Novation Agreement 

Novation is the transfer of contractual rights and responsibilities from one party to another. While the benefits of a contract can be transmitted by assignment, the parties must use a novation agreement to transfer both the benefits and the liabilities.

A novation happens when one contract is canceled and replaced with a new contract in which the original contractual duties are carried out by different parties. In the context of building design and construction, novation typically refers to the process through which design consultants are first engaged to the employer  but later 'novated' to the contractor.

This is common on design and build projects where the design team is appointed by an employer to conduct preliminary studies or prepare a concept or detailed design, but when a contractor is appointed to carry out or complete the design and construct the works, the design team (or a part of the design team) is novated to work for them.

This can be advantageous to employer s because it preserves continuity between pre-tender and post-tender design while leaving the contractor solely responsible for designing and building the project.

The procedure of novation does not hold a contractor liable for any design work done for the employer prior to novating their contract. To accomplish this, the building contract must clearly declare that the contractor studied and adopted the design.

Documentation of the Novation Agreement

Without approval, a novation agreement is not feasible. If novation and the terms of the novation agreement were not agreed upon when the consultant was first hired, they are under no duty to consent to be novated. It is also critical that the primary contracts between the employer and the consultants, as well as the primary contracts between the employer and the contractors, have specific language requiring the contractor and the consultant to enter into the novation agreement.

To eliminate the risk of simply agreeing to an unenforceable agreement, a specimen form of the proposed novation agreement should be affixed to the original contractual instrument.

It is critical that any novation documentation is properly drawn up and makes clear which services consultants performed for the employer and which they will now perform for the contractor; otherwise, initial appointment agreements, such as a requirement for the consultant to inspect the contractor's work and report to the employer, may be rendered meaningless when they are in fact now appointed by the contractor.

Kinds of Novation

Standard: When two parties agree that additional conditions must be added to their contract, creating a new one.

Expromissio: This novation must involve three parties: a transferor, a counterparty, and a transferee. All three parties must agree to the new terms and enter into a new contract.

Delegation: One of the contract's parties transfers their responsibilities to a new party, legally tying that party to the contract's provisions.

Novation vs. Assignment

An assignment transfers rights or property from one person or business to another. However, the assignment merely transfers the benefits; any duties stay with the original contract party. The new party receives benefits and potential liabilities due to the novation.

Another significant difference is that novation requires the approval of all parties involved, which is why novation is nearly often accomplished through a tripartite agreement. Subject to the precise provisions of the contract, it is not necessarily essential to get consent in the case of an assignment.

Novation Subcontractor of Construction Contract

A novation agreement transfers a construction subcontractor's rights and duties from the first (in administration) contractor to a second (solvent) contractor.

Changing a consultant's appointment from the professional consultant and the employer to the professional consultant and the contractor under a novation agreement. A deed of novation is typically used on a construction project to transfer the appointment of a professional consultant from the employer and the professional consultant to the design and build contractor and the experienced consultant.

Novation Agreement Consideration

Most common Design-Build contracts allow for novation and include standard novation deeds. The following issues should be taken into account and handled by parties to a novation deed:

Release

The standard novation deed includes a general release in which the outgoing and continuing parties release each other from all claims arising from the original contract.  Parties should obtain clarification on the novation's impact on accrued rights, claims, and demands arising from the original contract, as well as all future rights, claims, and demands.

Warranty

The requirements of the standard deed of novation include a warranty by both the outgoing and continuing parties that the work completed by the continuing party under the original contract is in conformity with the provisions of the original contract.

Risk management

The crucial point is that the insurance program for the consultant must be properly structured to meet this potential gap.

Advantages and Disadvantages of Novation in Construction

Advantages of Novation are:

A Reduced Learning Curve: Working with the customer early on allows the architect to obtain a thorough understanding of the customer's needs. If the architect is not novated, this knowledge may be lost, and parts of the process may have to be repeated with a new design team. This can be damaging to the ultimate design of a complex or highly technical undertaking. Novation can give some economies of scale that the customer can benefit from in terms of the design team's learning curve. If the architect knows they will be involved throughout the process, not just during the pre-contract and tender stages, there is a chance of achieving a lower overall cost. Not to mention the time and money it takes to brief a new design team.

