity Surveyor) will be to overview the Contractor's activities for compliance with

the design brief and to monitor the project performance with regard to cost, time and
quality.

63

4.9: Contractual Issues:

The contract was prepared in a very simple format and using plain English. The
condition of contract was designed specifically for this project.

Since the nature of the contract was fixed time and fixed cost, it is essential to
protect the project from any substantial changes. In the conditions of contract it was
stipulated that any change which the Contractor proposes to any design documentation

created before the date of the contract during (pre-Novation) stage, must be submitted
to the Project Manager with details of:

proposed change.
reason for proposed change.
effect on other elements of works.
cost and time effects and

(i)

a certificate is signed by the relevant member of the design-team stating

that the proposed change


will not adversely affect the functional integrity of the work.
will not affect quality standards of the work achieved.

( Refer to Appendix C for "Condition of Contract" Content page )

In the course of the project, major contractual issues highlighted by Telecom was

the request made by the consultant to reduce their risk and responsibility in the
contract. Telecom acceded to this request where it could.

4.10: Client information system:

Traditional methods of managing information have not always worked. Late


supply of information is a common occurrence. As often as not it leads to a claim by
the contractor for an extension of the contract period (Atkins,1990).

The following diagram illustrates the Traditional system of managing information


that leads to delays and extension of time.

Figure 4.2: TRADITIONAL INFORMATION FLOW ( Source: Savant)

65

In the Traditional system, the client is left outside the big picture as shown above.
However once a client project management system is implemented the following is
achieved:

Circular links are removed.

Immediate recording and storage is possible.


Inputs at source by system user.
Relevant information available in sufficient time to be useful.

Audit trial to correct or improve processes are possible in a short


period.
Finally Real Time Project Management is possible.

FACILITIES OF THE PROJECT MANAGEMENT INFORMATION SYSTEM:

The system is comprehensive and integrated.


It links sending/receiving of information by use of on-line
acknowledgment.

Items such as project correspondence, meetings, checklists and


non conformance reports which often require many individuals to
perform specific tasks are linked to an action list which provides a

mean for all originators of actions to control and record the actual
performance of those actions.

The project brief and other contract documents are held on the
system and can be amended and updated as required whilst
maintaining an archival record of the changes made.

Issuing of payment certificates and project cost information is carried


out and held on the system including variation control and committed
cost reporting.
Default consequence control is built in to many parts of the system.

66

Access is unlimited - 24 hours per day, 7 days a week.


All information is current and latest version and all participants have
the same information.

Security systems allow selective barring and protection of created


data.

The system cannot be broken into by a telephone line.

Enough levels of security coding to pin point to only one person if


things go wrong.

The following diagram illustrates the information management system used on


the Telecom project in Adelaide.

Cost Control/Monitoring
I

PROJECT DATABASE
Payment types
Budgets
Contract sums
Trade packages

Variation Register
Extension of time claims
Contingency sums

Commitments statements
O'

ADMINISTRATION
Payment certificate
Action list

Status codes
Amendments codes
Documents Proformas
Documents milestones

Check list

Project brief
Project diary

DOCUMENTATION

QUALITDY

Drawing register
Shop drawing register
Document register
Production paths
Correspondence register
Transtnittal forms

ELECTRONIC MAIL
Project Memorandum
instrucdons
Request for information
Other forms as required
Terminal messages

,
AUDIT TRAILS
Performance requirements
Accountability

Non-Conformance register

Figure 4.3: OVERVIEW OF INFORMATION MANAGEMENT SYSTEM


( Source: Savant Pty Ltd).

68

4.10: Risk Management:


The selection of Novation contract as the project delivery arrangement is an
important aspect of risk management undertaken by Telecom. Other risk considerations
are:

contractors have access to study the design and drawings during the pre-Novation
period
implementing a single line of control to the project executor
initial design activities and business case studies are done concurrently

In implementing the 'Novation' contract, the contractor carried full risks of:

Time: It was a fixed time contract, so there is little provision for extension

of time as is often the case in other forms of delivery arrangements. The

contractor must accept the risk of time extension whether it is due to


inclement weather or industrial disputes.

Cost: The contractor must finish the project within the contract cost as it is

a fixed priced contract. His room for maneuver is the cost saving that he
would get, if he can come out with cost saving suggestions.

Design: The contractor is responsible for the design during post-Novation

period. Therefore he is required to give a warranty of latent defects for a


period of 14 years.

69

(d) Latent Conditions: The contractor is responsible for, and assumes the risk

of, all increase costs and any losses and expenses in respect to physical
conditions and characteristics of the site and surroundings encountered in
the execution of the works.

However, the contractor will not be responsible for the risks of time extension
and price increase caused by:

Breach of an express term by Telecom.


Change to the scope of project brief which the contractor has been granted

an extension of time-under the contract.

A national or regional industrial dispute not caused directly or indirectly


by the contractor or his sub-contractors.

