Construction includes all activities whose purpose is to make an improvement to land.
But to define the industry in such terms is merely to substitute the undefined phrase “improvement to land” for the term “construction.”
There are many types of construction-oriented activities that result in no physical change to a premise, although that premises might still be seen as having been improved.
For example, the preparation of engineering drawings that lay out a street plan and sewer and water system for a new subdivision is clearly a construction related service.
Such drawings may in themselves enhance the value of the service. Such drawings may in themselves enhance the value of the land, but those drawings do not alter the physical nature of premises.
On the other hand, there are many activities that do alter the nature of a premises, but will only rarely be viewed as being construction related.
The most obvious examples of such activities are the annual plowing of a farmer’s field and the sowing and reaping of crops. These activities are more normally considered as agricultural in nature than as being forms of construction.
Yet similar activities, such as landscaping, are usually grouped with construction, especially since the landscaping of a premises is often the final stage of the construction of an improvement to the premises.
In many cases, the answer to the question of whether a given activity constitutes construction will depend on the circumstances in which that activity is conducted.
For instance, the installation of industrial equipment or fixtures may be either manufactured or constructed. Where such equipment is installed in an existing physical plant, without alteration of that premises, it is likely to be considered a manufacturing activity.
However, where it is installed as an integral part of the physical improvement of a premise (for example, the installation of equipment, where substantial modification is required to the flooring and electrical wiring of the premises) it is more likely to be seen as construction.
In other cases, the distinction between construction and non-construction activities may be more difficult to explain. As was noted above, the plowing of land is rarely considered to be a construction activity, but the terracing of that same land normally will be viewed as construction.
In such a case, the distinction seems to be the purpose or degree of the physical alteration that is made.
In principle, construction contracts are no different from other types of supply arrangements and indeed from a purchasing management perspective, the difference between a contract for the construction of a building and a contract for a design and development of a custom built major item of personal property (e.g., a ferry boat or radio telecommunications system) is largely only one of context.
The risks entailed in construction may be quickly summarized. In most cases, construction contracts will include significant expenditure. They require detailed specifications that define the scope of the project.
Initial assumptions that underpin parts of the contract are likely to be disapproved as work proceeds on the contract. There is a need to establish work schedules, to monitor progress and to provide for interim payment.
On occasion, the project will have to be executed in separate stages. It will almost always be necessary to co-ordinate and control a large number of subordinate suppliers.
Nevertheless, although these requirements for active management are common in construction, they are by no means unique to it.
Comparable demands will be placed on a municipality’s purchasing administration by any other major procurement of comparable size of complexity.
The main feature that sets construction contracts (and other major project contracting) apart from more mundane procurement arrangements is the extent to which it is necessary to co-ordinate a complex input-output supervision arrangement, to ensure that the project is executed to the intended specifications of the municipality.
Stephen Bauld is a government procurement expert and can be reached at swbauld@purchasingci.com. Some of his columns may contain excerpts from The Municipal Procurement Handbook published by Butterworths.
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