Early Contractor Involvement (ECI) is an increasingly popular project procurement option but without thorough knowledge of how to make it work, there can be major pitfalls that cost operators millions.
“ECI is a relationship-based model focused on collaborative contracting,” says Steven Bird, Associate Director at Impact Group. “It’s about allocating risk, by negotiation, to ensure the best project outcomes.”
ECI begins with scoping and price, right from the start of a project. The client, project team and contractor work closely to finalise the design and address construction issues as soon as possible.
Meeting the needs of all stakeholders
“Greater collaboration between the client, contractor and designers means we have a great opportunity to share collective knowledge and directly meet the needs of all stakeholders.”
Unlike traditional project tenders, in which a rigid methodology and defined design must be followed, ECI allows constructability and budget issues to be addressed from the very beginning.
“By focusing on the design and getting input from contractors well before construction is under way, any buildability issues can be identified and design alterations can be avoided, saving time and money. The whole team is also better placed to identify areas of risk and contribute value-adding solutions because we see the project as a whole and understand the needs of all stakeholders. There are no blind spots,” says Steven.
Shared expectations and clear understanding builds trust
Under an ECI agreement, the builder benefits from greater financial certainty as the margin is secure and this in turn reduces the likelihood of margin recovery strategies such as ambitious claims and variations. In addition, the client gains confidence around cost and outcomes. This allows for a less adversarial relationship because everyone knows where they stand.
“Impact Group is currently working with BaptistCare in Kellyville to design and construct the final $45-million Stage 3 development of its Gracewood Retirement Village. The client’s aim is to develop a lifestyle retirement village which will be in keeping with the needs and expectations of baby boomers entering the retirement-living market.”
Using an ECI procurement methodology allowed Impact to provide BaptistCare with considered advice on contract form, risk allocation and competitive procurement of trades. It also allowed the contractor to provide value-engineering solutions to help ensure appropriate cost, program and quality targets are delivered.
“The contract is a Design & Construct Guaranteed Maximum Price, with any project savings shared between the client and the contractor. This incentive arrangement helps bolsters the sense of trust because the client knows the contractor also has a stake in the project’s success. It’s a win-win for all parties.”
Two critical steps to achieving transparency and value
The transparency and value equation can be addressed in two stages, says Steven, and assumes the client retains its own project team for verification. These stages are:
- Stage 1: tender to multiple contractors to select the most competitive and appropriate person/team to assist in design development.
- Stage 2: after undertaking the design phase there is a tender to multiple subcontractors in each trade to establish the remaining project delivery costs. This is critical to verify market coverage, completeness, contestability, and value for money.
One final word of advice from Steven: “It is vital that the client has a representative that understands this process and ensures it is appropriate for the project in order to deliver a well-designed and valuable asset.”
For more information, get in touch with the team from Impact. We’re here to help.