Real Estate projects can take many different forms depending on the requirements of the Project Owner and the nature, size and complexity of the works. There are different types of projects within the real estate industry, undertaken by all manner of real estate stakeholders. Projects can vary from simple maintenance work through to new-build mega-schemes. Each project has its own challenges due to varying factors including site constraints, stakeholder requirements, local authorities and neighbours to name a few.
Understanding and selecting the appropriate procurement method and appointing the right team will be the difference between project success and failure.
Constructor Hub provides a platform for its members to carry out a search for Contractors and Suppliers for their projects based on their specific project criteria and undertake a desktop evaluation of their shortlisted results to find Contractors and Suppliers that are the best fit for delivering their project.
Types of Projects
Owners and occupiers of real estate undertake different types of projects to their land and buildings for various purposes. Real estate projects typically comprise:
- New-Build,
- Refurbishment,
- Maintenance,
- Cleaning,
- Extensions,
- Fit-Outs,
Or a combination of the above.
Each project varies in nature and complexity and therefore have different considerations when selecting the procurement route, professional appointments and Contractor(s). Other factors affecting decision marking include whether the property is occupied, proximity to occupied properties, any special conservation considerations or any specialist products, materials or systems to be incorporated into the works.
Projects may comprise one-off projects, phased projects with sectional completions or on-going projects (such as maintenance).
RIBA Plan of Works
The Royal Institute of British Architects has published a well-established plan of works, which sets out the following project stages from inception to completion:
- Strategic Definition
- Preparation & Brief
- Concept Design
- Developed Design
- Technical Design
- Construction
- Handover and Close Out
- In Use
The Plan of Work can be followed by Project Owners for all manner of works and describes the systematic procedures whereby the project scope is defined against Project Owner’s business or other core objectives and developed into a fuller project brief incorporating the final scope, budget and timeframe of the project. The plan then describes the design stages leading up to construction and subsequent completion, handover and operations of the building.
It can be argued that the plan is just as applicable to relatively simple projects where the design work is condensed into stages 3, 4 and 5. The full detailed plan of work can be found at www.ribaplanofwork.com
Project Appointments
The nature and complexity of the project and the chosen procurement route will determine the appointments that a Project Owner makes to design and deliver their project.
For larger projects under the traditional procurement route the Project Owner would typically appoint a design team comprising either an architect or a surveyor, with accompanying specialist engineers and consultants including mechanical and electrical engineers, structural engineers, environmental consultants, principal designer under the Construction (Design & Management) Regulations 2015 and planning consultants, to name a select few. The Project Owner may also choose to appoint a cost consultant to manage the project budget, and a planner to manage the project programme.
Depending on the proximity of the works to neighbouring properties the Project Owner may also need to appoint party wall and/ or rights to light specialists.
When the design has progressed to sufficiently, (a full detailed design for the traditional procurement route or to create a clear “Client Brief” for a Design & Build appointment) the Project Owner will want to appoint a Contractor to carry out the works. Unless the Project Owner wishes to coordinate multiple contractors and manage the site directly, they will typically appoint a Main Contractor who in turn will appoint sub-contractors and suppliers to deliver the project works.
Most contracts assume that the Main Contractor has the discretion to appoint any Sub-Contractor they so wish subject to their ability to carry out the works or supply the materials that meet the project specifications. However, it is not unusual for a Project Owner to nominate a specific specialist supplier or Sub-Contractor and instruct the Main Contractor to appoint them directly, though this typically means the Project Owner assumes liability for that Sub-Contractors performance.
The Project Owner will typically appoint the Architect or Surveyor to monitor the works progress to ensure compliance with the project specification and administer the terms of the contract agreed between the Project Owner and Contractor(s). A clerk of works may also be appointed to undertake day to day monitoring of the works.
Procurement Routes
Traditional – Under the traditional procurement route the Project Owner is responsible for the full design of the project and the Contractor is therefore only responsible for carrying out the works in compliance with the design and in accordance with the contract.
Design & Build – Under a Design & Build agreement the Contractor is responsible for the design of the Project (in compliance with the Project Owner’s requirements in the contract forming the basis of the design) and the execution of the works.
Construction Management / Management Contracting – The Project Owner is responsible for the design however, they appoint a Management Contractor or Construction Management company who procures Sub-Contractors on
With Construction Management, the individual works packages are procured directly by the Project Owner, but under the management of the Construction Management company. With Management Contracting the packages are procured directly by the Management Contractor.
Appointing the right Contractor or Supplier, wherever they feature in the supply chain, is vital to a project’s success. The Project Owner should evaluate prospective Contractors and Suppliers to understand and be confident in their ability to complete their works. See our upcoming Article: Considerations for Choosing the Right Contractor.
There are many different forms of contracts used for real estate projects including the suite of contracts provided by the Joint Contracts Tribunal (JCT), New Engineering Contracts (NRC) and Federation Internationale Des Ingenieurs-Conseils (FIDIC).
Typically, each suite of contracts includes a fixed price lump sum form of contract, a design & build agreement, sub-contractor agreements and intermediate or short-form versions for simpler projects. The advantages to using standard forms of contracts are that all parties are generally knowledgeable and conversant in the contract and through the experience of the providers of the contracts; they include protection for the parties in most situations and eventualities.
Forms of Contract
For simple
- The details of the parties entering into the contract.
- Location of the project.
- The price, either as a lump sum or a description stating how the price works will be reached.
- A clear description of the works and/ or goods to be provided.
- Timeframes for the completion of the works and/ or provision of the goods.
- Payment terms.
- Details of any warranties or guarantees.
- Termination procedures.
In addition to fixed price lump sum contracts there are other forms of contracts where the valuation of the works is calculated and paid to the Contractor:
Cost Plus – This is based on the Contractors total expenditure on the project plus an agreed percentage to cover the Contractor’s overheads and profit. This is the least risky contract for Contractors and transfers all project cost risks on to the Project Owner.
Re-measurable – This is based on an agreed schedule of rates for elements of the project which is then measured and the final valuation reached.
Conclusion
Real Estate projects are inherently complex and risky and often constitute a significant investment by the Project Owner. By identifying the project scope, selecting an appropriate procurement route and appointing the most suitable Consultants, Contractors and Suppliers, the Project Owner can minimise their risk and maximise the returns on their investment.
It is also important that the team procuring works can demonstrate a degree of due diligence and transparency in their sourcing and selection of Contractors and Suppliers to stakeholders.