70

4.11: How Construction time was Cut:

Innovative construction techniques were designed into the structure to permit

rapid construction of the building and an overall time-saving in erection and these
included:

There was a restriction to start work in the first four weeks because building

approval was needed. Fletcher Construction arranged with the Adelaide City
Council to start construction of the cable chamber sub-structure, ground floor
and fmalising of documents for construction. While this was taking place, the
design of the super-structure was completed. This saved approximately 4 weeks
of the total scheduled construction time.

Connell Wagner initially designed the floors of the building using a Flat Slab with

a drop panel and a conventional form work arrangement. The introduction of the
"Transfloor System" by the builder had saved approximately 6 weeks off the
scheduled completion date plus a considerable cost saving.

Fletcher construction sub-contracted the work to "Betafonn Construction".


Panel lengths were approximately 8 metres long by 25 mm thick. The panels can

be up to 12 metres long which is the maximum for normal road transport. Panels
are transported in stacks on semi-trailers, approximately 160 metres squared per

load. Stacking bearers are provided at approximately 1.5 metres centres to


minimise stresses during transport.

( A Transiloor banded Slab system is shown in Appendix D)

The original schedule was programmed 12 weeks ahead of completion date. This
allowed for inclement weather and industrial strikes not caused by the site staff.

#71

Extra staff were hired during construction to complete the work on schedule, but
the majority of staff worked 40 hours a week to eliminate over time payment.

Having a tight schedule with practically no float meant that sub-contractors had
to be brought in early so that their contribution could be maximised.

All vertical elements are continuous from roof through to foundation. This
enabled the building to be constructed in a fast and efficient manner.

The success of the project was that design documentation's were approximately
60 per cent complete by Telecom prior to construction and this saved
considerable time to the builder.

A good working relationship and understanding between the Principal's project

management team, the Managing Contractor and the sub-contractors.

A contractor who understood and accepted that concurrent design and


construction activities to achieve a works programme with virtually no float
would require a contingency plan to achieve target date

Careful selection of a contractor who had the resources to fulfill his contract
commitment and confidence in the managing contractor ability to appreciate their
problems and react accordingly.

Continuous monitoring and expediting of the procurement, delivery of materials


and components to the job site and off-site fabrication area.

72

(13) Care in ensuring that a satisfactory industrial relations system was set for the
project before construction began, and the collective will to see that it was
properly administered to prevent anomalies occurring during the life of the
project.

4.12: Analysis of Case study:

A few important observations on the aspects of project management can be


drawn from this case study and these are:
Good project management can ensure project success.
It is possible to have a contractual arrangement where certainty of time and 'cost
as well as quality can be achieved if the Client is sure of what he wants.

The correct use of Novation contract can combine the benefits of both the
traditional as well as design and build delivery arrangements.

A close relationship between the Client and the Design Consultant during the

pre- Novation stage provides the Client the opportunity to monitor and provide
some direct input to the design process.

At the post-Novation stage, the involvement of the Contractor in the design can
result in cost and time savings. In this project, a total of 117 proposals for change
that will save money and time, have been submitted by the Contractor, so far.

Good quality can still be achieved for delivery arrangements that place the
responsibilities of quality approval on the Contractor (and Consultant under his

charge) if a proper approval procedure is adopted the Client can be part of the
process.
Good foresight and planning can prevent the development of potential risks.
A clear understanding by Client, Consultants and Contractor of their respective
roles and responsibilities is a key to project success.

The use of an independent project manager can improve the management an


administration of a project thereby resulting in project success.

Finally, the Telecom MCB project is a fine example of a successfully manage


project in our current economic climate.

5.0:

AUSTRALIAN PARLIAMENT ROUSE, CANBERRA.


CASE STUDY 2:

5.1: Introduction:

In November 1978 the then Prime Minister Mr. Malcom Fraser announced the

government intention to proceed with the design of a new Parliament House. The

government anticipated an opening date of,

January 1988 as part of the

commemoration of the 200th anniversary of European settlement of Australia.

The Ministers of Parliament sensed that if they did not force the issue, by using

the convenient political peg of a bicentenary project, a new Parliament House would
never be built and that's how the Australian Prime Minister Malcom Fraser got stuck
with it (Ramsey, 1986).

A week later Fraser announced Australia was to get a new Parliament house in

time for the 1988 bicentenary. The new building originally was to be 58,000 square
metres approximately three times the size of existing Parliament House and total cost
was estimated at 151 million.

Due to those associated with the project, politicians and technicians would have
known that this cost is unrealistic if they are to achieve their objectives, especially due
to the time period to complete the project in ten years.

To ensure the target date, January 1988 for completion was achieved in an
efficient manner, the government established a new statutory authority; The Parliament
House Construction Authority. The role of this authority was to manage and control

phases of design and construction. On top of that they stacked it with establishment
figures from private enterprise to give mom expert opinions if required.

In 1979 the PHCA drew up an eight year construction programme culminating in


the new Parliament opening on Australia day in January 1988. To meet this deadline it

decided to use what is known as "Fast-Track Construction" and that's where the
problems became to emerge.

