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What's the Difference Between a General Contractor and a Delivery Partner?
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Join Jason and Carlos in episode 95 of The Offsite Podcast as they tackle three complex topics shaping modern construction delivery:
🏗️ Construction Roles Decoded: Jason and Carlos break down the confusing world of mega project delivery roles - from general contractors to delivery partners and managing contractors. They explore when you'd use each role and how risk flows through these contractual relationships.
📋 Framework Projects Deep Dive: The duo discuss the rising trend of framework-style project delivery that's reshaping infrastructure. They examine why clients choose frameworks over traditional delivery and the unique challenges of managing geographically dispersed work.
🚢 Tanzania's $10 Billion Port Gamble: The pair analyses the on-again, off-again mega port project backed by China's Belt and Road Initiative. They discuss the trade-offs countries face with international infrastructure funding and 99-year lease agreements.
Key Timestamps:
00:00 - Introduction & Bridge Design Disasters
03:09 - Construction Delivery Roles Analysi
20:17 - Framework Projects Discussion
37:26 - Tanzania Port Project Update
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Transcript
Client Relationships in Consulting
00:00:00
Speaker
I guess it's the classic like agency or consultant type problem. Like even though the client might not get the best outcome they wanted, as long as they feel like that agency or that consultant is on their side, helping them navigate the problem, the relationship is kind of intact. And if that person's just getting paid based on fee, so you end up kind of with like that, I don't know, this might be, ah I might be burning bridges here, but you know, like the,
00:00:23
Speaker
you know, like the real estate agent that like, they maybe don't get you the best possible result, but as long as they make you feel like they helped you. Yeah, yeah, yeah. You know? i love how you just gave for estate agents there because and like, yeah, it's low risk in terms of missing people off.
00:00:38
Speaker
Yeah, no, was going to add to, I was a quick calibration on the fly. Nice.
Introduction to Episode 95
00:00:43
Speaker
ah so
00:00:50
Speaker
Welcome back to the Offsite Podcast, episode 95. I'm Jason Lansini, joined once again by co-host Carlos Cavallo. And today we are talking about the long list ah confusing roles that different parties can have in the delivery of mega projects, from delivery partners to managing contractors, and the list goes on.
00:01:13
Speaker
And we're going to give a comprehensive breakdown of what is what. Then we are going to dive into the concept of framework projects. Why would you do them? Is it good for a contractor?
00:01:24
Speaker
What's unique about delivering a framework project? And then finally, we're going to dive into the recent, the the latest update from the offsite newsletter, which details Tanzania's $10 billion dollars port bet backed by China at the Belt and Road Initiative.
00:01:41
Speaker
So a bunch to get into, Carlos, and we're 12, 13 minutes late, thanks to someone.
Roles in Mega Projects
00:01:48
Speaker
Am I responsible for all 13 minutes? No, probably I'll give you about 10.
00:01:53
Speaker
And then we did talk for 12 minutes about the the weird head shake thing. have no idea what you're talking about. That's right. It would have been the cold open, so we would have covered it already.
00:02:05
Speaker
but That's all good. I thought we were going to talk about the ah someone that built a bridge with a 90 degree angle on it, but we could talk about the head shake. They're in way more trouble than 12 minutes late start trouble.
00:02:15
Speaker
Yeah. yeah Is this the one in India? don't which one I'm picking. Yeah, I guess for anyone listening, there is a bridge with an actual right angle. So imagine a crossroads where you can only go from forward facing to turning right and vice versa um on a bridge with a pretty low barrier around it as well. it's so Just because it's a road bridge. vehicles supposed to drive over this bridge and it's got a hard right angle turn it. A very hard one.
00:02:42
Speaker
I'm sure Oli can flash up an image. i'm looking Yeah, if we get the picture up on this thing. The turning, it like I'm guessing a vehicle can't make it around the turning radius. Yeah. Also, it's ah it's like a plus $10 million dollar bridge. It's not like a quick and dirty, like. It looks quick and dirty from the photo, but. Yeah. yeah But yeah,
00:03:04
Speaker
They're definitely in more trouble. than slightly late to the podcast. The first topic were that we were diving into was then from a conversation that we had the other week when we were talking about all of these different, we're trying to work out what role different um companies play in the delivery of a project.
