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2.2.5 Traditional Approach Disadvantages

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Under the Traditional Contracting approach, the Employer often chooses to get involved in the direct appointment of companies to undertake key elements of the Project, such as, but certainly not limited to, curtain walling, elevators, and specialist installations (e.g. air conditioning). This means that there can be many different companies involved directly with the Employer, each requiring a separate set of contract documents to be signed with the Employer. This situation can lead to difficulties for Employers when it comes to allocating responsibility and liability to the right party for anything that goes wrong in the implementation stage or, subsequently, with the completed facility. Added to this, the Employer usually shoulders the greatest financial burden for Project delays if one of the contracting parties delays any of the other contracting parties.

Another area where the Employer is more vulnerable under the Traditional Contracting Approach is with regard to Variations, since the Contractor will be looking for reimbursement for all the extra costs involved. These extras often arise because the Contractor is very often appointed before the Design Team has fully completed the Detailed Design work; the extras creep in as the shortcomings in the design work are uncovered. By contrast, under the EPC and Design-Build approaches, once the Front-End Engineering Design has been fixed, the Contractor will thereafter be deemed to have allowed in its bid pricing for everything necessary to complete the Project. Any changes brought about due to the development of the Detailed Design by the Contractor will all be at the Contractor's expense and not be reimbursed by the Employer.

As mentioned in Section 2.2.4, one vital point about the overall relative time-frame taken to complete a Project under the Traditional Contracting arrangement needs to be remembered. This is that the time taken to compete the design work generally has to be added to the construction time to obtain the overall time-frame for handover of the Project from its conception. By contrast, under an EPC/Design-Build arrangement, a large portion of the design work can usually be undertaken while the procurement and early construction activities are ongoing. In theory at least, this means that, under both the EPC approach and the Design-Build approach, a saving can be achieved in the overall time taken to get to the point of handing over the completed Project to the Employer compared with adopting the Traditional Contracting approach.

Practical Risk Management for EPC / Design-Build Projects

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