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Feature article

Procurement part 2:

Smaller projects

WORDS BY James Legge

The recent Winter edition of Architect Victoria interrogated the issues relating to the role of the architect in the contemporary procurement of both design services and construction – particularly in relation to large projects. Design and Construct, Novation and the increasing role of Project Managers in the procurement methods used in large contemporary projects, along with the relationship between risk and value were examined.

This Spring edition of Architect Victoria seeks to further this discussion, but this time looking at small to medium sized projects. We will examine the role of the architect and some of the risks and opportunities in various procurement methods of both design services and construction.

We will look at a range of models; some that architects are ‘arm twisted’ into using, others that architects are advised to avoid but which remain the only practical commercial model, and models where architects are taking back the initiative and control of projects in order to realise better built and community outcomes. We will also look at possible models to explore into the future.

When I first started practicing as an architect in the early 1990’s, the practice’s projects were run in the traditional manner. We were engaged as architects by the client, who with our assistance also engaged the other consultants. Once the building was designed and documented, a competitive tender was held between three or four known builders, and a contract signed between the client and the builder. We were there during the construction phase to ensure the client and builder played nicely together and everyone followed the contract documents. A traditional and straightforward process that generally provided an outcome that reflected the quality of the drawings, both in build quality and in cost variation.

Some contracts, such as the Small Building Works (SBW-2), were written in a collaborative process between the Australian Institute of Architects and the Master Builders Association. Others for larger projects were produced by Standards Australian and designed to be used for construction projects across various industries.

Occasionally our clients would seek to have their lawyers modify the terms of the contracts to their advantage. We would firmly discourage this, pointing out that these contracts were in wide use, produced by government or industry bodies, and were designed to be fair and equitable to both parties to the contract.

So what has changed?

Aside from domestic projects, where I suspect that clients still largely rely on the recommendation of their architects, it has become more and more common for institutional and commercial clients to have top tier law firms edit and amend standard industry contracts to the point that it is now rare to use an unaltered Australian Standard contract for either consultants or builders.

Even government departments and government funded organisations undertake this practice with the aim of shedding as much risk from themselves and loading it instead on to either the consultant or the builder. This, despite the claims of Standards Australia that ‘it leads and promotes a respected and unbiased Standards development process ensuring all competing interests are heard, their points of view considered and consensus reached.’

In a further casting off of risk by clients, architects are now often asked to engage all other consultants as sub-consultants and provide warranties for both their own and their subconsultants’ work; while builders are asked to sign up to contracts that require them to take on the risks of latent conditions, such as site contamination – a risk that clearly should rest with the owner of the land.

Nicole Hardman points out that architects have let themselves be left out of decisions around one of the key aspects of the delivery of great buildings, decisions around procurement. Nicole calls on architects to equip themselves with knowledge and understanding of the procurement landscape and take back a position of leadership in procurement discussions.

Jon Clements examines the decision making processes within Universities, Councils and other similar institutional bodies in relation to procurement. Some procure their architects on tender price alone, others use a matrix. Most will require experience in similar projects setting up a catch 22 for young firms who may well be completely capable but lack examples of similar built work that would get them through the matrix evaluation. How do we encourage all institutions, particularly ones that receive government funding, that the evaluation process should be based on ‘best value’, rather than cheapest price? And that ‘best value’ may well involve using someone who is not the least expensive, and doesn’t have the most experience, but will likely give the project everything they have to get the project built?

In counterpoint to the above, and in direct opposition to what we are warned as graduates training for registration, Peter Malatt and Mark Healy propose that some projects can proceed sensibly as Cost Plus contracts. Often insisted upon by hospitality clients, these agreements rely on good working relationships between the architect, the client and the builder, all of whom are working towards the best possible outcome for the budget and time available.

In many hospitality projects completed by Six Degrees the lease of an existing venue has been purchased, but significant works are required to realise cash flow and profit to the new owner. In these instances, Cost Plus contracts are the only sensible way of proceeding as they allow works to proceed almost immediately, with design and documentation straining to stay ahead. Judged by many as more of an old fashioned handshake agreement than a sensible fixed price contract, they do at least lack the ‘arm-twisting’ referred to earlier in the amended industry standard fixed price contracts.

Another non-traditional form of construction procurement sometimes encountered by small practices, or indeed by architects undertaking their own homes, is the client acting as Owner Builder. A difficult and time consuming role for someone unfamiliar with the construction industry, it can result in significant savings and truly spectacular outcomes if undertaken by someone with enough trade contacts and enough time to be fully engaged in the building process. Chris Gilbert and Jas Johnston document how this procurement method helped enable the spectacular outcomes of the Sawmill House.

New and exciting developments in procurement start to turn the term on its head. Who is being procured in a Nightingale Model project when an architect does away with the developer and gets together a group of small investors to fund a project where a triple bottom line is being pursued? Where quality, quantity (of square metres) and social sustainability are not sacrificed to the altar of profit maximisation? In Nightingale Model projects, explained by Jeremy McLeod of Breath Architecture, the investors, usually including a number of architects, agree to cap profit and back the architect driving the project in the pursuit of a great built outcome. An outcome that is geared towards an ever growing database of purchasers not interested in the cookie cutter approach of agents and most developers.

Then there is crowdfunding, the healthy, bouncing, laughing baby of procurement. Currently frowned upon by ASIC, but considered with growing interest by many, crowdfunding seeks to harness the power of the mob to fund projects via small contributions from many. Hundreds of thousands of dollars have been raised for various projects by platforms such as ‘Kickstarter’. How can architectural projects fit into this model, now and into the future? Catherine Debreceny examines what is currently allowed and where ASIC legislation is heading.

This edition seeks to be both educational to small and medium practices and a call to arms for architects to not be passive in this space. We need to suggest appropriate procurement methods to our clients and charge according to the risks we take on. If we are pushed to take on greater risk in the construction process then we should push to be remunerated accordingly. We should be open to the use of various procurement methods, depending on the project, and alive to the risks and possibilities of them all.

This is no longer a static field using only traditional models. For some time it has been undergoing change that has not been in the interest of either architects or the built environment, however it remains an area that, by its nature, we need to remain engaged with. Indeed it is an area in which architects need to take back the initiative.