Cost of the new Parliament house had accelerated since January 1984 and could
not be contained anywhere near the original budget. Cabinet learnt the full extent of the
blow out in a confidential report from the PHCA.

The new Hawke government in 1985 replaced all the members of the PHCA with
new members comprising a former chairman and managing director of Theiss Holding,
the giant construction and mining company (Ramsey, 1986).

Cabinet was asking why the original cost estimate was so low and apparently it

was due to the fact that they had no design concept to work off and based the
estimates of construction costs on three other major projects; The Opera house, The
extension and renovation of the NSW Parliament and the Westmead Hospital in NSW.

5.2: Project Background:

In mid 1979, a two-stage, world-wide design competition was held and this

attracted 329 entries. Over the next seven months this was to be pruned to five
finalists, each of who was paid $100,000. By that stage the gross floor area had
increased from 58,000 square metres to 60,294 square metres (National times, 1986).

In June 1980, Mitchell and Girurgola architects, in partnership with Australian

architect Richard Thorp, were selected unanimously by the competition jury as the
winner. The proposal was based on 69,000 square meters of space and costing $156
million.

The assessors stressed that many of the elements in the winners cost estimates

were "subjected to detail confirmation." It was they added; impossible to be more


precise in costing at this stage (Ramsey, 1986).

5.3: Organisational Structure:


The Parliament house construction authority was set up from the outset and
consisted of a combination of people who were technically, politically and financially
proficient. The Organisational structure of the project was established by the PHCA at

an early stage with the PHCA placed at the top of the organisation as "Project
Management Centre," with a project manager appointed as a specialist consultant.

3T-

5.3.1: Project Management Structure:


CABINET

PARLIAMENT

Minister for The Capital territory

Cabinet
Committee

National
Capital
Development
Commission

PHCA

User

Joint
Requiremeni
Standing
Conmdttee

Architects

Consultants

Construction
Manager

Cost
Planner

Project
Planner

Contractor

Sub-Contractor

78

The appointment of Concrete / Holland construction companies fitted in well


heavies in the
with the Fraser government philosophy of involving private enterprise
project.

The consortium had an established record in several big building projects,


including the Westmead hospital and Sydney's centre point tower. Its tender had the
active support of the late Phillip Lynch, then the Deputy Prime Minister. On top of this

the consortium has a contracted consultancy fee based on 4 per cent of the total cost of
the building.

Concrete and Holland joint venture is only one of many firms, including a number

of overseas firms, they range across technical expertise such as cost planners, project
planners, engineers etc. (Ramsey, 1986).

5.4: Contract Arrangement:


The project was organised using the "Fast-Tracking" system of construction in
great
which detailed design and construction proceeded together. Whilst it provides
design
benefit in reducing project duration, it also allows for the politicians continuous
This is
changes to be made. Bits can keep being added and space shuffled about.

what's happened over the years. Since the original design was chosen in 1980 the
Parliament house had grown by an additional 11,000 square metres (Monaghan, 1987).

The principal firm engaged in building the Westmead hospital was appointed by

the Authority as one of the two firms that comprise the Construction Manager for the
new Parliament house. There were few firms in Australia at the time with experience in

that form of Construction Management (Morokoff, 1988).

'79

5.4.1: Agreement with the architect:

Selection of the design by a competition virtually guaranteed the appointment of


the winner as the architect for the project, and this had weekend the Authority position.

According to the Parliament House Construction Authority that the agreement


with the architect and other agents were developed by the Authority on the basis of a
relatively simple building and before the Authority had reached full understanding of
the real complexity of the project.

The Audit also found that the agreement was deficient in that:

Did not recognise fully the role and responsibilities of the architect during
the construction phase of the project.
Provided little incentive for the architect to submit design and
documentation work on time or to design within the cost allowance.
Did not provide for equitable risk sharing with the architect, and
Provided few options for action against inadequate performance by the
architect.

5.4.2: Agreement with the construction manager:

The construction managers main function are to organise and co-ordinate


construction work on the project and supervise the numerous contractors.

The

selection was a joint venture comprising a construction firm and an engineering firm.

80

Deficiencies in the agreement:

An agreement with the CM was signed in mid-1981 and it was to remain


effective for the life of the project - a period approximately 8 years. The Authority
developed the agreement with the CM before it became aware of the complexity of the
project
The main deficiencies noted by the Audit were:
Failure to require the continued availability of appropriately qualified key

personnel of the CM organisation throughout the duration of the project.


unclear or ambiguous provisions of the agreement that did not convey
clearly the authority's intentions; and inflexibility of some provisions in that

they did not allow for changing circumstances over the life of the project.
Ineffective penalty / protection provisions.

Inadequate consideration given to arrangements for fees and other matters.