00:03:24
Speaker
And they all have, there always seem to be a new name or a new role for ah for a company. so We thought we'd try to build the like comprehensive lexicon of ah roles that kind of go into building and delivering a project and break down what each one does, ah maybe why it would um be something that's attractive or valuable for a certain project.
00:03:46
Speaker
And then maybe also we can follow the money and the risk of it. Are you as ah surprised by the the long list of ah roles as I was?
00:03:56
Speaker
Yeah, it's always been it's always confusing because there's so many labels. um yeah And there's one or two that obviously we're super familiar with. so we We'll probably start with those ah for a bit of context. But then there's so many types of, I guess, there's a lot of relationships and how they sit.
00:04:15
Speaker
ah which become increasingly evident on massive schemes where the the clients or the customers probably trying to sort of spread risk, bring in expertise without sort of yeah in and what they probably think is quite a clear way, but it's quite confusing with these labels. So, yeah, there's five or six quite common ones that I think are worth going through.
00:04:35
Speaker
Understanding yeah some examples, what that looks like from a risk profile. As a dumb contractor that always referred to to anyone that was above me as the client, um it was revealing to know that there's a lot of different pieces ah in the puzzle. yeah Yeah, for sure.
00:04:53
Speaker
What do you reckon?
Complexity of Project Roles
00:04:54
Speaker
We start from the bottom and work our way up and the bottom being the general contractor, even though there is a lot more beneath that stack. that willll show you the We have the general contractor They're taking on most of the performance risk of and the cost risk of the project. They might tend to the project in a lump sum or have some other contract structure like a fee based structure or a schedule rates. Yeah.
00:05:16
Speaker
Yeah. So that the GC or May Contractor is the classic client gives a piece of scope, go and build this airport terminal. They take that contract on board. They got relatively high risk on like time and cost.
00:05:29
Speaker
um And then they're going to go in, probably subcontract out most of the work, maybe self-deliver some of it. Very few contractors will sort of self-deliver all of it on a complex scheme. So the usual like Balfour, BAM, Lendlease, Multiplex, their traditional g GC or main contractor.
00:05:48
Speaker
um So yeah, that's the one that's probably I'd say most people are familiar with. Yeah. and And then the sandwich between them and the ultimate, let's say asset owner or client is where the where all the funny names start to come in.
00:06:02
Speaker
So as you maybe go, ah maybe going up a couple of levels, then you've got maybe this role of a managing contractor, yeah which is probably the most obscure to me because it feels like ah it feels like a ah general contractor.
00:06:17
Speaker
but with some nuance. So I don't know if you want to run through that. Yeah. So you might have like the client ah hiring a management contractor sort of sit above everything below.
00:06:30
Speaker
They're probably responsible for coordination of contractors involved. They're probably involved in procurement, at least from a advice and strategy point of view.
00:06:42
Speaker
They're probably doing a lot of stuff in early engagement, but then they're probably going to pass most of the risk profile on to the next tier down. I think these contractors are often sort of cost plus fee. So it's kind of a sweet place to be. for a Yeah, so in many ways it feels very similar to a general contractor ah other than maybe a because you know they're they're typically going to be subbing all of the work.
00:07:10
Speaker
They're probably going to tier twos or or direct to threes maybe in the coordination
Managing Contractors
00:07:15
Speaker
of the work. and then And then what's really unique, I guess, is is maybe that commercial structure. Is that probably the thing that sets ah managing contractor aside from a a general contractor? Yeah, because the two can be easily confused and muddied. Like we know, so like ah let's just say on Crossrail, they're referred to as main contractors, but most of those joint ventures would sub everything out. So then you're you're already in these blurred lines of like what some people would perceive a managing contractor to do.
00:07:43
Speaker
So it's not super clear. But they're letting the contracts with all the subs. So the flow of money is going from client to them to the subs. managing contractors, the actual contract sits with the client, but they facilitate the process.
00:07:58
Speaker
So it won't necessarily be like the contract is just with the main contractor, the contractor has a contract with the client. You can actually have the managing contractor procuring on behalf of the client, but the the contract sits directly with that client.
