Comparison of construction costs on motorway projects using measure and value and alternative tendering initiative contractual arrangements

Abstract

This paper reports the outcome of an investigation into the construction costs in 11 motorway projects. The projects formed one length of road and were of identical specification; five of the projects were undertaken by a traditional design, tender, construct method, and five were undertaken by a procurement system by which the contractor bid a lump sum for the work and so absorbed potential risks and benefits from changes in prices of resources or fluctuations in quantities of work necessary for the completion of the work. One project was undertaken by a design and build method. The results of the analysis indicate that in roadworks the construction cost per kilometre of road is some 11% less expensive when lump sum contracts are used. This benefit appears to be more pronounced in the case of bridge structures incorporated into the motorway. Of greater significance is the cost certainty that is afforded using the lump sum methods. The research showed that lump sum projects were much more likely to be completed within the budget. Finally the lump sum methods required less management by the client organization and delivered more harmonious working relationships between the client and contractor.

Keywords:

• Procurement
• tendering
• construction costs
• variations
• value for money