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Procurement models: What is early contractor involvement (ECI)?

Different projects often require different procurement and contract options.  Traditional procurement methods that bring contractors into the process after key decisions have been criticised for causing inefficiency in project delivery as it separates the design and construction process sequentially. To combat those problems, more and more projects are looking to procurement models like Early Contractor Involvement (‘ECI’) to allow a flexible and efficient approach to a project.

What is ‘early contractor involvement’?

An ECI (sometimes referred to as ‘ECE’ – early contractor engagement) is a procurement model that allows the contractor of a project to be involved in the early phases of design between parties such as the Principal and designers. It is usually a two stage process.

In the first stage, the Contractor is engaged to prepare the preliminary design with the Principal.  This is often looking at the ‘buildability’ aspects of the project and including the know-how associated with the actual construction and construction cost alongside the design process.

The second stage often involves a design and construct model, however, the Principal does not have to engage with the Contractor and can competitively tender the works to another Contractor, although often the relationships developed during stage one means the Contractor and Principal continue to work together through the project.

ECI v traditional procurement

The ECI model has shown to provide benefits for Principals and supports improvement within team work, innovation and planning.[1] ECI contracts allow for improved facilitation on collaborations and innovations such as the ability to develop and test and create prototypes material before committing to constructions. This could improve communications between owner, designer and contractor for better project time and cost certainty, as well as providing the Principal with comfort that the project is actually buildable.

The traditional design and construct contract often involves the Principal requiring the Contractor to develop, compete and be responsible for the design process along with the construction. The preliminary design by the Principal’s designers will be the contractor’s responsibility.

With the ECI model, not uncommon for two or three ECI participants to be chosen to complete stage one and submit their stage two process to allow for a competitive ECI process.

Pros and cons 

The advantages of using ECI include:

  • Less intensive tendering process
  • Fewer variations during construction
  • Shortened delivery time
  • Provide greater value than traditional procurement models
  • Less adversarial structure
  • More cost effective
  • Increase transparency (including in relation to costs), therefore reducing risks such as reduction of litigation
  • Increase of shared responsibilities.

Some of the disadvantages include:

  • When designers are novated, their primary duty are changed from project owner to contractor and the principle loses and independent source of advice
  • It is unlikely the Owner would not accept the Stage 2 offers due to the time invested in developing the relationship in stage 1 and the disruptions to time-frames from re-tendering
  • High turnover of staff or major relationship breakdowns could significantly impact the performance.

When is it used?

An ECI allows the Principal the flexibility if they do not wish to relinquish preliminary design control to a contractor that is not suitable for the project. If that is the case, the Principal can spilt with the first stage by engaging the contractor under a consultancy agreement to provide advice on the design process that will be undertaken by the Principal’s designers. This allows flexibility to the Principal without the obligation to hand over design process control or negotiate and agree on the entire construction contract.

ECI are used in projects such as mega infrastructure projects such as port expansions and new port development, where contractors are experts can offer innovative and knowledge to develop a more realistic and reliable operating schedule and cost estimates, however it can be used on simpler projects such as subdivisions and apartment and commercial construction.

What kind of project does it suit?

At the moment, there is no Australian standard form contract for ECI.

ECI models have mostly been used in projects involving unidentified risks. An ECI is best suited for projects that are not repetitive work and require creative input from the Contractor.

This will be the first in a series by Morrissey Law & Advisory examining the various procurement models available in the construction industry.  If you have any questions around ECI or wish to discuss different procurement options and models, contact Morrissey Law + Advisory.

(This article was prepared by Michael Morrissey with assistance from Mary Ann Wen.)

[1] Building and Construction Procurement Guide: Principles and Options; http://www.apcc.gov.au/ALLAPCC/Building%20and%20Construction%20Procurement%20Guide.pdf

Disclaimer: This publication by Morrissey Law & Advisory is for general information and commentary only and should not be considered or relied upon as legal advice. Formal legal advice should be sought in relation to any matters or transactions that may arise in relation with communication.