by Iain Wishart
Differences of language, custom and culture are obvious challenges facing UK organisations who may become involved in development activities in the EC. Although the European Commission is currently pressing for a radical pan-European standardisation of construction documentation it will be some time before any proposals are fully considered or implemented. Developers wishing to extend their activities into Europe will therefore need to familiarise themselves with the several different methods of procurement which currently exist in the EC.
This brief synopsis is intended to help highlight the similarities and differences in letting building contracts within the principal countries of the EC to enable newcomers to this market to glean a basic understanding of the prevalent procurement methods.
In the UK, we have become familiar with three foremost methods of procurement for building, which could be summarised as:
1 General, or lump sum, contracting — where the client commissions an architect to prepare a design and a main contractor is employed to construct the building using specialist trade subcontractors.
2 Construction management/management contracting — in which trade contractors are managed by a management contractor or a construction manager, again with the architect being employed by the client to produce a design.
3 Turnkey contracting — where the contractor is responsible for the design and construction and provides the necessary design services.
The three charts indicated in figs (i) to (iii) illustrate the principal methods. There are of course several variations to these themes and there is a positive plethora of different forms of contract, but in geneal terms, building procurement in the UK and throughout Europe is normally achieved by one of the three methods described, with general lump sum contracting being by far and away the most common.
In France, although lump sum contracting is becoming more common, it is more likely that a form of construction management will be used with the architect undertaking the role of construction co-ordinator. The architect’s design may be fully detailed, but more often than not the trade contractors themselves are expected to respond to outline drawings and performance specifications during the tender period with their own proposals. Trade contractors sometimes group together and decide upon one representative who liaises with the employer, and the lead contractor will often be the structural frame contractor. UK employers may be encouraged to learn that tendering trade contractors expect to have their bids reduced during tender negotiations and they make provision in their tender submissions for subsequent negotiated reductions.
Similarly, in Western Germany a form of construction managment is the prevalent method of procurement and here again the architect in addition to his design role may have the co-ordinating responsibility or in some cases this may be undertaked by an independent project management firm. Design-and-build contracts are quite common in West Germany, with one source estimating it as high as 40%. In common with their French counterparts, West German contractors are quite used to grouping together, although they normally do so in more formal joint ventures or consortia.
In contrast to France and West Germany, the Italians favour a lump sum contracting arrangement, but, unlike contractors in the UK, many Italian contractors will undertake considerable amounts of the building work themselves and will directly employ the craftsmen with the skills to enable them to do so, subcontracting the mechanical and electrical installation work and one or two other specialist trades.
Spain, like Italy, favours a lump sum contracting arrangement, but unlike Italy the general contractor will subcontract most of the work to others. As is the practice in Italy, the detailed design work is normally carried out by the architect.
Residential construction accounts for a substantial proportion of the Portuguese industry’s turnover and this factor, together with the influx of foreign construction companies and developers (mainly British) in the Algarve, has helped to create a north-south divide. The larger contractors in the north execute most of their contracts in a lump sum contracting arrangements with the employer retaining an architect to produce a detailed design. There is a tendency even for major contractors to keep much of the construction work in-house, subcontracting specialised trades only. In the residential construction industry in the Algarve, much of the development work is undertaken on a design-and-build basis.
In Greece, the industry has under 500 registered construction companies and the majority of these might be classified as small companies when compared with their UK counterparts. There is, however, an unaccounted number of unregistered subcontractors including considerable numbers who operate on a labour-only basis. Most of the larger developments are therefore carried out by a relatively small number of major contractors who are licensed by the government to carry out the work and most would be contracted on a lump sum basis.
In the Netherlands, the Dutch typically enter into a lump sum contracting arrangement with the employer appointing a main contractor who in turn will subcontract part of the work. Because of the soil conditions which prevail in most parts of the Netherlands, most buildings require piling and it is normal for both demolition and piling contractors to have direct contracts with the employer. It is also not unusual for the employer to enter into direct contracts with specialist firms for the mechanical electrical installation work and the main contractor is paid a fee for coordination and supervision.
Although Belgium shares common languages with both France and the Netherlands, their procurement methods tend to be the same general contracting arrangements as are used in the Netherlands and there are close parallels to be drawn to the Dutch construction industry.
As one might expect in all the countries there are differences between the systems and methods adopted by government and public authorities and those used in the private sector. Each country has its own preferred forms of contract, although Italy has less in the way of standardised forms than other countries, which is surprising in a country where the state is heavily involved in most aspects of industry. An EC committee, inaptly named GRIM (Group for Regulation Information and Management) is considering the feasibility of devising a European standard form of contract, at least for public procurement (which will become the subject of open tendering this year for projects over 5m ECUs).
One marked feature of European contracting generally, as compared with the UK, is the greater involvement of contractors in the development of design. It is commonplace in a number of the countries that architects will produce scheme drawings for tender and contract purposes and then restrict themselves to a role of approval and supervisor only.
Contractors will therefore work with designers to try to achieve an optimum solution in terms of value engineering.
The United Kingdom is unique within the EC in its use of quantity surveyors, and the profession has no near equivalent in any EC country, although certain of the measurement and valuation functions are carried out under the control of architects and engineers. However, we are confident that with the greater interaction of business within the EC, there will be a growing demand for the services of quantity surveyors in advising on construction costs, procurement and construction management. The advantages of independent cost advice and the disciplines that the profession brings to construction cost management are becoming recognised in many European countries.