00:08:11
Speaker
So I think Mace on London Olympics had a situation like that where they're basically sort of acting as it the client's sort of doer, but they're not actually in that position where they they own the risk of the supply chain below because that say they they hold they hold mostly like coordination risk. I think I read a bunch of stuff that it's like mostly around like their biggest risk is like, I guess, negligence in coordinating the project.
00:08:35
Speaker
Yeah, exactly. So that's really ah you're bringing in expertise. thats sweet And what do you reckon the client organization is is getting out of that? and And what does their organization typically look like? Like, i guess in the general contractor world, you know famously on large projects, you'll do kind of you'll see kind of this man marking thing happening where for every person,
00:08:56
Speaker
ah in the general contractor role. There's almost like ah an equivalent somewhere in the client org or or in any of these layers we're about to to hit on soon. But on a managing contractor, is the client still doing that or are they, are they does it give them the ability to be slightly less resource loaded?
00:09:13
Speaker
I'd imagine it's slightly less because it goes back again to the the contractual relationship and how they sit. They're probably pushing for as many people as they possibly can and and argue that that should be the case because if they run a cost plus fee, you're in a pretty lucrative position to be putting a lot of people onto that job. it's the old like show me the incentive and I'll show you the outcome kind of thing. It it does it does lend itself to the the only person incentivized to to keep the cost down here is the is the owner.
00:09:42
Speaker
Yeah, and it's probably I'd imagine a ah scheme um which is the scope is really quite undefined. It's probably a useful thing to have a management contractor because yeah trying to actually price something and then go through the change process early doors with the main contractor is going to be a difficult and yeah tough process. Whereas a manager contractor on that cost plus you have that flexibility to still get good value down the road whilst having them in the door and working with you.
00:10:11
Speaker
so So that actually feels very similar to another model which might be called like a construction manager, which is maybe a terminology that isn't familiar as much in say the UK.
00:10:22
Speaker
ah Feels very similar in a role that exists in other other markets. um with maybe a slightly different risk ownership. It sounds like the managing contractor role ah is the amount of risk is is surprisingly limited.
00:10:38
Speaker
But there there can sometimes be these construction manager type roles that are at risk over some capped or target cost is a model that exists.
00:10:50
Speaker
Is that something you've seen before?
Construction Management in the US
00:10:51
Speaker
It's not something I'm that familiar with. It looks like it's quite common in the US where Yeah, they again, they wouldn't have the contractual responsibility to manage supply chain, but they do actually own delivery of it. So you can imagine a model there where you haven't gone for the classic main contractor, you're deploying a construction manager to manage the bunch of tier twos delivering the job or or tier ones.
00:11:17
Speaker
So yeah, kind of removing that big middle layer. Yeah, use case seems very similar to that managing contractor role, which is like maybe the scope is a little bit fluid. You're trying to you're kind of trying to start work while while a bunch of the maybe design or other things are being yeah resolved and you you don't want that gap of whatever, maybe a year or two to do that procurement.
00:11:38
Speaker
Yeah, think a lot of it comes down to how defined the scope is and how complex the scheme is. Yeah, who who's going to hold, who's going to take on, who can price and take on certain risk really, isn't it? Yeah, exactly. so we've got the delivery partner that we see more and more of. And the delivery partner could be like a Bechtel on ah Crossrail or you see Jacobs and Fleur and those sorts of organizations stepping in on top of mega schemes. yeah And that is, it's kind of low lowish risk they're probably paid for services because it's they're coming in at a time where it's super undefined but they're there because you've probably got many tier one contractors at play and then that coordination piece becomes huge um and you probably don't have a client team that's big enough to do any kind of man marking
00:12:27
Speaker
a level that would you'd have that control and and visibility that you need so they're probably going to do everything from like governance and reporting to yeah the pmo function and and everything else yeah so kind of like the previous two on steroids for and and like you said the use case is i'm a client organization that has such a large influx of of infrastructure or something to deliver or like a or a mega project or something that it's so outside the capabilities or the capacity of their team that they need to effectively kind of embed this this function in there. So it's sometimes like you said I think it's fee but I have seen in previous projects ah that sometimes they can be on a um like some sort of pain gain share arrangement as well so that there's some alignment of incentives.
