Cost plus In this model, the owner pays the general contractor the costs of construction plus a predetermined fee. This shifts risk to the owner – because there is no incentive (other than repeat business opportunities) for the contractor to mini- mize costs. While it can be helpful to have the general con- tractor involved earlier in the process with this model, the “uncertainty in terms of total cost to the owner” causes fi- nancing challenges, as well as equity issues as the “owner takes liability on cost overruns.” Construction Management This model makes the most sense when the owner has solid construction experience. Essentially, the owner as- sumes the responsibilities (and risks) of the general con- tractor, contracting with the contractor as a consultant, who in turn contracts with sub-consultants. “The construction manager acts as the owner’s agent and is typically com- pensated for the cost of the work plus a predetermined fee.” The owner assumes virtually all of the project risks. Challenges arise when the construction manager must answer to two masters, the design consultant and the owner “each of whom may disrupt schedule or budget” – and the difficulties in managing the schedule and budget if contract documents are incomplete. Construction Management at Risk Here, the owner contracts directly with the consultant and the construction manager. “The construction manager then contracts with trade contractors, assuming the obli- gations of the owner.” Bellinger says this model incentivizes keeping the proj- ect on schedule but there is “tension where construction costs or schedule are impacted by design issues” – there can be “finger pointing between the owner’s consultants and the construction manager and trade contractors.” Ontario’s Construction Lien Act Review Continued from page 8 “The current legislation requires a fight,” he said. “It is a multi-year process. You are paying interest on money that you are borrowing. That’s where adjudica- tion becomes an interesting option.” It would be better than just putting a lien on the project, where holdbacks and payment delays can stretch for years. Howard Krapat, partner at DLA Piper, also said that the adjudication process might combine a solution to the Lien Act’s costly delays and consequences for prompt payment. Ackerley said the key may be three concepts, “woven together in some fashion” including prompt payment rules, a new adjudication process, and these two ideas married with the existing lien legislation. He said there is a fourth issue – how money is han- dled within a construction project, specifically the trust account concept. The CLA’s trust provisions “is sort of a second pro- tective remedy, which comes up frequently in insol- vency proceedings,” Krapat said. But this has another layer, because of conflicts at times with the federal Bankruptcy and Insolvency Act – which receives priority in considering the rules. OVER $1,000,000,000 Design-Bid Build Bellinger says “this model has gone by the wayside” be- cause of the accountability issues and conflicts that can arise. The owner contracts with the designer and hires the builder at the early stage – and the builder is expected to “come in on a fixed price before design is final.” “This can work if the owner is prepared to give basic re- quirements and stand back” but can be problematic be- cause the architect and builder aren’t working together, and “the constructibility of the design becomes an issue.” Design/Build (Integrated Project Model) In this model, the contractor and/or design/contracting team set out to achieve the owner’s objectives with the ability of the contractor and designer to modify the project to meet the objectives. “Giving a fixed price, it’s the pricing of the building based on a basic statement of requirements of the owner.” The challenge is that the owner should not get too far into the details.” The cohesive team approach from the beginning elimi- nates many conflicts and delays, she said. “There’s in- creased potential for a relatively certain fixed price since all parties are working together to conform to the owner’s re- quirements.” 600 - 1000 Centre St. N Calgary, AB Main 403.296.2400 Toll Free 1.800.565.8132 rogersinsurance.ca The Canadian Design and Construction Report — July - August 2016 – 11