Reduced Contractual Risk for the Employer: The procedure of novation and the transfer of responsibility to the contractor implies that the employer contractually accepts minimal risk while yet having control over project design. Of course, exact contracts vary, but at the point of novation, the Design-Build contractor is responsible for all future design work, which can occasionally extend to cover all previous design work accomplished prior to the contract being granted (including any design errors). As the contract proceeds, the employer only has to deal with one company: the contractor. This streamlined method benefits the employer by removing the possible complications and hassles of interacting with many organizations to resolve issues.

Early design development improves cost certainty: Cost certainty is better in Design-Build projects when the initial employer's needs are most precise. Novation assists customers in achieving a well-developed design early in the process by providing the architect with clarity across the duration of their collaboration. If the architect is satisfied that the scheme will move forward and is not working "at risk," they are more inclined to develop the design further, providing for a more accurate grasp of costs during the tender stage and boosting total cost certainty.

The Contractor has more influence and control over the design: Traditional contracts have the potential for conflict between the contractor and the design team over who is responsible for flaws and whether they are the consequence of a design or construction quality issue. This often puts the employer in a tough position and raises the likelihood of the parties reaching a 'stalemate. 'Novation helps to avoid this problem; in an integrated design and construction team, the contractor is automatically responsible for resolving the issue. These concerns should potentially appear less frequently in a novated Design- Build contract because the designer and contractor worked closely to jointly develop and agree on the final design, as well as to ensure buildability and quality. Through the influence of design decisions at each level, the contractor is better positioned to manage and control the risk to quality.

Whereas The Disadvantages of Novation are:

The Contractor and Architect Must Have a Good Relationship: On every Design- Build project, the contractor and architect must collaborate closely, but this is more crucial when novation has occurred. Novation is frequently criticized for putting further strain on these parties' relationship. Without a healthy relationship, there is a larger possibility that the project will suffer and crucial concerns such as time and cost will suffer.

 

 

Bridging Method for Construction Project Delivery

What is Bridging in Construction

The Bridging method is a tried and true method for completing construction projects. Bridging is more effective than other methods in protecting the project owner's interests. In a design-build contract, the bridging method places final design and construction responsibility on the contractor. However, unlike a typical design-build contract, the owner is fully protected from the start with all aspects of the design and specifications that are important to the owner, and the owner ends up having an agreement with the contractor to have full design-build responsibility.  All aspects of the design and specifications that are important to the owner are fully protected by the Owner's Design Consultant ("Bridging Architect"), while proposing design-build contractors are free to use their skills and capabilities to provide the owner with the best total price and time of completion proposals.

A properly executed Bridging project's construction price is not only as dependable for the Owner as a price based on final Contract Documents under the traditional Design-Bid-Build method, but it is even more dependable because the Owner's exposure to contractor-initiated change orders due to errors or omissions in the contract documents is greatly reduced. Frequently, change orders result in considerable increases in the ultimate building contract price. Bridging should be considered for every construction project as a cost-effective and efficient form of project delivery that, when done correctly, would save the owner time and money.

Two design firms are involved in the bridging process. The first is under contract with the owner, and its duties extend halfway through the design process. The resulting documents define the aspects of the project that the owner wishes to control; they also provide enough detail to allow the selection of a construction company. The documents allow the contractor to seek alternative construction methods and thus achieve cost savings in construction technology. Following the selection of the contractor, the contractor appoints a second design firm (with approval by the owner). This design firm is hired as a subcontractor by the contractor and is in charge of final construction drawings and specifications. Construction does not start until the construction drawings are completed and all parties agree that the owner's intentions will be carried out.

Advantages

Bridging typically saves money on contract prices and provides the owner with a fixed construction price in about half the time and at half the cost of traditional design. Bridging also significantly reduces:

•        Costs incurred as a result of a change order initiated by the contractor.
•         Claims made against the owner
•         Delays/costs/disputes associated with resolving the ever-present post-construction "bugs."