00:13:16
Speaker
Because, yeah, whenever you have anyone in the the contract contract structure that's making a fee on volume of work, you just get wonkier incentives. But it's really hard to sign people up to any sort of pain gain, especially when the scope is so...
00:13:33
Speaker
Fluid. Yeah. Yeah. And these guys, like they'll, they'll argue they're there to like keep the contractors honest and be the, that the experienced eyes, but they're probably incentivized to be, animals when it comes to, uh, commercial and program performance, which is what what would be so they incentivized just to be, to, to, I guess, posture towards the owner.
00:13:55
Speaker
And as long as the owner's happy, we're happy. So, so I guess compared to say like an EPC M or an EPC contractor, yeah who we'll get onto in a sec, are definitely incentivized to be brutal and ruthless.
00:14:09
Speaker
Yeah, but but but we say, is it about if the client's happy, you're happy? if if Is the client happy if you're one day late because they don't pay a huge bonus, but you're one day late and it doesn't really matter? So you can end up in a gray world there where they are still battling for their own commercial gain for something that might not be is. I guess it's the classic like agency or consultant type problem. Like even though the client might not get the best outcome they want, as long as they feel like that agency or that consultant is on their side, helping them navigate the problem, the relationship is kind of intact. And if that person's just getting paid based on fee, so you end up kind of with like that, I don't know, this might be, I i might be burning bridges here, but you know, like the,
00:14:51
Speaker
you know, like the real estate agent that like, they maybe don't get you the best possible result, but as long as they make you feel like they helped you.
Design and Build Contracts
00:14:59
Speaker
Yeah, yeah, yeah. You know? I love how you just gave for estate agents there because and like, yeah, it's low risk in terms of pissing people off.
00:15:06
Speaker
Yeah, no, I was going to add to, I was a quick calibration on the fly. Nice. I think the last one that's worth, ah I guess, a notable mention is if you think about design and build contracts, smaller size, then there's probably some kind of what they would call an an employer's agent or a client's representative.
00:15:24
Speaker
Yeah, might be like an Arcadis. Sometimes they're called superintendents in Australia. they're going to be super lightweight. They're really going to be looking at how much spending and ah scope creep and things like that um and really administering contacts contracts. so um And then you've got the then you've got the big the big boy one, ah which would be like an EPC or an EPCM contract.
00:15:47
Speaker
And so that that's looking like it's looking like sometimes what a general contractor risk would look like, ah but taking on usually even more risks like design, cost, procurement at risk. Typically, at least in my experience, is letting the vast majority of the work, maybe they're self-delivering some, but they're they're letting...
00:16:09
Speaker
very large packages to say general general contractor or multiple general contractors. So this would be like like a scheme wide where there's lots of major pieces of scope that you would split out to tier ones.
00:16:21
Speaker
Yeah. So if you took like a very large project um and said what a ah like a delivery partner or a managing contractor might do, The flip side of that was would be kind of like what an EPC, the difference between abpc and EPC and EPCM being the M and that's the maintenance piece of it. So that's kind of like a longer term responsibility. But on just on the EPC being engineer, procure, construct, they're basically taking on all of that that risk, which is a role say Bechtel plays a lot as well.
00:16:52
Speaker
And they're typically fixed cost rather than variable. Is that right? Typically. And I've seen a lot of them where there's like they They try to align incentives with the owner's incentives. So I don't know, picture like a gas plant or ah or a, I don't know, a ah processing facility that ultimately is going to generate some revenue in the end by you know producing something.
00:17:14
Speaker
i've seen I've seen a lot of like incentives tied to that. So yeah, it's it's typically, and then what you'll find is because they're on effectively like a fixed cost with some ah pretty nice incentives and disincentives, that they that is where you'll see like pretty brutal contracting to the supply chain and underneath.
00:17:33
Speaker
Because they'll want all that cost to be fixed and they'll want they'll they'll usually retain a lot of power under the contract to to direct how things are going so that they don't end up in the spot where the kind of the contract they're working with is just like telling them what's going on.
00:17:47
Speaker
ah Interesting to think about where that plays into for and for a say an owner or even maybe another thought exercise is yeah like which which if you were if you were delivering a a major scheme what would be the the stack that you would be kind of thinking about makes the most sense? i think specifically maybe prompting around alignment of incentives.
