Early Contractor Involvement: Assumptions That Undermine Stage Two

Bringing a contractor in before the design is finished can save money and time, or it can remove your competitive position. Six assumptions worth testing before you choose it.

In a two stage approach you select a contractor on its fee, preliminaries and team, pay it for pre construction services while the design develops, then convert to a construction price. The logic is sound: you buy buildability advice and procurement lead time early. The weakness is that the second stage is a negotiation with one party, and everything depends on rules you set before stage one.

How to test a claim like this

Test any two stage proposition by asking what competitive pressure remains at the moment the construction price is agreed. If the answer rests on the contractor goodwill, the structure is weak. If it rests on open book subcontract tendering that you can inspect, a pre agreed basis for overheads and profit, and a credible ability to walk away, the structure is sound. Then ask what you are actually buying in stage one, and whether anyone will read it.

Myth 1: Early involvement means you have selected the contractor for the whole job.

Reality: You have selected a party for stage one and given yourself an option on stage two. Whether you can realistically decline the option depends on how much the contractor has become embedded in the design, what it holds that you do not, and whether another contractor could pick up the work. The option is only real if you have protected the deliverables and the information.

How to check it yourself: Write down today what you would do if stage two pricing were unacceptable, name the alternative route and confirm that your pre construction agreement gives you ownership of everything produced.

Myth 2: The second stage price will be competitive because the subcontract packages are tendered.

Reality: Package tendering does supply competition for the measured work, which is often the larger part. It does not touch preliminaries, overheads, profit, risk allowances or the contractor own work, and those are exactly where the margin sits. Unless those elements were fixed in stage one, they are negotiated when you have least leverage.

How to check it yourself: Fix preliminaries as a priced schedule and overhead and profit as percentages in the stage one agreement, and require open book subcontract tender returns with at least three bidders per package.

Myth 3: Pre construction services are a small cost not worth negotiating.

Reality: Pre construction fees are modest against the contract sum, but the deliverables are what justify them. A contractor paid for pre construction advice that produces only a cost plan and a few programme updates has not given you value, and the fee then looks like a retainer for the inside track on stage two.

How to check it yourself: List the stage one deliverables with dates: buildability review comments, a procurement schedule, a developed programme, a risk register, package tender lists and a cost plan at defined design stages.

Myth 4: Early involvement will shorten the overall programme.

Reality: It can, by overlapping procurement with design and by letting long lead packages early. It can also stretch the programme if the contractor advice reopens design decisions, or if stage two negotiation drags because nothing was pre agreed. The saving comes from early procurement, so if you do not actually let any package early, there is no programme benefit to collect.

How to check it yourself: Identify the specific long lead packages you intend to commit during stage one and put their award dates in the programme, then measure the approach against whether those dates are met.

Myth 5: The contractor advice will reduce cost because it knows how to build cheaply.

Reality: Buildability advice is genuinely valuable and often saves real money on method, sequence and interfaces. But a contractor also has an interest in a specification it can deliver comfortably and a programme with room in it, and some of its suggestions will move cost from its risk into your quality. Advice needs reviewing by someone whose interest is yours.

How to check it yourself: Have your designer and cost adviser respond in writing to each buildability proposal, stating the cost saving, the quality consequence and whether they recommend it.

Myth 6: If stage two fails you can simply tender the job conventionally.

Reality: You can, but you will have spent months and will be re tendering a design the market knows was priced once already. Bidders ask why the first attempt failed, and the answer affects their pricing. The practical defence is not optimism about re tendering; it is a pre agreed mechanism for resolving a stage two disagreement.

How to check it yourself: Include a stage two procedure covering how the price is built, what reference points apply, who resolves a disagreement over a rate, and the notice period for ending the arrangement cleanly.

What this changes in your decision

• Fix preliminaries, overhead and profit in the stage one agreement, not in the stage two negotiation.
• Require open book package tendering with a stated minimum number of bidders and full visibility of returns.
• Define stage one deliverables with dates and make payment of the fee depend on them.
• Name the long lead packages to be committed early, and treat them as the measure of programme benefit.
• Agree a written stage two procedure, including what happens if the parties cannot agree the sum, and have a licensed legal adviser review it before signature.

Domira builds and supervises projects across Saudi Arabia, and the commercial discipline above is how its projects stay inside their budget and their programme. Send the drawings, the contract or the site and Domira will tell you where the risk actually sits.