A form of contract strategy for large projects, which is a hybrid approach including project management, cost plus and fixed price contracting. The client engages a managing contractor to oversee the construction of the work on behalf of the client, however the managing contractor does not usually undertake the work directly, but sub-contracts the work to others. Typically the client engages the managing contractor at an early stage, and the managing contractor supports the client in scoping the work, managing risk, developing the design, programming the work and obtaining any approvals that are needed. Once the design of the work is agreed, the managing contractor arranges the tender packages; issues tenders and awards work scopes on behalf of the client. The managing contractor also supervises, manages and reports progress on the project to the client. The attraction of this type of contract is the flexibility and speed with which the client can commence work and the opportunity to draw on the capability of the managing contractor in terms of procuring the design, sub-contracting the work packages and supervising the sub-contractors. In addition, there is a single point of accountability and, while the managing contractor may be remunerated on a cost plus basis, there is transparency of the sub-contractors’ costs and flexibility to change approach without the limitation of fixed scope of work needed to agree a fixed price with the managing contractor. See also Engineer, Procure and Construct.
Outcome-Based Contract Management training is available at Academy of Procurement.
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