Early Contractor Involvement (ECI) is a method of contracting used by construction businesses, companies, and other associated businesses/companies/professions/trades in the industry. Builders are given the chance to be involved from the early stages and start working on the project. In case the design is not complete, basic work can begin.
There are varying degrees of engagement under ECI. They are as under:
- Construction management (CM),
- Managing contractors (MC).
- Guaranteed maximum price (GMP).
They are used interchangeably and are confusing, thanks to their varying meanings.
When an ECI engagement is in place, construction managers or contractors work for a fee agreed upon earlier. They work effectively in the following terms:
- Overheads.
- Preliminary Works.
- Profits.
When they enter into the contract the real-time construction costs and expenses are not known. The reason is that the design is yet to be finalized. There are some instances where there is no set price for the works. This engagement allows the principal to:
- Execute discrete portions of the construction work.
- Order all long lead items before each design element is finalized.
- Getting input from both construction managers and contractors regarding design. If the design is under development, they both can provide input on what is feasible.
- Getting a wider degree of transparency when it comes to pricing of trade contractors.
- Completing the project ahead of schedule.
Early Contractor Involvement (ECI) engagements are usually found in construction work. They are also found in design and construction work too, especially in design completion, and construction progress too. The Principal in this matter is the project’s owner.
What to understand further about ECI?
Quantum Analysis experts explain that both ECI engagements and lump sums for contracts are agreed when either the construction manager or contractor works, and the principal has the least certainty of the final cost of the project. The reason is that the contractor/subcontractor did not give their pricing.
Under ECI, Principals rely more on preferred contractors/construction managers. They also prefer to behave more honestly rather than speaking real facts. The reason is that they will be observing the subcontract tender process, provision of budget, and also give advice without any pressure from contractors.
This is known as a trade-off. ECI models provide quicker work completion, transparency in contracts/subcontracts, and early input from builders.
What do Lump Sum contracts do in this area?
Lump sum contracts give competitive pressure in terms of pricing of top-level contracts. This gives more certainty regarding the price of projects especially when they are well-documented. Somehow this has less control when the project begins. This is something expert witness services caution their clientele against.
On the other hand, ECI contractors are effectively engaged in providing the principal with the required amount of consultancy and service. A lump-sum contractor somehow may not be involved because of different interests between them and the principal.
What is Construction Management (CM)? A brief overview
Construction management (CM) involves the principal working with contractors/construction managers managing things on the principal’s behalf. They’re representing the principal as their representatives. Trade contractors conduct work in the way the project owner engages them. There are times when the trade contracts are signed by the construction manager on the principal’s behalf.
Principals pay trade contractors directly. They do so based on recommendations from the construction manager/contractor. They are also paid a fee for managing the entire project. They also provide correct preliminaries.
What does the Managing Contractor arrangement mean?
The managing contractor arrangement works like usual construction management arrangements with a few exceptions.
First: The trade contractor is appointed by the construction manager as the lead. Second: The lead contractor/construction manager is liable to the principal for any acts and omissions of trade contractors.
There are two categories to consider:
The contractor is first given a certain sum of money. The actual third-party expenses of construction tasks are then agreed on. However, the contractor can be required to verify third-party expenses involved in the construction project.
The second one requires both parties involved to agree on lump sum prices for contractors to conduct work when the accurate estimate is agreed on reasonable footing. This arrangement has the advantage of cutting down burden of management on both parties. Transparency is achieved for the principal during the pricing process.
If the parties wish to convert the arrangement into a lump sum contract, They must consider the following:
- When the design is completed, contractors should submit a lump sum proposal for the work that should be done. Principals can accept, reject, or negotiate some of the work and adjustments.
- They can opt for individual trade packages priced on really good terms. They can have exemptions for tasks with risks. They are hence calculated together for lump sum.
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