Who are the typical parties involved in a construction and engineering project?
Construction (2nd edition)
The principal as the party procuring the work. Principals may contract with both design consultants and building to carry out and complete building work. Alternatively Design and Construct procurement models are commonly used, under which the Contractor engages the design consultants. Contractors will engage various sub-contractors to complete different aspects of the work, depending on their expertise. Project managers are also often engaged by a principal in such projects.
Subcontractors are almost always engaged as most 'Tier 1' contractors have minimal capacity 'in house' to perform construction work.
On the one hand there is always the client, i.e. the public or private entity or the natural person who acts as principal, and on the other hand there is the contractor receiving the instruction to build.
Other actors are often involved in the project. A lot of construction projects require the services of an architect. Basically, as soon as a building permit is required for the project, the intervention of an architect becomes mandatory. The specific relation between the client and the contractor on the one hand, and between the client and the architect on the other hand, is usually the subject of different contracts. However, recently new forms of collaboration (the so-called “bouwteam”, under influence of a practice in the Netherlands), are becoming increasingly popular. Nevertheless, associating a contractor and an architect in the same contract remains tricky under Belgian law due to a strict incompatibility of these professions.
The typical parties in an engineering construction project include the owner, survey and investigation institution, designer, constructor, materials and equipment supplier, supervisor, cost consultant and other consultants.
Construction and engineering projects typically involve employers, contractors and supervising engineers, as well as subcontractors.
On the client side of large infrastructural projects like federal highways, state highways, port facilities or power train paths you will often find the Federal Republic of Germany or a federal state of Germany. Airport and Port authorities and public-owned SPV’s also act as principals of building contracts. Deutsche Bahn (German Railways) is a major player in the field of railroad construction.
Contractors of construction and engineering projects are usually large and mid-sized privately owned construction companies. There are no publicly owned contractors.
Large-scale private projects typically involve many parties bound together by a single or multi-level contracting structure. Key parties involved in construction projects are the Employer (typically also the project owner) and the Contractor (681 GCC). In practice, two main types of contracting arrangements appear: (a) a setup with a main contractor engaging Subcontractors to carry out and complete separate parts of the works or (b) a setup under which the Employer employs a number of contractors to perform different parts of the works. Regardless of the structure selected, subcontractors typically may further assign parts of their works through engagement of other contractors, etc. (Sub-subcontractors). A Designer and/or a Supplier are also usually involved in a project, undertaking the planning/design of the project and the procurement of the necessary materials and equipment, respectively. As an alternative, Engineering Procurement and Construction Contracts ('EPC Contracts') are widely used in the construction industry. Finally, where a project is financed using project finance, among the project parties are the Sponsors (usually coinciding with the equity investors) and the Lenders, i.e. banks (single or syndicate) or other financial institutions providing finance mainly to the project owner/developer.
As far as the public works contracts are concerned, Art. 2 para. 2 of the Public Procurement Law refers to the following parties involved in a project: (a) the Project Owner, being either the State or any other public entity, on behalf of which a certain public project is realised; (b) the Construction Entity, being primarily responsible for the implementation of the project; (c) the Contracting Authority, being the division of the Construction Entity, which is responsible for supervising the construction of the project, while exercising decisive powers on the latter's behalf, particularly with regard to contract-related matters; (d) the Supervising Authority, being the technical department of the Construction Entity, which is responsible for the monitoring, supervision and management of the construction of the project; and (e) the Technical Board, as the competent body to provide opinions prior to issuance of the Contracting Authority's decisions.
- The principal: who generally owns the land on which the construction will be erected;
- One or several contractors
- Engineers (civil engineer / HVAC engineer / etc.)
- Construction managers/representative of the principal
The primary parties to a construction contract are the owner, construction manager, general contractor, design professionals, subcontractors, and suppliers.
The owner is typically a developer, a governmental entity, or a private corporation or individual whose primary responsibility is to finance the construction and set the requirements and programmatic direction for the project. The owner does not typically self-perform the construction work. Instead, the owner contracts with either a construction manager, a general contractor, or both.
A construction manager acts as an advisor to the owner on various aspects of the project, including financing, design, construction, scheduling, purchasing, and budgeting, among others. Construction managers come in two forms, each defined by the risk being undertaken. On one hand, an “agency” construction manager (also called a “fee advisor”) performs all the responsibilities of a typical construction manager without holding any of the contracts (i.e. without taking on the risk). On the other hand, a construction manager “at risk” advises the owner during the design phase of the project and the acts a general contractor during construction by entering into subcontracts to perform the work (i.e. undertakes the risk by holding the contract).
A design professional such as an architect or engineer performs the design work on the project. In a design-bid-build project delivery method, the owner will enter into a contract directly with the architect/engineer to procure design services, as well as environmental and project management services. In a design-build project delivery method, the architect/engineer will be hired directly by the general (or “prime”) contractor. Architects/engineers typically provide plans and specifications for the general contractor to follow when performing construction work.
A general contractor (also known as a prime contractor), is generally responsible for scheduling, directing and supervising the work. Although the general contractor may self-perform some (or all) of the work, the general contractor usually hires subcontractors to perform all of the work on most projects.
A subcontractor (or first-tier subcontractor) is generally hired by the general contractor to perform work in a certain trade (i.e., electrical, mechanical, masonry, plumbing, etc.) A sub-subcontractor (or second-tier subcontractor) is a subcontractor hired by the first-tier subcontractor to prosecute some specialty trade.
A supplier does not actually perform work on a project, but rather delivers materials and equipment to the project site.
The typical parties to a construction and engineering project are the client and the contractor.
The parties will vary depending on the nature, size and complexity of a project. Every project will have an employer (sometimes referred to as the “client” or “owner”) for whom the works are being carried out and a contractor. Contractor is an entity that performs construction work pursuant to a construction contract. Either the employer or the contractor may procure materials, plant and equipment from upstream suppliers.
