Easy Design

What form of (ECC) contract to use, A, B, C or D?

You work for a firm of consultants who have been appointed to engineer new site roads, including two bridges, on a large factory site for a large multi-national company. Write a report for the client’s site manager to explain your choice of procurement strategy. Your firm has fully designed the new work and you have advised your client on his choice of procurement strategy, which is to award a single contract, based on the Engineering and Construction Contract (ECC) conditions of contract. In your report advise the client of the main option (under ECC) that you recommend and make particular mention of the time periods needed for the tendering process and advise the client of the potential risk areas and how these are dealt with.

There are many options and each has its place depending of circumstances.

As an example: If you have a very well defined project with detailed drawings and specifications then I lump sum for fixed price project might be the best. This is specially true if the owner has very limited resources to monitor the project.

The other extreme would be a full cost plus contract. This is okay if you are in a real hurry to finish the project and have a experienced staff to monitor all of the activities of the contractor. It is fast but very costly.

One in between method is a cost plus fixed fee with a guaranteed maximum cost and a share the savings clause. This lets the project move forward fairly quickly but gives the owner some protection for a very high final cost and some hope for a lower cost. It also give the contractor some incentive to keep costs down because he gets to keep some of the savings as profit. It also discourages him from dragging out the project because the other portion of the profit is fixed in the fixed fee. This method also works best with an experienced owner staff and engineering and procurement leading the field construction by some time.

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