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 — September 2016 – 11