Prime contractor
Prime contrator is an entity that has the complete responsibility for the delivery and, in some cases, the operation of a built asset and may be either a contractor, in the generally excepted meaning of the team, or a firm of consultants. The prime contractor needs to be an organisation with the ability to bring together all of the parties in the supply chain necessary to meet the client's requirements. There is nothing to prevent a designer, facilities manager, finanacier or other organisation from acting as a prime contractor.
However, by their nature prime contractors tend to have access to an integrated supply chain with substantial resources and skills such as project management. To date, most prime contractors are in fact large firms of contractors, despite the concerted efforts of many agencies to emphasis the point that this role is not restricted to traditional perceptions of contracting [1].
Prime contractor responsibilities
Responsibilities of a prime contractor toward a subcontractor:
- first responsibility is to provide general instructions on observance and its related regulations
- second responsibility is to provide technical instructions on taking safety measures at specific sites
It is not necessarily possible and sometimes completely impossible for a subcontractor to take effective safety measure with his sole efforts. This is a reson that these responsibilities of prime contractor is stipulated.
Even if these two responsibilities are not fulfilled: however, a prime contractor is not punished. These responsibilities are equivalent to instructions. A main objective of, the prescripyion of these responsibilities is to draw more attentions of a prime contractor[2]
Sanctions for prime contractor
Sanctions and penalties for prime contractors failing to comply with prompt pay requirements identified by the STAs included[3]:
- withholding future prime contractors payments
- interest of 1,5% to 2% per month on the amount owed or fixed-fee charges of $50 per day or some other amount
- suspension of bidding privileges
- in repeat or chronic cases the contractor may be suspended from bidding or revocation of prequalification
Prime contracting
Prime contracting is where an individual supplier (prime contractor) acts as the sole point of responsibility between the client and supply chain. As long as the supplier has the appropriate competence and experience, there is no restriction on who can assume the function. Prime contracting incorporates the following[4]:
- open-book accounting where the actual costs incurred by the supply chain are revealed to the client
- target cost pricing where the prices paid are established based on value for money for the client and a realistic profit for the supply team
- whole-life costing where, before construction begins, a whole-life cost model is generated
- pain/gain share where both the client and prime contractor benefit financially from reductions in project costs
Examples of Prime contractor
- Construction companies: Construction companies are typically the prime contractor for building projects. They are responsible for coordinating the activities of subcontractors and ensuring that the project is completed on time and within budget. Examples include Turner Construction, Gilbane Building Company, and Hensel Phelps Construction.
- Engineering companies: Engineering companies are sometimes the prime contractor on projects that require a high level of technical expertise. They have the ability to provide design services, coordinate the activities of subcontractors, and manage the project from start to finish. Examples include AECOM, Buro Happold, and Parsons Brinckerhoff.
- Facility management companies: Facility management companies are sometimes the prime contractor on projects that require a high level of operational expertise. They are responsible for managing the day-to-day operations of the built asset, such as maintenance and repairs. Examples include Jones Lang LaSalle, Sodexo, and CBRE.
- Management consultancies: Management consultancies are sometimes the prime contractor on projects that require a high level of strategic planning. They are responsible for providing advice on the best way to deliver the project and ensuring that the project meets the client’s objectives. Examples include McKinsey & Company, Accenture, and Deloitte.
Advantages of Prime contractor
- A prime contractor can offer a central point of contact for the client, allowing for a simplified chain of communication and more efficient management of the project.
- Prime contractors are able to provide the necessary resources, such as labour, materials and equipment, to complete the project on time and on budget.
- A prime contractor has the expertise and experience to assess project risks and take measures to mitigate them.
- Through their experience and contacts, they can provide the client with access to specialist knowledge and services.
- Prime contractors are also in a position to provide value engineering, as they are familiar with the project and can better identify potential cost savings.
- They are able to provide a single source of responsibility, meaning that the client only has one point of contact and one party to hold accountable.
- Prime contractors can also provide clients with a greater degree of flexibility, as they have the ability to make quick decisions and respond quickly to changes in the project.
Limitations of Prime contractor
The role of a Prime Contractor has many limitations. These include:
- Limited knowledge of the project and its requirements: As the Prime Contractor is responsible for the delivery of the asset, they may not have the necessary in-depth knowledge of the project, its requirements and the skillset of the team needed to complete it.
- Limited control of the supply chain: The Prime Contractor may not have control over the key components of the supply chain, such as the design and engineering, which could lead to delays in the delivery of the asset.
- Limited ability to manage risks: As the Prime Contractor is responsible for the overall delivery of the asset, they must manage the various risks associated with the project. This includes managing the financial, political, legal and technical risks.
- Limited ability to respond to changes: The Prime Contractor must be able to manage any changes that may occur during the course of the project. This includes changes in the scope of the project, modifications to the design, or changes in the budget.
- Limited ability to manage conflicts: As the Prime Contractor is responsible for the overall delivery of the asset, they may be faced with conflicts between the parties involved in the supply chain. This could include disputes over payment, quality of work, or working relationships.
The following are other approaches related to prime contractors:
- Design-build: This approach involves the hiring of a contractor who is responsible for both the design and construction of the project. The contractor is responsible for obtaining all necessary permits and ensuring the project meets all codes and regulations.
- Construction Management: This approach involves the hiring of a third-party construction manager who is responsible for managing the entire construction process. The construction manager is responsible for hiring contractors, supervising construction, ensuring quality control, and overseeing project budget and schedule.
- Owner-Contractor: This approach involves the hiring of a contractor by the owner who is then responsible for the entire project. The owner is responsible for managing the project and ensuring the contractor meets the project requirements.
In summary, there are several approaches related to prime contractor that involve the hiring of a contractor or third-party to manage the entire construction process. The particular approach chosen will depend on the unique requirements of the project.
Footnotes
| Prime contractor — recommended articles |
| Firm fixed price contract — Construction management contract — Design bid build — Contingent staffing — Provisional sum — Project owner — Strategic outsourcing — Bonding company — Insurance intermediary |
References
- Cartlidge D. (2012), Quantity Surveyor's Pocket Book, "Routledge"
- Lowe D. (2013), Commercial Management: Theory and Practice, "John Wiley & Sons"
- Singh A.,Hinze J.,Coble R.J. (1999), Implementation of Safety and Health on Construction Sites, "Balkema"
- Smith G. (2005), Management of Disadvantaged Business Enterprise Issues in Construction Contracting, "National Cooperative Highway Research Program"
Author: Natalia Talarek