5.4.3: Coordinated package contracting:

Most of the construction work on the project had been let in the form of trade or
works contracts. Under this approach individual contractors are engaged separately to

undertake specific work in a nominated area. The dual role of the CM under such
contracts is that of head contractor and superintendent of works.

The dual role enabled the CM a fee of 4 per cent of the construction costs,
comprising 2.5 per cent for head contractor duties and 1.5 per cent for superintendent
duties.

81

5.5: Cost blowout:

Once announcing the winning entry, it carried with it a price tag of $220 million.

The new cost estimates had jumped by more than 46 per cent on what the government
two years earlier had said.

The base cost plan of $220 million produced in June 1980 was the estimated

building cost of the project excluding allowances and non-building items such as
furnishings, sound and vision equipment's.

The biggest professional fee of about 11 per cent was going to the Architect
Mitchell Giurgola Thorp. The cost explosion began to show up in January 1984. At
that time, after allowances for inflation, they surged ahead of budget during the month
by $5 million, by September the overrun had crept up to $7 million.

In October 1984 it rocketed to $30 million and by late 1985 it had reached a
staggering $60 million above budget forecast. Clearly the cost was now out of control
and no one took it seriously because cabinet was distracted by the budget of 1984 and
in early planning for the election (PHCA, 1987).

According to Peaty, in real term the original building budget of $220 million

(May 1987) prices had increased by 23 per cent, a further 6 per cent of the increase

was due to matters beyond the Authority's control, such as cost of industrial
disputation, insolvencies and exchange rate variations.

82

Inflation over eight years alone accounted for the remaining increase to the
building budget in August 1986 prices of $811.1 million. In addition in 1982 the
Authority had been given additional responsibilities not included in the original building
budget, for providing furniture, sound and vision communication equipment's.

As the budget for the non-building items was $171 million (August 1986) these
prices brought up the total project budget to $982 million (PHCA, 1987).

So in the end it became a political exercise in blaming your opponent and hoping

nobody would probe too deeply about what went wrong. Finally Bob Hawke's ACT
Minister Gordon Scholes placed the responsibility on Fraser, especially in establishing
the $220 million budgets back in August 1980 (Ramsey, 1986).

,83

5.6: Analysis of Case Study :

1. Planning for the new parliament house began in 1965, but construction did not start

until 1980. Parliament then decided to have the new Parliament house completed

for the bicentenary in late 1988. To achieve this date it has adopted the "FastTrack" approach.

2. According to a management review (Weekend Australian May, 1990) the

Parliament house construction process says a Traditional, rather than Fast-Track


building programme would have resulted in considerable saving while still achieving
the government's pre-determined delivery date.

3. As stated previously in this thesis There are a number of advantages in adopting a


Fast-Track method:

Reduced overall project duration.


Gives a greater flexibility for the owner.

Helps to resolve industrial relations problems through the employment of a


construction manager rather than a main contractor.

4. Appointing a construction manager had avoided conflicts that would arise when a

head contractor is appointed on a firm price basis and generally generated a good
team relationship.

5. Having two construction managers Holland and Concrete could create conflicts
especially the two construction managers are in competition previously with one

another and both are independent in decision making issues on the project. It
would have been better if appointed only one construction manager.
84

Another important issue is that, the selection panel must be chosen from a list of
possible Engineers, Quantity Surveyors, Construction Managers, i.e. some one who

clearly understand the concepts, rather than have politicians who do not know
anything about construction of Parliament houses.

There were weaknesses in the Authority's management of the architect. Especially

it failed to exert adequate control over the architect whose performance were
lacking at various times. These arose partly from the agreement with the architect
which did not contain specific incentive to submit design work on time, and within
budget and without errors.

The Authority should also have taken firm approach with the Construction
Manager. Like the Architect, the agreement with the Construction Manager did

not ensure that work is organised efficiently and economically. The Authority

lacked a comprehensive system for monitoring the Construction Manager's


performance and reacted slowly when needed.

Cost control systems were inefficiently maintained, the cost planner's service was
not fully utilised and variations were improperly managed.

Overrun of concrete supplies were unexplained.

There were short comings in

supervision, records and administration of concrete supplies.

A consultant

estimated that in 1985, direct and indirect cost arising from delay in concrete
deliveries were $3.7 million. The authority appeared to have put too much reliance

on the Construction Manager to ensure that concrete was supplied satisfactorily


and that the work of excavators and associated contractors was satisfactory.

.85

The authority says the design competition for the Federal Parliament House was
well managed and had produced an outstanding piece of public architecture.
It found the failure to finalize terms of agreement for the Architect in time
include them in design competition. Conditions had compromised the Authority
bargaining position as the architect knew it was assured of the job
(Weekend Australian, May 1990).

Many of the problems encountered by the Authority with Construction


Management and Fast-Track were similar to those encountered by the General

service administration of the United States Government (GSA). Construction


management and Fast-Track were found to be unsatisfactory on public building

works in the United States. In the 1970's , it hoped that these methods would save
1.5 to 2 years on large projects. But problems arose, including:

The government owner could not delegate the same amount of authority

that is given to the construction manager in the private sector. lack of


authority and divided responsibility prevented effective control and
management of the job site by the construction manager.

