What is Early Contractor Involvement?

What is Early Contractor Involvement? How can Early Contractor involvement help you when buying a New Commercial Property?

Early Contractor Involvement, also known as an ECI, is a construction contract that allows a builder to become involved in potential construction work before signing a new commercial lease or before the lease, planning and design process has been completed.

What is the purpose of Early Contractor Involvement?

Having an Early Contractor Agreement provides full transparency around construction, design and any other uncertainties around a project, lease or design, mitigating any risk involved.

An ECI is a more risk-averse method than traditional delivery or procurement models. It allows you to get a rough estimate on the construction, design and planning costs before entering a commercial contract, signing a lease or finalising an office design. Traditional delivery models typically do not disclose the preliminaries, profits, overheads or design/construction fees; therefore, the cost of construction or design is unknown.

How does Early Contractor Involvement (ECI) Work?

Under Early Contractor Involvement, you work with the Contractor to mitigate the unknown risks or planning permissions involved in your office’s construction and/or design.

What are the Benefits of Early Contractor Involvement?

With an ECI, you have full transparency on the price of the work needed for completion when you enter the contract or sign the lease, affording you less hassle and costs down the line. With an ECI, the contractor can advise, guide and provide you with a list of potential problems or risks before the work is carried out, designs completed or leases signed.

Early Contract Involvement is suited to fast-track projects and is more flexible than a Lump Sum Contractor and will include a competitive tender process for subcontractors and trade works conducted on an open book basis.
With an ECI, the principal benefits range from the input and experience of the contractor before the design or planning is finalised, navigating complicated designs or construction elements to helping make budget-conscious choices.

A contractor often has worked on many projects, with years of experience and a deep understanding of the building process, regulations and procedures that must be carried out to ensure a safe, straightforward build. Unchecked problems and regulations can prove costly and disastrous down the line.

You may also find that a design consultant you have engaged may ‘behave’ differently than one engaged by a Construction Manager. A Construction Manager can give clear instructions on the design and what is needed to achieve your design whilst still adhering to the building structure.

As a client, you can often become ‘emotionally or personally involved’, so navigating and keeping design teams or subcontractors on the right path or approaching them if a problem occurs can be tricky. In these circumstances, a Construction Manager can navigate, plan and assist with any issues that may arise to find solutions and be a single point of recourse for all involved.

ECI contractors help provide assistance and guidance around:

• Buildability by identifying any risks or challenges that may arise during construction and finding solutions by working with the design team to overcome them.
• Value Engineering by advising and finding solutions to budgetary pressures by identifying possible savings with the design and materials used in the build and construction.
• Design Management by working with and coordinating the design team, ensuring the finalised design works within the budget and the floorplan, following any structural or legal requirements.

An ECI allows the principal to:

• Gain input and advice from the construction manager/contractor on the design during and before it is developed or completed.
• Potentially start work by performing discreet parts of the planning and construction before the design is complete.
• Have complete budget and pricing transparency over any trade pricing or subcontractors needed. 
• Itemise and provide clarification on any materials needed and their price
• Handle, inform and address any planning permission costs or legal costs involved
• Guide and inform you on any problems that may need addressing that could prove costly in the future.

An ECI is not only for peace of mind but also allows the project’s construction, planning and design to be completed faster, helping minimise disruptions to your business operations.

What are the types of Early Contractor Involvement available to me?

There are three types of ECI engagements. The type or amount of Early Contractor Involvement is subject to your business needs and can be discussed during a consultation.

You can choose from the following:

• Construction-only ECI.
• Design & Construction ECI.
• Design, completion & Construction ECI.

Which depends on your Early Contractor Involvement Contract (also known as an ECI contract).

The important questions

The different Early Contractor Involvement Contracts can be confusing and overwhelming. Choosing a suitable contract for you can make your design, planning and construction and/or commercial lease signing easier and more enjoyable while helping you avoid costly mistakes down the line.

Several considerations must be considered when initially researching or contacting a contractor. We encourage you to do all your research before this stage, write down any questions, and ask them during your consultation.

The main questions you must ask yourself and your contractor in the initial call or consultation are:

1. Can my contractor place orders or start work before the design is completed? Is it recommended?
2. Do I wish for my builder or contractor to provide input before a design is finalised?
3. What are the different price options for my design?
4. What are the different Early Contractor Involvement Options, and which do you recommend for my project?
5. Can a contractor help me with the relevant legal, government, and CDC approvals?
6. Can a contractor help navigate any mitigating risk factors involved?
7. What are the mitigating risk factors you see initially with the design, planning and/or construction of my project?
8. Should I retain control of the design, third parties and subcontractors, or do I wish my Contractor to arrange this?

