A construction project begins with an idea, a perceived need, a desire to improve or add to productive capacity or the wish for more efficient provision of some public service. Whether the idea will be converted into a completed project will be decided during the planning and design phase. However, prior to that, among the first things the owner must do is to decide what sort of project delivery system will be used. How will the various parties be related? Will the owner engage a design professional to prepare plans and specifications and then contract separately with a construction contractor? Or, will a single entity be responsible for the entire project? Other possible options include several separate specialty contractors, each related by contract with the owner, the use of a construction manager as an advisor to the owner, the use of the owner’s own construction forces and the phasing of the project such that individual portions of the field work are commenced prior to the completion of all design work.
The other primary decision required by the owner early in the project relates to the type of contract to be used with the contractor. Will the contractor be paid a specified fixed price, regardless of the actual quantities used in the project and regardless of the contractor’s actual costs? Will the quantities of materials be measured and the contractor paid on the basis of those quantities and pre-agreed-upon unit prices for each material? Or, will the contractor be reimbursed for its actual costs, plus a fee, perhaps with an agreed-upon upper limit? The owner will also need to decide the basis upon which the design professional will be paid. Often these decisions are not made without consultation and advice. Depending upon the owner’s expertise and experience in administering construction contracts, the owner may engage a professional engineer, an architect or a project manager during this pre-project phase to advise on these important decisions.