The construction manager firms lack of authority meant that it could not be
held financially responsible for the project and its outcome , and

The harmony among the team members, that had been hoped for died upon
the signing of the contracts.

GSA experience was that Construction Management and Fast-Track


increased the government's exposure to liability for delay claims
(PHCA,1987).

On balance, it appears that the new Parliament House project, given its shear size

and lack of expertise at the time, proved to be relatively well managed with a price. In
comparison with other projects it had achieved the quality criteria and opened on time
for the 1988 bicentenary and did not stray significantly from the agreed budget.

,87

RAL CONCLUSION
In recent years, participants in the construction industry

have become

increasingly aware of rising construction costs and perceptions of increased quality


problems.

The sustainable or warranted level of construction activity depends on the


underlying demand, which in turn depends on economic and demographic factors. For

example, the underlying demand for new dwellings depends on household formation,
demolition's and demand for second homes.

Similarly, the underlying demand for office space depends on office employment

and on the space required by the introduction of new office technology. Essentially,

the warranted level of construction activity in a specific sector derives from the
underlying demand for the services provided by that type of building in the light of
economic and demographic trends.

The goal of an owner is to have a project that incorporates the latest technology
with the capacity to meet project cost and scheduling objectives. This goal has resulted
in Fast-Track construction of projects.

Fast-track procedures require the structure to be committed for construction long


before the architectural and engineering services final design is finalised. it is important

to provide a structure which is a 'bare bone skeleton' onto which the remaining building

fabric is placed. It must be readily able to accommodate changes during design, during

construction and after construction.

In order to assist in assessing the cost and

buildability of the various alternatives, regular consultation is needed with subcontractors regarding alternatives, particularly in regards to form work.

At the birth of the project, the brief should be short, to the point, and setting out
the client's basic space and performance requirements. The skilled adviser to the client

will set out the performance specification and little else, thereby allowing the
contractors scope to come up with the most cost effective and innovative solutions.
Contractors need to have direct access to the client and understand how his business
works.

Contractors are much closer to the market rate products than consultants and are
able to compare, say a curtain wall with a brick work and window facade and arrive at
the most appropriate solution.

Clients are demanding more and more say in the design stage. Instead of giving a

contractor a brief on an A4 slip of paper, as they have done in the past, clients are
employing their own consultants to come up with the concept design.

Clients consultants are now designing building to roughly the layout and look of

the building. When the contract is let the contractor then has the responsibility of
thrashing out the details which makes tenders more easily comparable.

The client must appoint a project manager who has the following expertise:
Negotiation skills to produce win win situations rather than traditional win
lose outcomes.
Communicate effectively , including developing a good listening skills.

Ensure that a multidisciplinary team operates in the most co-operative


manner to achieve its goal effectively.

Understand their client's business needs from building project, and tailor

services to meet them.

The project manager should be the guardian of the client's interest. Equipped

with a detailed knowledge of the construction industry, a good grounding in


management techniques and endowed with heaps of charisma, these individuals must
help their clients spend money wisely. For a fee of between 1 to 3 per cent of building

costs, project managers help firm up the brief, appoint the professionals team, choose

the best form of contract, hone the design process and deliver the building to their
paymasters on time and to budget without conflicts.

Fast-track construction of projects is economically viable if the following are adopted:

Steel frame construction is the key to speed. With services being 40 per
cent of the building's value, it is essential to weatherproof the building as
fast as possible.

The use of lighter steel structures reduces loads on the existing walls and
needs less foundations and less piling.

Structural steel work should be prefabricated into the largest manageable

sub-assemblies consistent with the shop size and means of transport to site.
Painting of the sub-assemblies should also be undertaken off-site where a
controlled environment leads to a satisfactory standard of furnish.
Avoid repeating mistakes all over again in each project.
Do not hesitate in decisions.
Take calculated risks.

Do not be afraid to make errors - you make them anyway.


Do away with paper work where possible.
Apply a direct approach with involvement and commitment of persons.
Work with simple control budgets.
Finally overlap amply between engineering, manufacturing and construction
with continuous cross checking.

90

Novation is an evolution of the system of procurement that attempts to combine


the advantages of the Traditional and Design and Build procurement systems. It allows

an initially traditional arrangement to be converted to a Design and Build arrangement

at a certain stage of the project life cycle. It takes account of the unique feature of
construction production which has distinct phases in its life cycle.

The most significant factor that limits the application of Fast-Track contracting is

in regard to the risk of change to project scope once the building contract has been
initiated. For projects where there exists a high chance of client initiated change during

the building process, other project delivery systems are more likely to be the most
appropriate, e.g. Construction Management. In this regard, Fast-Track projects cannot
be adequately handled by Design and Build or Novation, even though these processes

does have potential to save some time compared with the traditional 'hard-money'
contract which separates entirely the process of design and construction.