The answer to these questions will be determined by the type of contract you should consider. Likewise, the contract you consider should be determined by the answers.

This article will help guide and inform you about the different types of contracts, what they involve and which may better suit your needs, wants and particular circumstances.

Types of Early Contractor Agreement Forms and Contracts explained.

Although there are a variety of different forms and contracts that are required for the construction, planning, and ECI arrangements, the most commonly used Australia Standard ECI forms are:

• Early Contractor Involvement Lump Sum Construct Only forms (AS 4000, AS 2124).
• Early Contractor Involvement Lump Sum Design & Construct Forms (‘D&C’) (AS 4902, AS 4300).
• Early Contractor Involvement Construct Only Forms (AS 4916, modified AS 4000 or modified AS 2124).
• Early Contractor Involvement Design & Construct Forms (AS 4916, modified AS 4902 or modified AS 4300).

These can seem confusing but will start to make sense when you select the type of Early Contractor Involvement agreement that suits you, your business and your circumstances.

To understand what forms are required, you must understand the three types of Early Contractor Involvement and the necessary contracts.

Forms of Early Contractor Involvement (ECI) 

There are three types of Early Contractor Management:

• Construction Management (CM)
• Managing contractor (MC)
• Guaranteed Maximum Price (GMP)

These can often be used interchangeably, and the infinite terms can often seem confusing. Still, there are some things to consider before you choose which will suit your business, as each represents quite a different ECI experience, and what is provided for each may not always suit your requirements.

We always suggest you research (by reading this guide and the types below!) and ask what kind of ECI would benefit you during a consultation.

Construction Management (CM)

Construction Management, also known as a CM Contract, requires you, the principal, to engage the trade contractors, whilst the Construction Manager manages the contractors on your behalf as your agent. The Construction Manager is then paid a fee to manage and provide the preliminaries of the construction.

Construction Management traditionally requires the trade contracts to be signed by the construction manager, and the trade contractors are paid directly by you based on the Construction Managers’ recommendations.

If the Trade Contractors engaged by you (the principal) default, this will be your responsibility and at your risk.

A typical form of a Construction Management Contract is called an AS 4916 agreement.

Managing Contractor (MC)

Management Contractor, also known as an MC Contract, engages the trade and contractors and manages them as the head contractor. This is on an open-book basis, and the managing contractor is usually liable for both the omissions and acts of the contractors.

The arrangement and function of a Managing Contractor are similar to a Construction Manager, although there are some differences. Managing Contractors:

• Engages the trade contractors
• Are typically liable to the principal as head contractor for any acts and/or omissions of the trade contractors the Managing Contractor has engaged on the principal’s behalf.

Typically a Managing Contractor falls into two categories.

First, the Managing Contractor is paid by the principal, and the contractor must verify third-party costs. Traditionally the trades are paid directly by the Contractor. This is generally the case throughout the whole process from start to completion.

Second, both parties agree to a lump sum price and a reasonably precise budget estimate, and the Managing Contractor completes the work determined by the accurate estimation. This is called a ‘lump-sum’ contract. The advantage of this arrangement is that it reduces the administrative burden and allows for full transparency to both parties during the trade/subcontractor employment/engagement process.

Converting the arrangement into a ‘lump sum contract’ such as the second category, can be achieved in two ways:

• During the design development and when it is sufficiently developed to allow for planning, the Managing Contractor will collate a ‘lump sum proposal’ and submit this to the principal for the work required for completion. This is then either accepted, amended or negotiated by both parties.
• Trade packages, including associated work, allowances or risk items, are priced progressively, which produces the ‘overall lump sum.’

These contracts will often be accompanied by an ECI agreement or bespoke form of formal instrument that explains the arrangement, the intended work and the overall cost to the principal for full transparency.

This also can involve Government Clients or any other approval process that is required to carry out the work to completion.

There are no standard Managing Contractor forms, as these are often bespoke. Although the Principal often documents the arrangement between themselves and the managing contractor using a modified AS 4000 or AS 2124.

If the Managing Contractor is responsible for the design, they may use an AS 4902 or AS 4300 form.

