Could Early Contractor Involvement (ECI) be suitable for your development project?

Early Contractor Involvement (ECI) methodology is a relationship based model focused on collaborative contracting. As an alternative to traditional lump sum tendering it enables risk to be allocated, by negotiation, to the party best able to manage and mitigate the risk. The Client Project team and contractor work together, in a contractual relationship with the client, firstly to scope and price, then to finalise the design and finally construct a project.

Greater collaboration between the Client, contractors and designers allows the move away from the traditional adversarial approaches to a sharing of collective knowledge and directly meeting the needs of all stakeholders.

Constructability and budget control are built in from the start, unlike traditional tendering where tenders must conform to a prescribed method and defined design. Design time savings are also possible when the contractor, designer and Client work together to design the job once, as opposed to alternate solutions offered and value engineering carried out post award of the contract.

If the contractor is involved from the outset of the project, the building expertise is quickly evident in the design and building of the project and in ongoing factors such as quality, finishes options, ongoing maintenance and asset lifespan. ECI allows for a greater number of initial risk uncertainties to be removed so parties can agree to a realistic risk-adjusted price.

All costs and documentation are transparent and the decision-making process allows for discussion and deeper understanding of the project requirements. The builder benefits from greater financial certainty as the margin is secure and this in turn reduces the likelihood of margin recovery strategies such as ambitious claims and variations.

Greater certainty encourages more flexibility and commitment to win-win behaviours and an attitude of shared responsibility. One core requirement to implement ECI is a commitment to ECI from the Senior Management Team and Boards of both the Client and the contractor. This will support an environment of transparency, and contestability from the top echelons of the organisations to the hands-on delivery team – this is essential for a successful project execution.

The aim of the Early Contractor Involvement process is to conclude risk allocation, cost/time certainty and a no surprises delivery strategy. The remaining consideration for any Board of Directors is how to ensure market transparency and a competitive outcome when entering into an open book negotiation with a single contractor.

While the commencement of the Early Contractor Involvement process, on this basis, requires a reasonable level of trust amongst all parties, the transparency and value equation can be addressed in two stages and assumes the Client retains its own Project Team for value verification:

Stage 1: Tender to multiple selected contractors for Overhead, Margin and Preliminaries (collectively referred to as Non-Trade Costs) in order to select the most competitive and appropriate contractor to be engaged to assist in design development.

Stage 2: After undertaking the design phase there is a tender to multiple subcontractors in each trade to establish the remaining project delivery costs, being Trade Costs. Assessment by the Project Team of the Trade Costs supplied by all Trade Contractors within their tender submission is undertaken to verify market coverage, completeness, contestability, and value for money.

It is vital that the client has a representative that understands this process and ensures it is appropriate for the project in order to deliver a well designed and valuable asset.

For more information please contact Steven Bird at Impact on 0488 552111 or stevenb@impactgroup.com.au

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