Construction work packaging

[edit] Introduction

Packaging is normally associated with general contractors who split a large project into a series of work packages suitable for obtaining tenders and placing orders with the subcontracting and goods supply chain, thereby transferring risk for delivering some elements of the works to others.

However, the design team, generally advised by the cost consultant, may elect to preempt a general contractor by selecting specialist systems required for early inclusion into the evolving design. This creates a built in package requirement.

A package can include any or all of the following activities:

The conditions of the package contract will vary depending on the main contract arrangements.

Under a traditional contract the main contractor will split tender documents into subcontractor packages that are geared to the most competitive returns, which are then included in the main contractor’s tender offer to the client.

Under a management contract the client’s cost consultant and the management contractor, in co-operation with designers, decide how to package the works and direct the team as a whole to produce package designs suitable for obtaining subcontracts under the terms of the management contract. This method of procurement allows parallel working on design and construction. For example, work on the foundations and superstructure can commence before the design for the whole building is complete.

The adoption of Building Information Modelling (BIM) is likely to lead to an increase in the early appointment of specialist package contractors by design teams to avoid having their model unravelled by appointments that might otherwise have been made at a later stage. This suggests that in traditional tendering, main contractors will be forced to adopt the specialist without any freedom of choice. This may lead to some interesting legal wrangles in respect of non-performance or delays caused by the imposed specialist subcontractor.

For contractors to successfully transfer risk for elements of the works there are a numbers of issues to consider:

The interface between packages must be carefully considered, defined and constantly monitored.
Elements can fall between packages (for example the flashing to a roof rainwater outlet).
Responsibility and consequent liability must be clearly defined.
The way each package is to be monitored should be agreed when placing orders to save package management resources and avoid man-for-man marking which is duplicative and costly.
The risks transferred to the package contractor need to be proportionate to the size of organisation executing the package. For instance four weeks of full liquidated and ascertained damages might be of greater value than the subcontractor’s annual turnover and so would be unsustainable.

If the project is split down into too many packages it becomes confusing and unmanageable. As a very general rule of thumb the following might apply:

On large building projects divide the project cost by £2m to establish the number of differently priced packages. For example; £200m = 100 packages, £50m = 25 packages, and so on.
On medium size building projects divide the project cost by £1m to establish the number of differently priced packages.
On fit out projects, which have a high monthly turnover and a fast programme, stick to say five packages; mechanical, electrical, information technology, building work and furniture and equipment.

Earned Value Management Handbook, Published by the Association for Project Management in March 2013 suggests work packages are: ‘…the lowest level at which performance data is normally analysed. It is therefore important to balance the length and scope of the work package against reporting cycle lengths, and to consider when and how to earn ‘value’. Each work package must have a clearly defined start condition and finish point, with all deliverables defined. The scope of each work package must be unambiguously defined with the procedures to be followed identified. Each work package comprises a number of activities to be performed.’