Guaranteed Maximum Price (GMP)

Guaranteed Maximum Price, also known as a GMP contract, is similar to a Managing Contractor but works within a fixed budget and is often an arrangement where the contractor is required to use their best efforts to ensure they do not exceed the overall contract price.

Like Managing Contractors, Guaranteed Maximum Price Contractors can often mean different things to different arrangements. With any contract, the key to a GMP is for both parties not to concern themselves with the title but with the substantive terms within the documents and understanding the goals of the engagement and what both parties wish to achieve by the arrangement.

There are three ‘stages’ of a GMP:

• Stage 1: Lump Sum Proposal
  A Lump Sum proposal is prepared and submitted by the contractors to the principal with third-party costs, trades and subtractor fees and is accepted, amended and negotiated by both parties.
  
• Stage 2: The Actual Cost
  The actual cost is paid by the Principal to the Contractor to perform the work, with verified copies of third parties, trades and subcontractor invoices.
• Stage 3: Progressive Conversion of Cost to Lump Sum
  After the initial design documents are released, both parties determine each trade package’s budget and risk assessment. The contractor starts work before the design is complete. The final price or cost is known.

Where to from here?

So, you have all the information, equipped with the knowledge on what an ECI is, and you have all the questions you must, but navigating the following steps can seem overwhelming. Understanding what you want for your project is essential, and so is asking yourself a few questions before making those initial calls or booking consultations.

ECI or Lump Sum?

If all of this information and choices haven’t overwhelmed you already, we boil the whole debate into one question to ask before moving forward: Early Contractor Involvement or Lump Sum? It comes down to what works for you and what benefits each provides.

A Lump Sum Contract allows the contractor to start work after an agreed lump sum price is contracted. The scope of work is set based on design, planning and required construction.

Lump Sum Contracts are more effective when the design is detailed enough to negotiate a lump sum or work, materials and price. Lump Sums Contracts do not factor in the mitigating risk factors for both the Principal and the Contractor. As a general rule, the more unknown risks, the higher the Contractor’s price when risks and unknown costs such as CDC approvals or building regulations are addressed.

When signing up for a lease or starting work on any building, primarily commercial properties, ‘the unknowns’ are risks most prefer not to take. And for a good reason! The price of the hidden risks and problems not factored into a Lump Sum price can lead to a substantial amount of headache and cost to you and your business.

Early Contractor Involvements and ECI Contracts are ‘cost plus’ arrangements, which does not mean the ECI costs more; it means quite the opposite.

Early Contractor Involvements and Agreements require the principal to pay the Contractor a fee (often referred to as ‘the cost’) for the preliminaries, profit, materials and overheads, ‘plus’ the cost for third parties, trades and subcontractors required to get the project to completion, allowing for complete transparency.

Do I want my contractor to place orders or start work before the design is completed?

If you have answered ‘yes’ to this question, then an Early Contractor Involvement arrangement is the way to go.

With an ECI, you have complete transparency on the price of the job for completion when you enter the contract/sign a lease. An ECI affords you less hassle and costs down the line. An ECI Contractor can advise, guide and provide you with a list of potential problems or risks before the work is carried out, designs are complete, or leases are signed.

An ECI is suited to fast-track projects and is more flexible than a Lump Sum Contractor, and will include a competitive tender process for subcontractors and trade works conducted on an open-book basis.

Do I want my builder or contractor to provide input before a design is finalised?

If the work is relatively straightforward, a conventional Lump Sum Contract is usually preferred, but when are building and construction ever straightforward?

With an ECI, the principal benefits from the input and experience of the contractor before the design or planning are finalised, navigating complicated designs or construction elements and helping make budget-conscious choices.

ECI contractors help provide assistance and guidance around:

• Buildability by identifying any risks or challenges that may arise during construction and finding solutions by working with the design team to overcome them.
• Value Engineering by advising and finding solutions to budgetary pressures by identifying possible savings with the design and materials used in the build and construction.
• Design Management by working with and coordinating the design team, ensuring the finalised design works within the budget and the plan to adhere to any structural or legal requirements.

Should I retain control of the design, third parties and subcontractors or do I want my contractor to arrange this?

Construction only or Design and Construction can be a tricky question to navigate, and there is no real answer to this. Your level of confidence in planning and managing third parties and trades is one thing to consider when choosing between Construction only arrangement (Construction only Contract) or Design and Construction arrangement (DC Contract).