Bridging also speeds up and smooths out construction, and project acceleration processes work well with it.  All of these advantages for the project owner, on the other hand, can be obtained using Bridging without sacrificing:

•         Possibility to be creative.
•         Control of design.
•         Control over design specifics.
•         Engineering quality.
•         Construction quality

The Bridging Method in Action

Schematic Design: After the program of requirements and budget have been established, and the site has been located, the Owner hires a Design Criteria Consultant (DCC) to complete the schematic design. There will be consultation between the DCC and the engineers. At this stage of the design process, however, few engineering drawings will be included in the DCC's drawings.

Design Development + RFP: The DCC is in charge of preparing the bridging contract agreements, which serve as the foundation for the Owner-Design-Builder agreement. This necessitates a DCC effort at least as comprehensive as an architect's usual design development services; yet, the finished documents will be vastly different because far more architectural design will be done. A combination of performance and design specifications will be prepared by the DCC and its consultant engineers. The bridging contract materials, which also serve as the Request for Proposal, are made up of the DCC's designs and specifications as well as other legal documents. To safeguard the Owner, the design, and the quality of the construction, everything should be thoroughly developed and/or specified by the DCC and incorporated into the DCC's design documentation.

Bid/Negotiation Phase: The Design-Builder submits definite bids, or a firm pricing is negotiated with a chosen Design-Builder. As a Subcontractor, the Design-Builder will use an approved, distinct design professional, or the Design-Builder may be a design-build company. Once satisfactory prices have been received, the Design Builder's design professional is given notice to proceed with the preparation of final comprehensive Construction Documents.

Construction Documents: The DCC oversees the creation of Construction Documents, which are prepared by the design Design-Builder's professional. These are the documents that are commonly referred to as building documents. The DCC examines these documents and reports to the Owner, who handles any concerns that arise as a result of the examination. The DCC, on the other hand, does not authorize these documents. The Contract Documents will be supplemented but not replaced by the Construction Documents prepared by the Design Builder's design professional. If a discrepancy is uncovered later, the Contract Documents will take precedence over the Construction Documents.

Second Step Award: From the standpoint of the Owner, one option to explore is to give the Owner the opportunity to terminate the contract for convenience at the end of the Construction Documents Phase by paying a previously agreed-upon fee for the Construction Documents (with the Owner then owning the documents). This is a crucial safeguard since it preserves the Owner's leverage at this point. It also necessitates the Design-Builder and the design-Design-Builder's expert adhering to contract restrictions.

Construction Phase: The Owner manages the design-build contract, with the DCC or other independent inspectors or testing firms witnessing and reporting on the work in progress. The Design-Builder's design professional inspects shop drawings and files them with the Owner on a regular basis. The DCC's reports to the Owner result in progress payments to the Contractor and retained funds.

Bridging Design-Bid-Build Delivery Method

The procedure of bridging with Design-Bid-Build is well-known in the industry and is logical and well-organized. Before allowing construction to begin, the owner receives a firm price based on all contract documents. The Owner has a direct professional relationship with the Architect and Engineer. Obtaining a sufficiently reliable total price, on the other hand, takes too long and costs the Owner too much. The strategy assumes that architects and engineers have the most knowledge of construction processes and costs, which is not always the case. Assumes that the Contract Documents (final drawings and specifications) are error-free, which is unattainable.

Bridging  Design-Build Delivery Method

The design-build bridging construction method is a two-step process that differs significantly from design-build in two ways. First, the owner hires a separate architect or engineer to set approximately (30-50)% of the project's "design criteria." After receiving proposals from design-build firms based on the design criteria package, the owner hires a design-builder to complete the design and construction. The design criteria package serves as a "bridge" document between the initial project concept and the design-build phase, as the name implies. These bridging documents include enough preliminary drawings and specifications to allow design-build bidders to submit a quick to react bid.

The second distinction between design-build bridging and design-build is in the fee solicitation and contract award criteria. Fees for design-build services are not solicited in the RFQ, and the contract is awarded based on the qualifications-based selection method under the design-build method. Fees and price estimates are solicited in the RFP for design-build services under the design-build bridging technique, and the contract for these services is granted based on the lowest responsive, responsible bidder standard of award.

