Construction Project

Delivery Methods Submitted by-Nitin Kumar2013UCE1333Batch- C2

Submitted to-Dr. Sumit KhandelwalAssit. Prof. MNIT Jaipur

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Introduction

A construction project delivery method is a system used by an agency or owner for organizing and financing design, construction, operations, and maintenance services for a structure or facility by entering into legal agreements with one or more entities or parties.

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Types

Some construction project delivery methods are:1. Design Bid Build (DBB)2. Build Operate Transfer (BOT)3. Build Own Operate Transfer (BOOT)4. Design Build Finance Operate (DBFO)5. Design Build Operate and Transfer (DBOT)6. Build Lease Transfer (BLT)7. Design Construct Manage Finance (DCMF)

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1. Design Bid Build (DBB)

Traditional & most common approach Agency or owner contracts with separate entities for the

design and construction of a project. the architect is selected under a contract that is based on a

negotiated professional fee. The construction firm is most often selected based on the

lowest bid, and there may be many subcontractors under his contract/direction.

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Advantages Of DBB

▪ The design team is impartial and looks out for the interests of the owner.

▪ The design team prepares documents on which all general contractors place bids. With this in mind, the "cheaper is better" argument is rendered invalid since the bids are based on complete documents.

▪ Ensures fairness to potential bidders and improves decision making by the owner by providing a range of potential options.

▪ Assists the owner in establishing reasonable prices for the project.

▪ Uses competition both in the selection of the architect and the contractor to improve the efficiency and quality for owners.

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Disadvantages Of DBB

▪ In lean times, the desire for work usually forces the low bidder of each trade to be selected. This usually results in increased risk (for the general contractor) but can also compromise the quality of construction. In the extreme, it can lead to serious disputes involving quality of the final product, or bankruptcy of a contractor.

▪ As the general contractor is brought to the team post design, there is little opportunity for input on effective alternates being presented.

▪ Pressures may be exerted on the design and construction teams due to competing interests (e.g., economy versus acceptable quality), which may lead to disputes between the architect and the general contractor, and associated delays in construction.

▪ Failure of the design team to be current with construction costs, and any potential cost increases during the design phase could cause project delays.

▪ Redesign expense can be disputed should the architect’s contract not specifically address the issue of revisions required to reduce costs.

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2. Build Operate Transfer (BOT)

▪ A type of arrangement in which the private sector builds an infrastructure project, operates it and eventually transfers ownership of the project to the government or a joint venture partner.

▪ In many instances, the government or a joint venture partner becomes the firm's only customer and promises to purchase at least a predetermined amount of the project's output. This ensures that the firm recoups its initial investment in a reasonable time span.

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Advantages Of BOT

▪ The private firms are more efficient, hence project or service can be an delivered at lower cost .

▪ BOT projects create business opportunities for the local private sector, create employment avenues as well as attract substantial foreign direct investment .

▪ BOT projects help in facilitating transfer of technology by introducing international contractors in the host countries .

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Disadvantages Of BOT

▪ BOT is not a easy method and requires high capability of promoters .

▪ The success of BOT project depends upon successful raising of necessary finance.

▪ Transaction costs are high, they amount to 5-10% of total project cost .

▪ BOT projects are successful only when substantial revenues are generated during the operation phase .

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3. Build Own Operate Transfer (BOOT)

▪ Financing arrangement in which a developer designs and builds a complete project or facility (such as an airport, power plant, seaport) at little or no cost to the government or a joint venture partner, owns and operates the facility as a business for a specified period (usually 10 to 30 years) after which transfers it to the government or partner at a previously agreed-upon or market-price.

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Advantages of BOOT

▪ Encourage private investment▪ Inject new foreign capital to the country▪ Transfer of technology and know-how▪ Completing project within time frame and planned budget▪ Providing additional financial source for other priority projects▪ Releasing the burden on public budget for infrastructure

development[

▪ BOOT operators are experienced with management and operation of infrastructure assets and bring these skills to the scheme.

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Disadvantages Of BOOT

▪ The project requirements (including interfaces) must be well defined to enable contractors to effectively price the works and the structured finance - comprehensive data is required to allow whole of life risks to be priced and managed.

▪ There must be capability, capacity and appetite in the market to undertake a project of the required size and complexity.

▪ It requires a lengthy tendering and evaluation process, including achieving contractual and financial closure.

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4. Design Build Finance Operate (DBFO)

▪ Very similar to BOOT except that there is no actual ownership transfer.

▪ A single contractor ( with design, construction and facilities management expertise as well as funding capability) is appointed to design and build the project and then to operate it for a period of time.

▪ The contractor finances the project and leases it to the client for an agreed period (perhaps 30 years) after which the development reverts to the client.

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Advantages of DBFO

▪ Attracts private sector finance.▪ Delivers more predictable and consistent cost profile.▪ Greater potential for accelerated construction

programme.▪ Increased risk transfer provide greater incentive for

private section contractor to adopt a whole life costing approach to design.

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Disadvantages of DBFO

▪ Possible conflict between planning and environmental considerations.

▪ Contracts can be more complex and tendering process can take longer than for BOT.

▪ Funding gurantees may be required.▪ Contracts management and performance monitoring

system required .

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5. Design Build Operate and Transfer (DBOT)

▪  DBOT is a more flexible approach designed to eliminate the large elements of risk connected with outsourcing projects and provide a more convenient offering for companies seeking to outsource their customer-facing functions.

▪ Customized to the needs of the client, the DBOT model gives companies a greater degree of control over their outsourcing partnership.

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Advantages of DBOT

▪ The DBOT model can supply companies with great customer contact facilities and technology without heavy capital expenditure.

▪ Merchants offers a set-up fee repayment over the life of the contract, limiting the initial financial outlay.

▪ Organizations can also select their own timeframe for transferring the contact centre across to their management to suit their needs.

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Continued..

▪ Outsourcing the design, building and implementation of a contact centre helps to minimize the financial and commercial risk of setting up a n

▪ By bringing valuable expertise and skills to a company, a third party can ultimately help companies to expand their operations with the minimum of risk to their business. Ex. customer contact facility.

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6. Build Lease Transfer (BLT)

▪ Financing arrangement in which a developer designs, finances and builds a facility on leased public or joint venture partner’s land.

▪ The private partner recovers its investment through payments made by the government or joint venture partner.

▪ Ownership of the facility is transferred to the government or JVP upon completion of construction, and the concessionaire is granted the right to operate the facility and receive government or JVP’s payments (lease payment plus operational cost) based on its operational performance for a specified period of time

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7. Design Construct Manage Finance (DCMF)

▪ A private entity is built to design, construct, manage, and finance a facility, based on the specifications of the government.

▪ Project cash flows result from the government’s payment for the rent of the facility.

▪ In the case of the hospitals/prisons, the government has the ownership over the facility and has the price and quality control. The same financial model could be applied on other projects such as prisons.

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Advantages

▪ The advantages of this contract are that there is an existing contract mechanism in place, the task is related to the overall goals of the contract, and the contract team has extensive contacts in the community that would support this work. 

▪ This model could be interpreted as a mean to avoid new indebtedness of public finance.

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Disadvantages

▪ The disadvantage of this contract is that it might need to include a survey, which would require Office of Management and Budget approval. Additionally, the information collected would need to be maintained after the task and contract ended.  

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THANK YOU!!