CONTRACTS AND INTERNATIONAL PROJECT MANAGEMENT This Page Intentionally Left Blank A The University of New South Wales, Sydney, Australia Authorization to photocopy items for internal or personal use, or the internal or personal use of specific clients, is granted by A.A.Balkema, Rotterdam, provided that the base fee of Per copy, plus per page is paid directly to Copyright Clearance Center, 222 Rosewood Drive, Danvers, MA 01923, USA. For those organizations that have been granted a photocopy license by CCC, a separate system of payment has been arranged. The fee code for users of the Transactional and for the Reporting Service is for the hardbound edition: 90 5809 324 7/00 student paper edition: 90 5809 333 6/00 Published by A.A.Balkema, P.O.Box 1675, 3000 BR Rotterdam, Netherlands Fax: +3 1.10.4135947; E-mail:
[email protected]; Internet site: http://www.balkema.nl A.A.Balkema Publishers, Old Post Road, Brookfield, VT 05036-9704, USA Fax: 802.276.3 837; E-mail : info 0ashgate. corn ISBN 90 5809 324 7 hardbound edition ISBN 90 5809 333 6 student paper edition 0 2000 A.A.Balkema, Rotterdam Printed in the Netherlands V Contents ABOUT THE AUTHOR 1 INTRODUCTION VIlI 1 2 IN-HOUSE VERSUS OUTSOURCING 2.1 Introduction 2.2 In-house approach 2.3 Outsourcing - Contract approach 2.4 Public sector and private sector work 2.5 Case studies 2.5.1 Case study - Road construction 2.5.2 Case study - Contractor decisions on outsourcing 2.5.3 Case study - Outsourcing coal mining 2.5.4 Case study - Local government practices 2.6 Exercises References Bibliography 5 5 5 6 9 15 15 16 18 19 22 24 24 3 CONTRACT (PAYMENT) TYPES 3.1 Introduction 3.2 Outline 3.3 Fixed price contracts 3.3.1 Lump sum contracts 3.3.2 Schedule of rates contracts 3.3.3 Guaranteed maximum price (GMP) contracts 3.4 Prime cost contracts 3.5 Incentives/disincentives 3.6 Choice of contract (payment) type 3.7 Case studies 3.7.1 Case study - Sewer reticulation project 3.7.2 Case study - Substation dismantling project 3.7.3 Case study - Building excavation contract 3.7.4 Case study - Redevelopment of a large city park 3.7.5 Case study - Construction of a shopping centre 3.7.6 Case study - A contractor’s business 25 25 25 27 30 33 40 40 55 62 65 65 67 69 70 73 74 VI Contents 3.7.7 Case study - Local government - flooding and drainage 3.8 Exercises References 76 77 82 4 DELIVERY METHODS 4.1 Introduction 4.2 Outsourcing options 4.2.1 Case study - Contaminated sites 4.3 Traditional 4.3.1 Case study - House construction 4.3.2 Case stud