Typical parties in construction and engineering projects in Brazil vary in accordance with the specific set up of each single project.
A typical project would involve a Project Owner (“Dono da Obra”), that it is either a large company that is investing in the improvement of its assets or a Concessionaire, that is contracting the works for the implementation of the assets object of the Concession. For public procurements, the Owner can also be a public company or a public entity (Union, State or Municipalities).
In the Contractor’s side, there may be different kinds of Contractors, depending on the project’s particular characteristics and the procurement method chosen. There is usually the Civil Construction contractor, the Design Team, the System Supplyer and other key suppliers. In EPC Projects, the main suppliers will be integrated in a Consortium, or even as Subcontractors of the EPC Contractor.
Not rarely the Project Owner will make use of consultants to work as their inspection team or Owner's Engineer. In some projects that role is carried out by an internal team of the Owner.
In Project Finance structures, the financing agents will often be involved during the construction contracts negotiation.
In Public Procurement Projects, external public audit offices (“Tribunais de Conta”) may be heavily involved in the audit of the contract and its amendments. Their participation has been posing some complex legal challenges in recent public projects in Brazil.
The typical parties include the developer, building contractor, sub-contractors, design team, project managers, cost consultants, quantity surveyors, lenders, a lender’s project monitor and insurance brokers/advisors.
In Government Contract, the typical parties are the State as the Owner, the Designer, the Contractor and the Supervisor. Depending on the size of the project, a Construction Manager can be engaged by the Owner.
In Private Contracts, the typical parties are the Owner or Developer, the Architect and/or Designer, the contractor and sometimes a supervisor is required.
The parties will vary depending on the nature, size and complexity of a project. Every project will have an employer (sometimes referred to as the “client” or “owner”) for whom the works are being carried out and a contractor. Contractors typically subcontract parts (and sometimes all) of the works to various specialist subcontractors. Either the employer or the contractor may procure materials, plant and equipment from upstream suppliers.
The typical parties involved in a construction and engineering project are the developer, the planner and the builder.
The developer is defined in Article 9.1 of the LOE, as "any person, physical or legal, public or private, who, individually or collectively, decides, promotes, programs and finances, with own or other resources, the building works for himself or for subsequent transfer, delivery or assignment to third parties under any title".
The planner is defined in article 10 of the LOE, as "the agent who, on behalf of the developer and subject to the corresponding technical and urban regulations, drafts the project".
The builder is defined in article 11 of the LOE, as "the agent that assumes, contractually before the promoter, the commitment to execute with human and material means, own or external, the works or part of them subject to the project and to the contract."
In projects of at least average calibre, in addition to the employer and the main contractor, engineers, controllers, banks, insurance companies, health and safety institutions, project management companies, sub-contractors and other vendors are typically involved.
The typical parties are:
(i) the employer (sometimes referred to as the client or owner);
(ii) the employer’s representative – who may be referred to as the engineer, project manager and/or principal agent depending on the type of agreement concluded between the parties;
(iii) the contractor.
Typically, a large-scale construction and engineering project will also involve a number of sub-contractors with specialised skills necessary for the project.
A large construction / engineering project will typically involve:
- the project owner (maître d’ouvrage) who is the owner of the project works. The project owner is sometimes assisted by a project manager, who will have either an advisory role (assistant maître d’ouvrage) or a role to actually represent the project owners towards the consultants / contractors (maître d’ouvrage délégué);
- the design team, which will typically include an architect in charge of the architectural studies, engineers (bureaux d’études techniques) in charge of the technical studies, an economist who will be in charge of the control of the financial aspects of the project, a prime contractor (maître d’oeuvre d’exécution) who will be in charge of the supervision of the works performed by the contractor;
- one or more contractors, who will be in charge of the performance of the works;
- a health & safety coordinator (coordonnateur SPS);
- a technical controller (bureau de contrôle) who will be in charge of verifying compliance of the design and of the works performed with the applicable technical regulations;
- other types of consultants / advisors, depending on the project (BIM manager, environmental expert, geotechnical expert, chartered surveyor, legal counsel, notary, etc.).
Typical parties are developers, contractors, sub-contractors and different types of consultants, such as technical and management consultants.
In case of a turnkey contract, there will typically be an employer (and possibly a professional advisor) and a turnkey contractor, who will enter into contracts with architects, engineers and other consultants as well as sub-contractors and suppliers. The turnkey contractor will typically be responsible for designing the project based on functional requirements from the employer.
If the employer decides to engage directly with consultants to have the project designed, the construction work can be awarded to a main contractor, or the employer can enter into contracts on a trade-by-trade basis.
- The parties typically involved in a construction and engineering project will be the employer, lenders, the general contractor, subcontractors, architectural and engineering firms, construction managers and suppliers.
- The employer is the sponsor and ultimate owner of the project. Employers may be private parties or governmental bodies. Private owners may fund their projects by obtaining financing from lenders. Depending on the nature of the financing, these lenders may remain involved in the construction and the operation of the project, to ensure that their investment is protected and the project proceeds in a sound manner.
- The owner will often engage project management firms to administer the project on the owner’s behalf. These firms will usually have a client/consultant relationship with the owner.
- The owner will also often engage a general contractor to carry out the project. In most cases, a contractor will subcontract some portion of its work to subcontractors or suppliers. The owner may also engage a construction management firm that will serve only to manage the construction works, without actually carrying out any of the work itself.
- Architectural and engineering firms may be hired by the owner, the contractor or both (depending on the project delivery method) to provide the design for a project.
- In addition to the foregoing, various government agencies will play a central role in medium and large projects, ensuring compliance with government regulations and providing the necessary approvals and permits.