Early contractor involvement head contracting – reducing risk and time and cost uncertainty

26 October 2021

Over the past two years, the Construction and Infrastructure Team at HWL Ebsworth Lawyers has been developing and helping to deploy on a number of construction projects for government clients, a new form of integrated head contracting, which is early contractor involvement head contracting (ECIHC). This has been well received and spurred on by the realisation by many of our clients that integrating a construction contractor during the design development process allows key risks, including as to buildability, staging and programming, to be identified early in the design development process, and that this promotes a high level of time and cost certainty before the works are constructed. Construction contractors and designers have reaped significant benefits as well, as the early involvement of the construction contractor allows for collaborative input into the design and the de-risking of the construction contractor’s scope.

What is early contractor involvement head contracting?

ECIHC differs from “traditional” head contracting in that it involves the following key features:

  • the principal initially engages the design team (under a design services contract), up to a certain point in the development of the design;
  • the principal then engages the construction contractor, on the basis of that stage in design development, under a contract for an initial “design phase”, with an option (at the principal’s discretion) to transition to a contract for a “construction phase” on the basis of strictly limited amendments to an indicative contract sum and indicative date for completion submitted by the construction contractor at time of tender, in which the works are constructed;
  • during the first “design phase”, the construction contractor is engaged on the basis of a lump sum design phase fee, to progressively do the following (as a minimum) at each stage of the design process:
    • work collaboratively with the principal, the design team and other stakeholders to provide detailed buildability, programming and other input into design development and documentation, including pointing out any errors or other issues in the design;
    • optimise the program and fee on a progressive basis, as scope and design evolve;
    • obtain key trade pricing and enable key trade involvement where it will add value; and
    • undertake risk reduction studies to reduce the amount of contingency required;
  • the design team has corresponding obligations (under its design services contract) to work collaboratively with the construction contractor in developing and documenting the design;
  • before the end of the design phase, the principal and the construction contractor negotiate to reach agreement (construction phase agreement) on:
    • the contract sum, which can only differ from a tendered indicative contract sum for strictly limited reasons relating to the effects of changes during the development of the design (design development delta) on cost; and
    • the program and date for completion, which again can only differ from the indicative date for completion and program on the same basis;
  • design development delta and its effect on cost and program must be submitted progressively by the construction contractor at each discrete stage in the development of the design, and cannot be submitted for past stages in design development (because the construction contractor has already had the opportunity to consider design submitted to it in previous stages) if it is to be considered in the construction phase negotiation; and
  • the principal has an absolute discretion whether or not to proceed with the construction phase with the construction contractor, or alternatively re-tender the construction of the works;

Why might a principal consider ECIHC?

ECIHC is designed so that key risks, including as to buildability, staging and programming, are identified early in the process (in the design phase), via collaboration between the principal, the design team and the construction contractor.

The delivery model seeks to do so by involving the construction contractor early in the design development process so that the design solution that emerges at the end of the design phase is fully consulted and coordinated at each design milestone.

This can help avoid issues, eg unsuitability of design, latent conditions or coordination difficulties, emerging during construction, when they could well have been detected by the construction contractor’s review of the design documentation before construction. At the same time, the obligation of the construction contractor to progressively notify the principal of design development delta and its effect on time and cost at each stage of design development strengthens time and cost certainty for the principal.

Variations of ECIHC

Different variations of ECIHC are possible, depending on the level of development of the design, the priorities of the principal and how much early involvement is required. There is no set model.

For example, in the cross-over between the design phase and the construction phase, the principal may choose to novate the design team to the construction contractor. If the principal wants more integration between the construction contractor and the design team, the principal may reinforce the construction contractor’s contract for the design phase or require the design team and the construction contractor to sign up to a “framework” for the design phase, to be included in both contracts, between the principal, the construction contractor and the design team, which sets out step-by-step the design review and consultation process between the three parties. A framework can also formalise a role for other stakeholders in the design phase, such as the principal’s technical team.

A “heavier” form of ECIHC may be more appropriate for situations where the construction contractor can be signed up for the design phase at an earlier stage in the development of the design, whereas a lighter form with more general design review obligations may be more appropriate if the design is well-advanced by the time that the construction contractor can be engaged.

Reception of ECIHC

The ECIHC delivery model has been well received by principals, construction contractors and designers, as each of those parties have seen benefits from their individual perspectives. For example, principals have been drawn to the delivery model because of its collaborative approach to reduce and avoid conservative cost and time contingencies, designers have welcomed input into how their design can be improved and adapted to the reality of the construction project, and construction contractors have enjoyed the ability to find issues early, before they cause problems and lead to claims on the ground during construction. As such, a wide variety of clients from a variety of sectors have in recent months initiated discussions with HWL Ebsworth on how ECIHC can be used for their construction projects.

How can HWLE help you?

If you would like to further understand how the ECIHC delivery model works and how it can deliver better outcomes on your next construction project, please contact a member of our team.

This article was written by Marko Misko, Partner, Kevin Lock, Special Counsel and Konrad Anderson, Associate.


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