Bridging  CM-at-Risk Delivery Method

The Contractor CM-at-Risk enters the process early in order to offer costing, timing, and construction method information to the Owner's Architect and Engineers while the design is still being finalized. The contractor is paid a fee and secures subcontractor pricing that are competitive. At one or more phases during the design process, the contractor delivers a "Guaranteed Maximum Price" (GMP). But a GMP based on less than 100 percent full drawings and specifications is not contractually enforceable and can be deceptive to the Owner, just as it is in Design-Build. In many circumstances, a conflict might arise as a result of the CM-at-Risk using the same subs on other projects while also acting as a typical general contractor on other projects. The "finger pointing" problem that plagues Design-Bid-Build is also present with CM-at-Risk.

There is no conflict of interest if the Owner's Design Consultant and an external project Manager are the same firm because the Owner's Design Consultant is not the Architect/Engineer of Record. As a result, the responsibilities of Owner's Design Consultant and project Manager can be played in a variety of ways:

•               Separate Owner's Design Consultant and External Project Manager
•     Owner's Design Consultant in collaboration with Owner's Internal Project Manager
•         The same firm serves as both the external project manager and the owner's design consultant.

Conclusion

The bridging method has detractors because it has the potential to limit the design-build team's inventiveness. Bridging, on the other hand, aids the conventional Owner's transition to the design-build project delivery system by offering an "independent" design criteria consultant and a comfortable scope definition level. As the Owner develops expertise dealing with the dynamics of the design-build process, this strategy may lead to full use of the design-build project delivery system.

 

Construction Project Manager Job Description

Sometimes the owner decides to turn the entire project over to an independent manager. As one example, a school district may have little or no in-house expertise on capital project development; rather than employ a large provisional staff to supervise planning, design and construction, they might use the ‘project manager’ approach. Thus the project manager manages the project on the owner’s behalf. This arrangement means that the project manager contracts with the designer and the general contractor.  

For example, the project manager might decide to engage a single design–build organization or might employ a construction manager to carry out the work. The distinguishing attribute of the project manager form is the assumption of the responsibility for the entire project by a separate organization, on behalf of the owner.

Importance of Project Manager in Construction

Project Manager (PM) is responsible for the success of a construction project. They supervise every aspect, including the planning, execution, monitoring, control and closing. Project Managers ensure that timeframe targets and budgets are met. also, it is critical that a good owner relationship is maintained throughout the project.

PM’s responsibility extends beyond the project itself to the management of their staff and daily activities. For example, they may need to check the proper building materials have arrived at the site on time or explain the day’s activities to their team. As part of the monitoring process, PM’s must regularly report on the project’s progress to top management and the owner. In fact, owner support is a big part of the role. PM’s will plan and arrange visits to potential, new and existing stockholders to ensure they have everything they need.

Role of Project Manager in Construction Industry

project manager plans, schedules, and executes a project. Their duties include preparing the team for work, forecasting and determining what work needs to be done for different stages of the project, and estimating project completion costs. Some of their crucial responsibilities include budgeting and helping to procure land for a project. The following essential skills are required for project managers:

·  Planning: planning a construction project is one of the main roles of construction project managers. They must develop a comprehensive project plan, track the progress of this plan, and effectively communicate the plan with employees and owners. Without a detailed plan of action, the project will not be completed efficiently and therefore could be subject to delays and budgetary issues.

·  Time Management: A successful construction project manager is also skilled at time management. In order for a project to be delivered on time, the project manager must be able to set a realistic timeline and consistently meet the benchmarks within it.

·  Contract Management and Procurement: Project managers are typically aware of the entire contracting framework in order to deliver the project per contract specifications. This requires legal knowledge as well as procurement and contract management familiarity.

·  Budgeting: A project manager is responsible for keeping track of a project’s funding and how much it has used to date. Budgeting is necessary for the project to compare the estimated amount with it.

·  Risk Management: An effective project manager will always see each project as a trade-off between risk and reward. Risk management involves risk identification, risk analysis, and risk prioritization and control.

·  Leadership: Project managers require to be able to resolve conflicts between their team's members to move the project at a reasonable forward.

·  Communication: Both oral and written communication skills are necessary for success, as project managers communicate within the organization as well as with other organizations for support.

·  Organization: Project managers need to be organized, as they are responsible for ensuring access to tools and building materials, arranging meetings with owner, and setting worker schedules.

·  Negotiation: according to budgeting, the project manager may need to negotiate with owner, for either more funding or more time.