Other factors which may need to be taken into account when deciding on the
method of contract to be used is the availability of competent contractors within the
local market that could provide competitive tenders.

If the client relies on contractors that do not normally operate in the local market,
,

then problems may arise due to the contractor's lack of local knowledge. On the other
hand, local contractors lacking direct design experience, may not have the managerial
skills to cope with the responsibility of the design phase, or even miscalculate their risk

associated with warranting the design. Should such a contractor fail to deliver a
satisfactory product will ultimately lead to much greater inconvenience to the client.

The Telecom communication building project in Adelaide is a tine example of


Fast-Track construction using a Novated type contract.

Novation essentially describes a process of contract substitution, where one


contract is discharged and replaced by another. The new contract may involve only the
original parties, or the original parties plus a third party.

The type of contract used was lump sum, fixed price, fixed time with no rise and

fall clauses. The brief was detailed and complete, the contractor thoroughly briefed

before construction began.

The project has a well established design control

mechanisms where the contractor has to submit design documentation to the project
manager for review as soon as they are prepared. Any request for change subsequently

needs the support of the design team concerned and the approval of the project
manager as provided under clause 2.2(e).

Unlike most Novated or Design and Build contract, this project has a well
established quality control mechanisms that ensures the client is involved in the process

through the project manager. The contractor is required to employ a full time quality

assurance manager for the project. At each stage of the construction work, there is a

hold and witness point test where all parties concerned with the element being
constructed must sign a document endorsing their approval before the main contractor
can approve the work.

This process ensures that the work is proceeding according to specifications and

if something goes wrong in the future it can be traced back to find out who was at
fault.

Unlike the Telecom project, the Australian Parliament house, Canberra proved to
be one of the most difficult and expensive project in Australia.

92

Many of the problems arose from the use of Fast-Track system of project /
Construction Management.

This system was adopted to meet the target date for

completion on 26 of January 1988 Australia Day.

The lack of attention to cost control on the project has caused major difficulties
which resulted in a late pursuit of savings. The agreement with the architect which did

not contain specific incentives to submit design work on time, within budget and
without errors.

Also the agreement with the construction manager did not contain specific
incentives to ensure that the construction manager organised work on the project
efficiently and economically, and was slow to respond when poor performance came to
notice.

The handling of contractors by the Authority was poor and this was due to the

contractors regarding the commonwealth as a wealthy body and vulnerable to


excessive demands by the contractors.

Thus, Fast-Track contracting can be used successfully on building projects, and

provides benefits to both the client and the contractor, however, a number of
disadvantages are associated with the process.

The client should carefully consider the advantages and disadvantages, weighing

the relative benefits with alternative contract types when making his selection of a
project delivery systems. The most important aspect to keep in mind is that any one

contract system does not suit every conceivable type of project; the selection of a
system appropriate to the unique facets of a particular project is a critical determinant
of the ultimate success of the project.

.93

ATION FOR FURTHER WORK


There is a new form of contract emerging as a result of privatisation which
usually involves public facilities such as roads and education institutions. This type of
contract is called BOOT (Build, Own, Operate and Transfer).

Design and build contractors are the main beneficiaries of this type of contract.

For a set price, the contractor will arrange the fmance, design and construct the
accommodation and hand it over furnished with everything except the posters on the
walls.

The most common means of financing the deal, for the education establishment

to supply the land and a developer to stump up the money for the construction. The
developer then leases the building to the college for 25 years.

According to the business and development manager of Baulderstone

Hornibrook, not only are tenders high for BOOT schemes, there is also the extra cost

of contractual and legal fees to add to the cost of a detailed design. BOOT providers

also pay a high interest on capital than government authorities and they attract land
taxes and rates which government are not required to pay.

This type of contract is used widely in the Eastern States especially in Australia's

current economic climate where government are attracted to these schemes because
they allow them to allocate scarce funds to other projects.

BOOT contracts are beyond the scope of this thesis, and this type of contract
need to be studied carefully considering the advantages and disadvantages it has to
offer to the client and the developer.

8.0zR

CRS:

ATKINS,B (1990) Information Management of construction Projects. T.W Crow


and Associates
B.I.S SHRAPNEL, (1986-2000) Building in Australia.

BARNES, M. (1988) Construction Project Management. Project Management 6 2,


pp. 69-79.
BISHOP, D (1985) Buildability: The Criteria for Assessment. CIOB Technical
Information Service No 48 (4).

BURK, T (1993) Blake Dawson Waldron. Design and Construct Through Novation,
April. (Unpublished).
BRENSEN, M.J; HASLAM, C.D; KEIL, E.T (1989) Performance on Site and the
Building Client. CIOB Occasional paper No 42.
Building Economic Development Committee (1983) Faster Building For Industry.
NEDO, London, May.
BURGMANN, J.B (1982) Fast-Track and Structural Design of Westmead Hospital.
The Institution of Engineers, Australia. Civil Engineering Transaction, June
Business Council of Australia (1993) Case Study of Project Implementation in the
Building and Construction Industry.