00:18:09
Speaker
Obviously, a value of the scheme would change the view on what should be. But let's just think like a typical one, 200 million pound scheme. Main contractor slash general contractor feels sensible because they generally do have the expertise to go and deliver the scheme. Yeah.
00:18:23
Speaker
And you don't have this ah like odd pairing between that and someone that's sitting above that might have misaligned incentives and The one sitting above, do they even have more experience to just go and deliver that scheme than the one that's actually been hired to deliver the scheme is probably something I think about if you're going you know for... Just double clicking on that, on on the client side, let's say you let's say you don't usually have that resource internally.
00:18:50
Speaker
And so to keep up with the volume of like commercial things that, you know, your obligations to to ah to properly manage that contract. Are you thinking just supplement your team with like consultants? Are you thinking delivery partner? What would you what would you do Definitely in that sort of situation, you'd probably have the like Turner and Townsend, one of those organizations to manage the commercials and communication because that's ah that's the real time intensive thing. And if you're going to manage that, you kind of have to build out the whole team because be odd to just do that in isolation. So you definitely commercial support, multifaceted mega scheme, like a
00:19:29
Speaker
a tube like a tube with stations, the classic one where we see lots of contracts involved. I think the delivery part does make sense because you want that oversight. And once you're in your contract world, you really don't think about anyone else unless it's gonna directly affect your works. So you need those eyes and those people that are thinking the overall program and ah aligning incentives below.
00:19:52
Speaker
So what you think? What was interesting in researching for this is just that there is no definitive guide of this thing. So I think that i think we should publish a like ah ah very basic guide because ah the amount of times I've seen these different terms slowed around and I've kind of nodded along politely ah it would have been good to have a like, here's the typical structures.
00:20:16
Speaker
yeah Moving on, the um the yeah the other thing that both these topics, this and the prior one came out of conversations that we were having recently.
00:20:26
Speaker
We, ah you know, everyone's familiar with the idea of like a general contractor delivering, you know, a discrete project that they they bid the project, they deliver the project, hand it over, and they move on and and deliver another project.
00:20:40
Speaker
Increasingly over um the last five or 10 years and and and really ah in some markets a lot ah more recently, ah there's been this big rise of these kind of like framework style projects or schemes.
00:20:55
Speaker
um So some entities like, you know, rail networks or or other asset owners have run these over a long time to kind of batch up smaller projects and have maybe a panel of contractors that win a right on on one of these frameworks.
00:21:10
Speaker
And we've talked previously um about a couple of the examples out of Australia where they had the level ah crossing removal scheme, which was even bigger discrete projects with with some of those projects being multiple hundreds of millions for each of the individual projects and some 83 level crossings removed or something
Framework Projects and Their Benefits
00:21:29
Speaker
like that.
00:21:29
Speaker
It raises ah an interesting thought as as we've been working with more and more of these framework schemes across different markets. Like what? Well, first of all, I'm interested in like, yeah, what is a framework? ah why would Why would I do it as a client? What does it mean for me as a contractor? is it ah is it a good thing? Is it a bad thing? Maybe from there we can dive into what's unique about kind of delivering a um a framework project.
00:21:52
Speaker
Yeah, maybe starting right at the high level. Yeah. What what is it? What do you typically see? And then and then what's in it for the yeah owner or client? Yeah. So I think if we look at a typical framework and they do, as you said, they really vary in size now. We're seeing some frameworks that have like one piece of scope that is in the hundreds of millions.
00:22:09
Speaker
But typically scope is lots of mini projects. And we're talking like 10 grand to 10 million type pieces of scope. So these pieces of scope are like short durations, quite high turnover. Yeah.
00:22:21
Speaker
Visibility of it is is pretty poor. lot of data that they're trying to manage and and keep and sort of oversight of. There's a combination of contract specific teams and shared resources across these frameworks that are but being typically delivered by either the really big contractors or joint ventures built up of tier one contractors.
00:22:40
Speaker
And yeah, they're normally done. So if you take in the UK, for example, the big frameworks that people recognize are network rail and the water. organizations and they will typically let like a five year framework where they've sliced into regions, the country or the water companies quite sort of established boundaries.