· Problem-Solving: from time to time, a problem may emerge that requires unconventional thinking. Project managers need to be able to think outside the box to solve problems efficiently.

  Project Manager VS Construction Manager

While these phrases are sometimes used interchangeably in daily conversations, this is actually a misnomer. A project manager’s role is to represent the renter throughout the entire build-out process, from assisting in the site selection process and budgeting, to move-in and ongoing support. The project manager is responsible for managing the construction manager, as well as the architect, engineers, and any other vendors involved in project construction.

The construction manager only enters the picture once the project enters the pre-construction phase and is involved only through the end of construction.

  Project Manager VS General Contractor

project manager has construction experience, and will be on site throughout the project. project manager will find subcontractors and schedule them, order materials, and oversee the entire process. They do not actually participate in the construction process, but rather manage a group of individuals. They cost less than a GC, but may not have ultimate control like a GC.

General Contractors assume responsibility for the entire project. They handle the permitting process, completing work, and ordering materials. The owner simply secures the financing or pays the contractor at regular intervals. Stress levels are minimal since the owner is not involved in daily operations. However, these services come at a price. It is common to see GC’s charging up to 20% of the total cost of the project. If the owner has the financial means to pay or finance this fee, a GC may be the right choice for him.

Advantages and Disadvantages of Project Management

Here is a list of the advantages and disadvantages associated with project manager method.

Advantages

· Owner relies on project manager for coordination of most aspects of project.

· Potential for rapid project start-up and prosecution

· The project manager actually manages the project and leads their team throughout the entire project.

· The owner is able to provide feedback throughout the project.

Disadvantages

· Cost overhead can be more than many companies can afford. The hiring of project managers and training a project management team can be difficult for small companies and companies that are facing financial difficulties.

· Obsession is becoming a problem among project managers and makes for a stressful environment for all involved. Project managers can actually hinder a project by becoming too rigid or precise in their project plans. The team members no longer have a certain amount of flexibility.

· The project manager sets strict deadlines on resources and forces the team members to work within strict parameters.

· The manager becomes lead by the processes of management instead of being flexible. This causes their managerial skills to weaken and they become stagnant in their position.

· Owner relinquishes considerable control

Conclusion

While construction project managers may run several different roles within each specific project, their responsibilities are key to success in a construction project. A construction project manager helps employees effectively work together to create a great final product. The manager is the leader of the project, but by no means is it a job that can be done alone. Through proper teamwork, communication, budget management, resource management, and planning, a project can turn out more than successful. It takes a great team mentality in the construction business to make something great, but it also takes a great manager to direct everyone towards a successful project.

 CONSTRUCTION MANAGER CONCEPTION: AGENCY VS AT-RISK

The owner may hire a construction manager to provide professional construction management services. The Construction Manager Organization advises the owner on construction matters, including cost, schedule, safety, construction process, and other considerations; This advice can be provided throughout the project life cycle or in selected parts of it.

Construction Management (CM) also refers to a set of legal principles that are incorporated into the contractual relationship between the project ownership organization and the engineering / design company providing these services.

Two types of construction management have evolved.

Construction Manager Agency

This term describes the type of relationship, rather than the way the project is delivered. In a construction management agency (CMA) relationship, CM represents the owner as its designated representative. CM can act legally on the owner's behalf to sign documents and make project decisions.

 The "agency" type to arrange construction management, the construction manager acts as an advisor to the owner for a fee and the owner engages separate establishments for contractors and designer. Here, the construction manager acts as an extension of the owner's staff and takes few risks except for those related to fulfilling his advisory responsibilities.

A CMA agreement can be structured to cover the entire project life cycle, from design to turnover, or for a specific segment of the design or build process.

Construction Manager At-Risk

This term, commonly abbreviated as CM At-Risk or CMAR, refers to a specific type of project delivery method as well as the contractual relationship between the CM and the owner.

The Construction Manager "at risk" occupies a contractual position between the owner and the implementation contractors, with the construction manager replacing the general contractor in this arrangement and thus holding various commercial contracts. In addition to general contractor roles within the traditional approach to design, give and build, the Construction at Risk Manager provides expert advice to the owner on all construction-related matters, usually beginning long before field work begins.