CALLAGHAN, J (1992) Novated contracts. Address to CIAC, July.


Centre for Construction Market Information (1986) The Design and Build Market
CCMI, London.
DAVENPORT, P (1993) Pitfalls in Novation, Australian Construction Law
Newsletter, Issue #, Construction Publications Pty Ltd, April.

DODD, J; LANGFORD, D.A (1990) Construction Management on One large


project in London: A case Study. Construction Management and Economics 8,
399-414.
Estimating Practice Committee, Working Party (1979) Construction Selection - a
guide in good practice, CIOB

FAZIO, P; MOSELHI, 0; THEBERGE, P; REVAYZ, S (1988) Design impact of


construction Fast-Track. Construction Management and Economics, 5, 195-208.
GARDINER AND THEOBALD (1988) Is Management Contracting the Most Cost
Effective Way to Build. Building, April.

95

GRAY, C; FLANAGAN, R (1984) US productivity and Fast-Tracking starts on the


drawing board. Construction Management and Economics 2, 133-144.
GRIFFITH, A (1987) Quality Assurance in Building Construction. Building
Technology and Management, June/July.

GRIFFITH, F (1989) Project Contract Strategy for 1992 and beyond. Project
Management, 7, 2, pp. 69-83.
HEDBERG, A.N (1987) Building on the Fast-Track. Building, June.
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performance of the industry, project reports submitted to the college of Estate
Management for RICS diploma in Project Management.
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study: Tavistock Publications.
HILKER, 1(1988) Quality Control , US Style. Building Technology and
Management, August/September.
HILLERBRANDT, P.M.(1977) Economic theory and the construction industry.
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HINDS, J.K (1989) Contract Administration on Fast-Track Project. Building and


Construction Law, June.
HIRSH, B (1992) A New Fast-track for Public Works. Civil Engineering, February.
HOWDEN, R. et al. (1991) The Use of Novation Contracts in Building Delivery,
The Royal Australian Institute of Architects, August

HURU, H. (1992) The U.K. Construction Industry : a continental view.


Construction Industry Research and Information Association.
IRELAND, V (1987) The Choice of a Contractual Arrangement. Project
Managers Forum National.
KWAKYE, A.A (1991) Fast-Track Construction. CIOB Occasional Paper No 46.
LINDEN, F.V.D (1991) Fast-Track Construction Can Save Time and Money.
Hydrocarbon Processing, April.
Mac PHERSON, I (1987) Faster and Faster Track. Building, May
MASTERMAN, J.W.E (1993) An introduction to building procurement systems.

MINTZBERG, H. (1979) The Structuring of Organizations. Prentice-Hall.

96

MONAGHAN, J.V ( Auditor General) 1987, Efficiency Audit Report, Parliament


House Construction Authority; Construction Project Management, 14.
MORLEDGE, R. (1987) The Effective Choice of Building Procurement Method.
Chartered Quantity Surveyor, 9,11, p 26.
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for Building Projects. Construction Management and Economics, 3 217-231.
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February/March 1992.

PHCA, (1987) Project Parliament News No 6.


POTT, F.K (1988) An Alternative Payment System for Major Fast-Track
Construction Project. Construction Management and Economics 6 , 25-33.

RAMSEY, A (1986) Canberra Pleasure Dome: The Parliament House Cost


Explosion. National times, 7/13 pp. 18-21.
ROBINSON, R (1987) should Fast-Track Be Derailed. Civil Engineering, January.
ROBINSON, J (1987) Comparison of Tendering Procedure and Contractual
Arrangement. Project Management, 5, 1 p.p. 19-24.

RUBY, D.I (1978) Fast-Tracking Plant Projects. Plant Engineering 121-123.


SACON, Adelaide Exhibition Hall - Tender Registration, Aug. 1988

SIDWELL, A.0 (1983) An Evaluation of Management Contracting. Construction


Management and Economics 1 , 48-55.
SIDWELL, A.0 (1987) Performance in Project Management. Project Managers
Forum National conference, Adelaide.

WALDBY, D.W; LOIUS, L.J (1987) Quality Assurance of Design and Construction
of the Gateway Arterial Project. Queensland Division Technical Paper, March
Weekend Australian, May 26-27 1990.

97

9.1: Appendix A:

:Telecom Communication Building Layout Plan:

119/012/02

sERVIcmg.e, FINISHES

STRUOTURE.

'V

e-5:11211EMOI

TOTA!..FCOAT..',

.0;FINISHES:

'',y

.....

IVA

,-,.

:S.'COMPLETE

,fr:":";,;CRI-T.ICAL

CRITICAL:.