00:23:01
Speaker
They go for frameworks because if you've got within a region, you might have like 500 things you need to do over five years. And if you think yeah water, that could be anything from like a pipe that needs replacing and someone's local road up to like a water sewage treat treatment works that needs extending.
00:23:19
Speaker
And instead of going to the market on every single one of these contracts, they tender for a framework contractor. That framework contractor, I've never been involved in a tender, but there's going to be an aspect of like rates for doing certain things so they can get an idea of what things might cost because the scope's largely undefined.
00:23:36
Speaker
And then they bring the contractor on board. They assume or hope that that contractor will generate some efficiencies for managing lots of these projects because they'll have a central sort of HQ team doing the like overall project controls, project management, leadership and everything else, and deploying teams onto sites or onto pieces of work.
00:23:57
Speaker
So it's this sort of big web of contracts being centrally managed and reporting back to the client. So that's kind of what they are. if it it Going back to the prior conversation, the the role that i say a general contractor bidding on one of these things eventually is going to play, feel something close to a managing contractor.
00:24:18
Speaker
Yeah, so if we think about if we think about how he would actually run this in theory, you could imagine it some thinking that you would run it in a way of, it's like a general contractor with a bunch of packages on ah on a contract. so I think the benefit of that would be like,
00:24:34
Speaker
I guess, we're cut like governance and reporting structure, because its it feels like one project with a lot of packages. You'd feel like you have a bit more control because it feels like one project. It's familiar because that's how we normally to deliver schemes at that sort of scale.
00:24:48
Speaker
but You'd probably struggle to be quite reactive because a lot of these pieces scope, they're everywhere and there's not that one sort of team centrally. They can have this oversight of everything because they're so broad regionally in terms of scope.
00:25:01
Speaker
So yeah, so back to the, to summarize what you were saying from the like owner perspective, there's some degree of like bypassing or outsourcing of procurement. So instead of having to procure do all these jobs ourselves, we kind of just package them up there's some simplicity of probably getting budget approved and then it's like out the door and and off we go I'm imagining then that the typical pattern is that we're effectively just trying to get as much work as possible from a list of work done within a budget is the way, it is as opposed to like a typical
00:25:32
Speaker
major project, which is we have to finish the project and then sometimes the budget goes up or down. Like yeah yeah a half finished road is no good to anyone. But like in this framework context, you've got some budgets, get as much of this work done as possible up to a budget. is that Is that typically the pattern?
00:25:49
Speaker
Yeah, there's um there will be these sort of, there'll be a schedule of items. There could be a list of 500 items and then the contractor is going to be prioritizing these items over like a five-year period. And there'll be some that are urgent because maybe they're actually like a defect to an issue that's live. Some of them will be sort of more scheduled maintenance, but they're going to utilize their team to deliver those as they can.
00:26:11
Speaker
They're probably not incentivized to finish early because it's a five-year period that they're there for. On that, what you just described sounds like the contractor is being told upfront how much they're winning on the framework.
00:26:21
Speaker
Whereas i've seen what i what I've seen from different schemes and frameworks over time is that you you kind of get on ah on a panel and then you're bidding each incremental thing that comes out on that. um So you're kind of like winning the right to bid the next thing.
00:26:34
Speaker
Yeah, I think there's a combination of known and unknown. yeah So you're winning a framework with an an idea of what it could and and will include to an extent. then Then there's going to be a whole, like over a five year period. If we think a lot of these are ah like ah infrastructure that's running a country, there's going to be tons that pop up.
00:26:50
Speaker
yeah And then you're probably going to have to price those to an extent. But that price should be built on the foundations of rates that you've pre-agreed. So it's not first principles exercise every time you're trying to get these pieces of scope agreed.
00:27:02
Speaker
Okay, but yeah, in your in what you're describing, sounds like guess some degree, some amount of largely known amount upfront as part of the the the win for the contractor.
00:27:13
Speaker
Yeah, there'll there'd definitely be ah an idea of scope and cost as to what you're going for. um I mean, you I guess you kind of have to to get certain names in the door to get we guarantee there's going to be X amount of work.
00:27:27
Speaker
And then so then ah from the client, you're you've got this yeah outsourcing of procurement. and Probably like you said, you're banking on some efficiency, but yeah, probably also some like learning curve that you've got this one team that are kind of ah repeating the same thing over and over and over again that across the the country or the region.
