There are several general models of how construction contracts are structured and there are good reasons to recommend one over another in particular situations.
The contract you choose depends on weather you want total client control or if you're fine with the contractor handling everything. Before settling on one, be sure to explore your options. Keep in mind that certain contracts are flexible which means there will be no set date that the project will be finished.
A general contractor with in-house or subcontracted design expertise (design-builder) can often offer a streamlined package which is attractive to busy people not wanting hands-on involvement in the process beyond initial design and material selection.
This ‘one-stop’ approach to a contract is typically a fixed price attached to a material specification and set of design documents.
The main advantages of this approach are:
- Guarantee of final cost
- Minimum risk for the owner
Some disadvantages may be:
- Loss of some flexibility during the process
- The added cost of the convenience factor
- No independent control of quality
In this scenario a ‘construction manager’ will offer a fixed cost to manage the entire process either from the outset or based on a set of construction documents and specifications (prepared independently).
The construction manager is functioning in the role of general contractor yet employed by the owner.
The advantages of this form of contract are typically:
- Flexibility during construction
- Market competition in sub-trade contracts and
- Cost control flexibility.
Some disadvantages of this approach are:
- Risk for sub-trades is assumed by the owner (rather than the construction manager) and
- Loss of market competition in contractor cost (fixed fee for supervision).
This is typically an excellent strategy where a project needs to be rushed (or fast-tracked in industry jargon) and there is insufficient time to prepare detailed, coordinated documents for bid. Another good reason might be if there is likely to be a lot of changes during the design-construction process. Since the construction manager works for the owner on a fixed management fee, they are typically not profiting from changes in the work or work sequence.
Design/ Bid/ Build
This is the traditional method of procurement where an owner works with an architectural designer and related professionals to produce detailed drawings and specifications, often with cost reports. General contractors are invited to offer competitive tenders based on a detailed estimate of the documents within a fixed tender period.
This approach has the primary advantage of cost competitiveness, and a detailed set of documents will be the best guarantee of maintaining cost control during the process.
Some disadvantages of this approach may be:
(1) significant time is required for detailed document preparation and the tender period and
(2) document errors or revisions to the contract may result in some loss of cost control since changes could be costly.
A Design-Build project has the overwhelming advantage of convenience. By contrast, the traditional Design-Bid-Build and Construction Management approaches have the advantage of the competitive marketplace with multiple contractor estimates (and the possibility of cost-saving).
The traditional/construction manager contracts may allow a high degree of control since design and construction stages will involve an independent professional hired directly by the owner.
Selecting your Team
Before making any decisions about a direction for your particular project, talk to professionals knowledgeable in the construction industry in Cayman. Architects, builders and quantity surveyors will usually be willing to share their experience at no obligation.
Each method described previously has its devotees and detractors and it is ultimately up to the owner to decide which of the various methods will be a good fit. Seeking professional help from someone with a detailed working knowledge of these procurement options and how they work in the Cayman Islands can help you make an informed choice. Do not simply copy what someone else has done. It is important that you choose an approach after weighing all the pros and cons. While each approach may have a very different risk profile to you (after all some people like to base-jump, while others would rather take a nice stroll along the beach), it is very important that you own this decision fully.
Whatever approach you choose, it will be the people you select to work with and manage the process, who will be the key players in developing and managing a successful project. Consider the following when choosing your design and build professionals:
- Integrity and reputation should always be main ingredients when selecting people, so look at current, recent and past jobs, talk to past customers and check their payment and litigation history
- Choose design professionals who are adaptable and have a team spirit
- Ask your contractor, construction manager and architect to provide a checklist and procedures for administering, inspecting and testing the various stages of your project
- It is strongly recommended that you meet everyone who will be a part of making your project a success. Make sure you establish a good working relationship and feel comfortable with all the people who are involved
- Enquire about their current workload — can they handle your job and give you the attention and support you desire?
- Can you communicate with this individual or team openly?
- It is important that you do your homework, take your time and make sure that all of the design professionals you intend to engage carry professional indemnity insurance
- Only agree to terms after you are absolutely sure you have the ‘dream’ team that truly has your best interests at heart!
While there are many components to consider carefully, some being significantly challenging and time consuming, building your own home is an exciting project and for many people, it is a dream come true; so you should endeavour to have some fun too!