Often the contract between the owner and the construction manager is based on a guaranteed maximum contract price to coordinate, supervise and deliver your facility. In this legal relationship, CMR advises the client from the start of the project, and acts as a general contractor. While a general contractor often performs some of the field construction work himself, most, if not all, of the actual construction in the at-risk construction department is performed by subcontractors.

Alternative Project Delivery Methods

In addition to the CMAR method of project delivery, also can choose Design-Build(DB) or Design-Bid-Build (DBB) method.

Traditionally, most construction projects have used the DBB method. In this approach, the owner contracts with a company to complete the design phase of the project, and another company to carry out the construction phase. The DBB method has become less popular in recent years, as it exposes the owner the highest levels of risk.

In design - build (DB) method, one firm is involved to handle both the design / engineering and the physical construction of the project. This might sound like the CMAR approach; However, they have some differences.

CM at Risk vs Design-Build

There are considerable differences between CMAR and Design-build (DB). CMAR is fundamentally a traditional design, bid, and build delivery method at its core. It leverages from some preferred focus of the design-build (DB) collaboration, but the performance responsibility on the part of the engineer and contractor remains distinctly separate. Ultimately, the owner must still adjudicate between design and construction issues.

In the CMAR relationship, CMR bears the risk if the project exceeds the contractual price or schedule. The second difference is that, in a CMAR arrangement, the owner may employ the services of a separate design or engineering firm to handle the preliminary phases of project design, although that is not a requirement.

Construction Manager Advantages & Disadvantages

By engaging an expert advisor early in the process, the owner can achieve a project with a near optimal balance of time, cost and quality features, due to the opportunities for review of design alternatives as they are developed. Materials and equipment with long delivery times can be identified and ordered early in the process. There may be less exposure to contract claims and litigation.

A disadvantage is a lack of consistency in contractual arrangements among different projects.  Furthermore, even though it is the owner’s advisor, the construction manager may tend to emphasis the traditional contractors’ interests in cost and time savings, to the detriment of high-quality construction. Even though the ‘at-risk’ construction manager enters into contracts with subcontractors, these contracts are often in the name of the owner; thus, these subcontractors may look to the owner for payment, unlike in the type of general contractor–subcontractor arrangement. In more detail:

Agency-CM Advantages

·        Earlier involvement of CM in design and construction phases

·        provides construction expertise to designer

·       Provides the opportunity for “fast tracking” or overlapping design and construction phases – faster than traditional design-bid-build system

·        Enhances the owner’s own resources to help manage cost, time, and quality

·        Procuring separate design and construction contracts is less change for firm

·     Provides an independent point of view regarding constructability, budget, value engineering, and contractor selection (No inherent bias towards design or construction)

·        Potential to fast track early components of construction prior to completion of design

·        Reduces the owner’s general management and oversight responsibilities

Agency-CM Disadvantages

·        Added project management cost for CM services

·      Owner cedes much of the day-to-day control over the project to the CM, adding a level of bureaucracy in the field

·        CM not at risk for construction cost

·        Owner continues to hold construction contracts and retains contractual liability

·   Unlike CM at-Risk, Agency-CM services are not regulated by state licensing laws for contractors or A/E firms

·        High owner involvement (in comparison to other innovative delivery systems)

CM at-Risk Advantages

·    Allows for innovation and constructability recommendations in the design phase, yet the agency still retains significant control over the design

·       CM holds construction contracts, transferring performance risk to general contractor (GC)

·    GC puts more investment in cost engineering and constructability review than with CM-Agency

·        Fixes project cost and completion responsibility earlier than Design-Bid-Build

·        Potential to fast track early components of construction prior to complete design

·        Reduces owner’s general management and oversight responsibilities

CM at-Risk Disadvantages

·   Once construction begins, the CM assumes the role of a general contractor, leading to possible tensions with the agency over project quality, budget, and schedule

·   Use of a GMP may lead to disputes over the completeness of the design and what constitutes a change to the contract

·        Owner retains design liability

·        CM input may not be included by designer

·        Incentive split of savings scheme may create perception of inflated GMP

·    GMP approach may lead to a large contingency to cover uncertainties and incomplete design elements