Some Principals wish to retain control of the project and design to ensure no compromises, although this can prove to have disadvantages.

A contractor often has worked on many projects, has years of experience dealing with any problems that may occur, and understands the building process, regulations and procedures that must be carried out to ensure a safe, straightforward construction process. Any unaddressed issues and regulations can prove costly and disastrous down the line.

You may also find that a design consultation you have engaged may ‘behave’ differently than one engaged by a Construction Manager. A Construction Manager can give clear instructions on the design and what is needed to achieve your dream design according to the building structure.

As a client, you can often get ‘emotionally or personally involved’, so navigating and keeping design teams or subcontractors on the right path or approaching them if a problem occurs can be tricky. In these circumstances, a Construction Manager can navigate, plan and assist with any issues that may arise, find solutions and be a single point of recourse for all involved.

Early Contractor Involvement means everyone involved has complete transparency on the price of the work needed for completion, affording you less hassle and costs down the line.

A Construction Manager can advise, guide and provide you with a list of potential problems or risks before you sign a commercial lease before you design your office and can help you navigate all the questions, worries and risks involved in carrying out a project from start to finish.

Who can I call for more advice on ECI?

We hope this article has set you on a great path towards your commercial project dreams.

If you are considering engaging a contractor under an Early Contractor Involvement arrangement, we encourage you to ask the questions in this article. We have also provided you with questions you can print and ask on your initial phone calls or consultation.

These questions will help capture your intent and find a personalised solution for you and your build/design.

An experienced Contractor can help you find the perfect agreement and contract for you.

Talk to our Experienced Early Contractor Involvement Experts today.

Our company brings over 30 years of combined experience in Office Design and fit out and have helped thousands of businesses around Australia. This is what we do: 

• Commercial and interior design 
• Office Space Planning 
• Design and Fitout 
• Branding Fitout 
• Office refurbishment 
• Office Furniture and Workstations Fitout
• Commercial Joinery 
• Office Relocation 
• Project Management 
• Commercial Acoustic Solutions

We value honesty, trust and respect 

We are straightforward with our pricing and for what you’ll receive,  to ensure you can make an informed decision before investing in the right services for your office. 

Our business operates through our clients’ trust, which is why we work towards ensuring all our clients are fulfilled with their new office. 

Your workplace is our workplace. Our director will personally oversee and review each project to ensure that every detail is taken care of with the utmost quality in mind. Only “good” is not good enough.

Specialist in Office refurbishments while still occupied

We have the experience and knowledge to get the job done without obstructing the normal workflow of any business. 

We understand that business owners may be hesitant to start redesigning their offices and intimidated by the process, however, we specialise in walking you through the process to create a safe, efficient environment for your business. 

We offer free design, measure & quote to show you how we will make everything happen. To guarantee that everything will be finished in a timely manner and with as little obstruction to your business, we work weekends and after hours.

No job is too small

We want to ensure that every business can forge ahead and make a positive difference into the new world, which is why we dedicate time to every single project, regardless of how big or small your business may be.   

• We are experienced in Fitout During Occupation, so you won’t have to close down your doors while we do our thing.
• Honesty, trust and respect are what we value most; so there will be no hidden fees, costs or surprises that will change the final cost. Everything that would cause a change in the price of the project will be disclosed to you in a timely manner and discussed before anything major is implemented.  
• We love what we do, and because of this, we design every project with love and attention. We want to make sure you and your staff get a workspace that will inspire you and motivate you to do better every day, just like we do.

How do I get in touch or book a consultation?

If you wish for more information or to book a consultation with our Early Contractor Involvement experts, call us now or use our handy form to get in touch. We take care of your project end-to-end with our Early Contractor Involvement and detailed, itemised fixed price budget for clarity and control.

Please copy & print or write down these handy, helpful questions to ask your potential contractor in the initial call or consultation.

1. Can you place orders or start work before the design is completed? Is this recommended?
2. Can my builder or contractor provide input before a design is finalised? Is this recommended?
3. What are the different price options for my plan & design?
4. What are the different Early Contractor Involvement Options, and which do you recommend for my project?
5. Could a contractor help me with the relevant legal, government, and CDC approvals?
6. Can a contractor help navigate any mitigating risk factors involved?
7. What are the mitigating risk factors you see initially with the design, planning and/or construction of my project?
8. Should I retain control of the project, third parties and subcontractors, or do I wish my Contractor to arrange this?