Who are the typical parties to a construction and engineering project?
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 main parties to construction and engineering projects in Oman typically will be:
- Employer's designer/engineering, architectural and other consultants. In Oman an “Engineer” can have a design function and/or a contract supervision function.
- Construction contractor(s).
- Contractor's subcontractors and suppliers.
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 typical parties to a construction and engineering project are the Promoter, Project planner, the Constructor and the Construction director and the executive construction manager. We refer to the answer of question number 2 above.
Typically, a common procurement arrangement would involve the service user or the project company. The service user or the project company is typically tasked with hiring the service provider (the construction contractor or sub-contractor) to implement the project. The service user or the project company is often a special purpose vehicle (SPV) established in Indonesia for the sole purpose of developing the project. The service provider (the construction contractor or sub-contractor) may be managed by a sponsor who is an equity investor that oversees the bidding and project development.
The financial institutions also play an important role in financing the project and providing the relevant documents (e.g. bank guarantee or insurance policy) in order to allocate the risks of the project.
- If the service user is a government institution, then the government must undertake the proper procurement process according to Presidential Regulation No. 16 of 2018 on the Procurement of Government Goods/Services (“PR No. 16/2018”), and
- In other instances, the government may be the party being authorized to issue the necessary permits and licences.
In Government Contracts, the typical parties are the State as an Owner; the Designer; the Contractor and the Supervisor. In mega projects such as the New Mexico City Airport, a Construction Manager can be engaged by the Owner (State), in order to have a better control of the project. The new Mexico Airport (NAIM), has a Construction manager for this purpose.
In the case of Private Contracts, the typical parties are the Owner or Developer; The Arquitect and/or Designer; the contractor, and sometimes a supervisor is required.
It may vary depending on the type of infrastructure, but for the most part, the parties in a construction and engineering project are engineering and construction companies, both local and foreign, as well as subcontractors and suppliers.
The typical parties of a construction project are the following:
- The principal: who generally owns the land on which the construction will be erected;
- One or several contractors
- Engineers (civil engineer / HVAC engineer / etc.)
- Assistant/representative of the principal
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.
The typical parties involved in a construction and engineering project are:
The employer procures the work, and is typically a land owner or land developer.
The main building contractor is engaged by the employer to carry out and complete the work, under terms specified in a contract.
The contractor may engage subcontractors to do parts of the work.
The employer or the contractor (or both), will typically engage professional consultants, including engineers, architects and a project manager.
This depends on the type of project. Most types of contract structures are seen in the Swedish market, including single point EPC contracts as well as split contract structures. Very few employers and contractors have in-house capacity for design work, meaning that architects and technical consultants have an important role in most projects. As will be dealt with in more detail below, some projects are financed with bank debt, in which case the lenders will have a role in the projects.
It may also be mentioned in this context that inspectors play an important role in Swedish construction projects. The dominant Swedish standard forms (see more below), which are used in almost all projects in Sweden, provide that inspection of the works shall be carried out by an independent inspector. Final completion requires that the works have been approved at a final inspection. The inspector is appointed by the employer, but has to act impartially. His inspection reports are not binding on the parties, and can be reviewed and revised by a court or arbitral tribunal.
The construction industry in Hong Kong can be divided broadly into three main areas:-
(a) Public housing projects
(b) Other public sector works commissioned by the HKSAR government and quasi-government bodies such as the Mass Transit Railway Corporation
(c) Private sector development projects
The typical parties to a construction and engineering project in Hong Kong may include the following, in a wide variety of possible combinations:-
(b) Main contractor
(c) Sub-contractors and suppliers
(d) Design consultants (architects, engineers, surveyors, etc.)
Most construction projects are set up with two distinct teams: the construction team and the design team. The construction team often is headed by a main contractor, who in turn sub-contracts much of the work to directly employed domestic sub-contractors and also nominated sub-contractors as directed by the employer. There typically are numerous further layers of sub-sub-contractors and suppliers, including for example labour only sub-sub contractors. The design team is usually headed by the architect in building projects and the civil engineer in engineering projects as prime consultant, and include various other consultants such as the quantity surveyor, who maintains financial management during construction, and a structural engineer, who designs a structure that can accommodate all forces imposed on the building. The composition of the project team is tailored to fit each project.
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 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 acts as 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 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 employer and the contractor, which are in most cases diverse legal entities.
The FIDIC “rainbow suite” as well as other template and bespoke contracts are commonly used in the UAE. As a result, the parties typically involved in a construction project in the UAE are the same as you would expect in other FIDC friendly jurisdictions – Employer, Engineer, Contractor, Subcontractors and Suppliers.
Notably, in the UAE, a large number of the Employer/Clients are government owned.
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.
On a typical construction project /technical project, the typical parties are the client and the contractor.
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.).
Large-scale private projects typically involve many parties bound together by a single or multiple 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 whith 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.
Many major projects in Saudi Arabia involve government contracts, with ministries or government agencies as the employer, under the supervision of the Ministry of Finance. State-owned corporations like Saudi Aramco, SABIC and Maaden, are another major source of employment in construction contracts. Contracts typically involve an EPC contractor.
The number and types of parties involved would be dependent on the nature and complexity of the project. Traditionally, the design phase would be separate from the construction phase. During the design phase, the owner (also known as the employer) would hire a design team consisting of architects, quantity surveyors and civil engineers to determine a workable design for the project. Once that is completed, the construction phase is then engaged when the owner hires a main-contractor to construct the project. It is common for the project works to be divided into sub-contract packages, which are then sub-contracted to various specialist sub-contractors.
Alternatively, the Owner may prefer a single point of responsibility by appointing a main contractor who would be responsible for both the design and the construction of the project. This would be similar to a design and build model.
Technical and design consultants may also be directly engaged by the owner as and when required to provide their expertise in the project.