3.6  Managing Contractor

This form of contracting involves the principal appointing a head contractor (the managing contractor) who engages subcontractors to deliver the works.  The managing contractor is responsible for administering these subcontracts and accepts some delivery risk.  The principal and the managing contractor generally negotiate a fixed lump sum management fee.  The managing contractor may also receive incentive payments for achieving cost and schedule targets.  The managing contractor is engaged early in the process to manage the scope definition, design documentation and construction of the works.  The managing contractor sometimes performs elements of the design and/or construction and is paid for that in addition to the management fee.

The managing contractor typically:

•  is paid a management fee and incentive payments for achieving target price, schedule and other key parameters;

•  undertakes some or all of the design activities;

•  may perform some of the construction works but does not necessarily do so;

•  is responsible for preliminaries (e.g. crane hire, site sheds, supervision services etc), general project requirements (e.g. security, insurances etc) and project management (e.g. scheduling, coordinating, liaising, monitoring, reporting etc.);

•  prepares the trade packages and conducts the tenders, selects suppliers in close collaboration with the client;

•  warrants the quality of all works; and

•  warrants the completion of the works by the date for Practical Completion. In general, this model is considered only:

•  for complex or high-risk projects with uncertain scope, risks or technology;

•  where a high degree of expert government input is available; and

•  where early contractor involvement is beneficial.

Sometimes the managing contractor engages suppliers as subcontractors and is responsible for paying them. This variation of the managing contractor model is more like a construct only or design and construct arrangement and may be preferred depending on the risk allocation, payment and incentive structure considered to be most appropriate. Variants to the generic model have been developed by some jurisdictions to overcome the main disadvantages of the generic model described in these guidelines.  An example of such a variant currently in use is the two-stage design, novate and construct, guaranteed maximum price approach.

The following table lists features of the managing contractor model -