Project 1 involves the refurbishment and conversion of an existing building into residential apartments and retail units to the ground floor. A typical period of 18 months has been allowed for local planning permissions and permits Wotschke.P (2024). and the Commencement Date has been set to Q1 2026. The cost for the works is forecast at £4.4M and an allowance has been made for contractors’ fees and risk. The contract period is forecast to be 12 months.

This section builds on the recommended procurement route of a Traditional Single Stage Selective Tender by identifying and evaluating the most suitable form of contract to use, including suggestions towards amendments to the standard form. It also advises BHD on risk mitigation throughout. BHD are advised to use a standard form of contract.

Benefits of using a standard form of contract:

·         Tried and tested – Reduces risk and improves administration.

·         Fair – For both the Client and the contractor, unlike bespoke contracts which are typically biased.

·         Quicker and Cheaper – Removes expensive legal fees associated with contract formation.

·         Attractive for subcontractors – Less risk and a more competitive tender.

Before any recommendations can be made. It is important to understand the Client’s priorities in respect to Quality, Cost and Programme. A character profile of the is formed in the ‘Procurement and Tendering’ section. The following assumptions build upon this profile:

The Client is assumed to be British and familiar with the NEC Standard Form of Contract.

The Client is assumed to be renovating the property for re-sale/ rental of the residential and retail units and is not expected to occupy the premises on completion.

The procurement method and the level of risk the Client is prepared to accept will depend on the level of experience they have with the type and nature of the project. BHD can be categorised as an experienced private sector mixed-use developer with high levels of experience in the market. Unlike public clients, private clients may operate with higher levels of risk to ensure lower project costs.

The Client, therefore, should be competent in developing an Employer’s Requirements document as part of the Invitation to Tender. BHD are advised to send out a pre-qualification survey prior to the Selective Tender to gain confidence in the contractors’ abilities and to manage their financial and reputational risk.

The Client may wish to appoint an Architect to develop the Design to RIBA Stage 4 Technical Design intent (or HOAI equivalent, LPH5 – Ausfuhrungsplanung). The architect would be expected to generate a set of Performance Specifications and/ or Design Brief to include within the Invitation to Tender. It is imperative that the Performance Specification is sufficiently descriptive to mitigate the risk of Variations to the works.

Due to the nature of the works, It is recommended that the refurbishment works are valued against an Activity Schedule. Refurbishment works are typically undefined and an attempt to define the works through a Bill of Quantities will increase the risk. Any undefined aspects of works cane included within NEC Z-clause as Provisional sum.

The Client should attempt to include a ‘Fitness for Purpose’ clause within the contract. The successful contractor will be expected to take on portions of design responsibility and the Client may be willing to pay a lump sum price to offset this risk.

·         The Client is advised to introduce Y(UK)2 – Housing Grants, Construction and Regeneration Act 1996 into the contract to enable the use of Stage Payment and to protect the contract in the event of dispute.

·         The Client is advised to negotiate a liability cap including a performance bond by introducing Option X13 and X15 in the event that the contractor delays completion of the works.

·         The Client should consider reflecting any damages to the contractor that may incur as a result of delay within an X7 clause. These damages may be as a result of tenants or shop owners being unable to move into the residential or retail space.

·         The Client should avoid advanced payment clauses X14 and introduce X16 retention clause to improve cashflow. No allowance for retention has been included within the Cash Flow Analysis.

·         BHD are advised to review Secondary Option X1 – ‘Price adjustment for Inflation’ and make an assessment as to whether they are willing to take the risk on paying interim price adjustments or whether to agree a lump sum fixed price. In the event that this clause is included, the client is advised to include suitable indices values and to be explicit in regard to any re-measurable items.

·         Due to the nature of the refurbishment contract, there may be fewer specialist contractors providing tender returns on the works.and therefore the Client is advised that X15 and X18 may be introduced to improve the attractiveness of the contract. These are both in relation to limitation of liability.