Critical Analysis of Time and Cost of Management and Traditional Contracts

Abstract

This paper presents some findings of a PhD research program conducted by Naoum in 1989, which sought to investigate whether the means of procurement influenced project performance. Ten factors were identified to measure project performance: (1) Preconstruction time; (2) construction time; (3) total time; (4) speed of construction; (5) unit cost of building; (6) time overrun; (7) cost overrun; and client satisfaction with (8) time, (9) cost, and (10) quality. A theoretical framework was used to assist in comparing project performance in a case study sample of 39 management contracts and 30 traditional contracts. From the evidence available in the writer's study, it must be concluded that in neither the management nor the traditional system lies the solution to all the problems facing the construction industry. To achieve project success, the parties need to match the various organizational forms to the client's characteristics, criteria, and priorities with respect to time, cost, and quality. The statistical analysis suggests that management contracting performs significantly better in some respects than traditional contracting, in particular, when time was the essence of the contract and when the project was highly complex. However, the research did not provide enough evidence to support the view that management contracting can reduce the overall building cost, or that the system can increase the standard of quality.