LEGEND

CONTRACT. CO ..... SON:DATE

SUxLcoms CONTINGENCY:

F/NAL COMMISSIONING/CO .FL

sAmc's CARPARK.CONSTRUCTION

PLANT ROOM S NAJOR:SeR4icsa

ROOF G PLANT' ROOM STRUCTURE

5TH

PREOAST ERECTION C ROOFING'

,;TH:FLOOR

FINISHES

FLOOR'SERvICSS.0 FINISHES

4TH FLOOR'

3RD

2R0 FLOOR STRUCTURE

.2NO FLOOR

NO FLOOR STRUCTURE

1ST FLOOR aim/Ices

2ST FLOOR STRUCTURE.;

BASEMENT SUSSTRuCTURE.
SROuNS FLOOR. CONSTRUCTION
ORO FLOOR SERVICES C FINISHES,

CABLE CHAMBER SUBSTRUCTURE

STAGS 1 BUILDING APPROvAc


STAGE 2 BUILD/NO APPROVAL

CONTRACT AWARD/SITE POSSESSION


SITE ESTASLISHMENT

Namii

CURRENT DATE:

PROJECT: FLINOERS MOB TEL-000

1002
FEB MAR 'APR :HAT, JUN

JUL AUG
sEp

12 DAYS BEHIND SCHEDULE

1002

.1504
OCT NOV Dec JAN FEB MAR APR MAY JUN JUL AUG BED OCT NOV DEC 'JAN

CONSTRUCTION STATUS REPORT

9.3: Appendix C:
Conditions of Contract

Contents
DEFINITIONS AND INTERPRETATION
1.1.
1.2

1.3

Definitions

Interpretation
Ambiguous and inconsistent terms

DESIGN DOCUMENTATION
2.1
2.2
2.3

2.4
2.5

Contractor's design obligations


Preparation of Design Documentation
Shop drawing approval
Changes to the scope of the Project Brief
Ownership of, and copyright in, Design Documentation"

THE SITE
3.1

3.2
3.3
3.4
3.5
3.6

Safe access for Project Manager


Access for others

Risk of latent conditions


Survey and setting out
Set-out survey
Things of value

10

NOVATION
4.1

4.2
4.3

Novation of Design Consultant's agreements


Restrictions on termination of Design Team members
Novation of the Contract

ADMINISTRATION OF THE DESIGN AND CONSTRUCTION PROCESS .:1


5.1

5.2
5.3
\ 5.4

\ 5.5
\-,5.6

5.7
5.8-

5.9
5.10
5.11
5.12

Design development
Site meetings
Composition of the Project Control Gioup
Project Control Group functions
Project Control Group meetings
Contractor's reporting and related obligations

Removal of persons
The Project Manager
Contractor's Representative
Contractor's personnel
Production of documentation
Use of "CLIENT" information system

THE CONSTRUCTION PROCESS


27/2/92
1110372.4580/91

TERMINATION
11.1

11.2
11.3
11.4
11.5
11.6

35

Procedure following substantial breach by the Contractor,


35
Requirement for a notice under clause 11.1
36
Termination by the Principal following the 'show cause' proceddre 36
Termination where the Contractor is insolvent, etc.
36
37
Rights and liabilities of the parties following termination
S.
Termination for convenience
38

RESOLUTION OF DISPUTES
12.1
12.2

123
12.4

Dispute resolution procedures


Expert determination
The Principal's right of deduction following expert determination
Dispute resolution not to delay execution of the Works

4
41

GENERAL
13.1

Counting of days

13.2

Notices
Deemed receipt of notices
Governing law
Notices and fees

.133
13.4

135
13.6
13.7
13.8
13.9

Royalties and patent rights


Awards
Sales tax

Imported materials
13.10 Publicity
13.11 Subcontracting
13.12 Confidentiality
13.13 No assignment
13.14 Entire agreement
13.15 Disdaimer
13.16 Variation of the terms of the Contract

Schedule 1:

Schedule to, the Conditions of Contract

Schedl 2:

Quality assurance obligations of the Contractor:

Schedule \3:

Schedule of delay costs

Annexure A:

Unconditional- undertaking

Annexure 13::

Rules for the expert determination process

Annexdre 'C:

Code of conduct for an expert'

27/2/92.

1110372A580/91

43
43
43
43
43
43

9.4: Appendix D:

Transfloor Banded Floor Slab system:

'Revision

Date
April 1991,

A Transfloor banded slob system

9.5: Appendix E:

Parliament House Construction Budget:

THE NEW PARLIAMENT HOUSE CONSTRUCTION PROJECT BUDGET

MAY

$220M

1978

1979:. JUN

JUN
1981

SEP

kaf

DEC

$392M
$408M
$436M
$463M

MAR

1982

$512M

SEP

$526M

MAR

1983
SEP

air

$548M
$588M

FEB

1984
$644M

AUG

kga $684M

FEB

1985
$894M

AUG

$928M,

MAY
1981,, AUG
\NOV

$1673M
.5:

.'""MIFY

Building Budgets
Non-Building Item

:Approved Additions
-Escalation
InsolVencies, exchange rate, variations, govemement fees etc.

A' $1076