Who are the typical parties to a construction and engineering project?
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.