Articles by McGrigors
19 August 2005
Don't write off construction management
route just yet
by Colin Fraser
(Published The Scotsman)
Construction management is under fire. Will these blows prove fatal for the 20-year old procurement method? Or is it still viable? 2005 brings a land-mark court judgment on the Conran Great Eastern Hotel project in London, which over-ran by nearly a year and whose £31 million budget nearly doubled.
The judgment's timing may hurt the credibility of construction management, a form of procurement discouraged in Treasury Department guidance. Its choice was one of the core criticisms of the Fraser report on the Scottish Parliament. And this case, the first in the UK to deal with construction management in detail, highlights massive budget and programme problems in a private sector project.
Construction management is one way of addressing the complexity of large modern construction projects. It can fast-track a project, overlapping design and construction phases. That's why it looked as if it would satisfy political drivers of the Holyrood project: the opening date was first priority.
There is a balance on any construction project - cost, programme and quality - and Holyrood is a practical example. There, the clear focus was in relation to programme. In addition, whenever there was a competition between cost and quality, quality won. All that meant (said Fraser) that cost 'was not and could not be containable'... and this lop-sided cost-quality-programme triangle didn't deliver on cost or time. Construction management can also mean a budget is hard to fix until relatively late on.
Treasury guidance related to construction procurement means construction management is a procurement route 'of last resort', one that should be used 'sparingly' for any public building project, said Fraser, because the risks largely lie with the client. The analysis might be different in the private sector: entrepreneurialism might conclude that, for private capital as opposed to public purse, the commercial advantage in trading earlier outweighs the uncertainty in relation to build costs.
In the judgment on the Great Eastern, the issue was the construction manager's performance, not the choice of the procurement route itself. But why was that route chosen? It may have been because the site was difficult for redevelopment, made up of a sprawling mix of buildings of various ages and states of repair. The new hotel was to be large, complex, modern and high quality. It may have seemed like a swift way of taking the project from the outline design and programming (by the conventional professional team of architects, engineers and others) to full, completed, design and then to construction. It was even mooted that - when design and programme were more certain - the construction management regime would convert into a conventional one.
One major contrast with Holyrood is that - for the Great Eastern - the end result, once designed, appears to have been quite clear. The Parliament, on the other hand, was undergoing fundamental design changes late on in the project's life. Yet the hotel was delayed by nearly a year (losing a year's income). A budget of £35 million became £61 million. The problem that beset the Great Eastern was not so much the choice of procurement route, but performance of the construction manager. The court identifies one of the key skills of a construction manager as being realistic appraisal of progress, managing the commencement and progress of the trade packages. The construction manager distorted progress reporting and so could not manipulate the trade packages economically. The personnel involved were experienced main contractors, but had little or no experience in construction management. In other words, had the construction manager performed effectively, the construction cost and programme over-runs could have been considerably smaller.
Construction management bears some scars of battle. But it is not dead. Perhaps the biggest lesson to be learned is that it is not just main contracting by another name. Its risk profile is fundamentally different. It has its own set of advantages and potential problems. To work, it relies on a skill set quite different to that of a conventional main contractor. Whichever procurement route is under consideration, a risk analysis needs to be done. It is not 'one size fits all'. Is the project one where a disproportionate employer risk might pay dividends in terms of speed of delivery? Or does certainty and cost over-rule other considerations? And most of all: what does the client want?
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