00:27:48
Speaker
um Do you see often that there is a there's kind of like a performance incentive arrangement um on on the frameworks? I would expect there is. I've not worked or delivered a framework myself to know um yeah what is actually happening on the ground. um What I've seen just as an example is this like a you know you might have some scope that you've won and there's still a large amount of scope to be won over the following years.
00:28:16
Speaker
And so there's some performance benchmarking of the contractors on the framework that puts them in the pole position to win the next amount of work. So your performance on project one or scope part one is going to set you up to how much is part two and part three you'll you'll get.
00:28:32
Speaker
I think there's there's two different types of framework in that context. With some frameworks, it's one JV or contractor that wins everything in the five years. So it's all theirs unless they like hit some sort of dispute with a package that they can't get to good value and they might sublet that or give it to someone else.
00:28:50
Speaker
Yeah. And then there's some frameworks where there's three contractors in the framework and then they they do many competitions for each package of works. Yeah. So it would depend on each one and the one that there's many packages works, then yes, you're definitely going to be ah tracked on how productive you are and value for money. And I had a conversation with someone at a contractor recently where they want to go to full production rates.
00:29:13
Speaker
And basically, as you reduce the the pound per X of rate that you do, you get higher in the league table and you get more and more work. So you could end up with one contractor if they work out how to do something at a way more efficient rate than another, they're going to get all the work, which just seems like the fair and reasonable way to do it in terms of rewarding performance and good value for money for the taxpayer. Yeah, except they're usually paid on a fixed rate of those per widget anyway. So the cost per widget basically improves their margin rather than reducing the cost of the project. It would depend on the contract type.
00:29:52
Speaker
Yeah, they could be on cost plus. They could be on fixed rates. ah They could have some sort of paying gain share. um Yeah, it's hard to tell from that. In a world of construction being super cyclical and kind of boom and bust, yeah, it feels like these are the types of projects that most contractors want to have some base of that is kind of like the recurring work and then they can sit other projects on top of and then is it and then try to keep the same people on on the thing for the whole time? Or, yeah, you thinking they're rotating people in and out?
00:30:28
Speaker
It's a good question. I know lots of people that have been like frameworkers for life and they
Challenges in Framework Projects
00:30:33
Speaker
stick them out. And yeah, if you're if one of these major frameworks is near where you live and it's super convenient, you're probably there for the five-year cycle and trying to win the next one because it's a perfect world.
00:30:44
Speaker
It will be interesting to see how or to understand a bit more about the reality of yeah these contracts and and lots of sub-projects like Do the sub project teams start to operate a bit more like a tier two than part of this big tier one engine?
00:30:58
Speaker
Because even though the engine wants everyone to consistently deliver work and deliver profit, could there be factors that make people get very protective over their own scope and don't act in the best interest of the overall framework because ah They're sort of focused on theirs.
00:31:13
Speaker
So you yeah imagine fighting for resource or yeah all sorts of things going on behind the scenes. Totally. Yeah, that that transitions to the thing that I guess we really wanted to get to, which is yeah what we've what you've seen or at least what your first principles thinking of around like the best practices for trying to manage and deliver these projects, because the facts on the ground are what you just described. right You've got teams spread out, usually over large geographical areas.
00:31:36
Speaker
You've got projects that kind of spin up and end. ah sometimes very, very quickly. It's very hard to get like a real neat measure of production or performance or how we're actually performing on them.
00:31:48
Speaker
Dates can of sometimes be super fluid because it's like, oh, we'll do that one after this one. And suddenly this project's back two months and this one's four in one month kind of thing. There's a philosophical question of how much is is is best to think about it as one overall project with packages like you described, or it's some more decentralized approach.
00:32:10
Speaker
Yeah. What have you, what what's, what where would you start? Yeah. So I think there's, for me, I would batch them into contract value. Yeah. Because if if you had any kind of one project approach, you're gonna have this confusing thing where you look at a piece of scope and then you make a knee jerk decision on how much time you're gonna think about it because you might deem it as important or non-important.
00:32:37
Speaker
And on top of that, the small pieces scope are probably a lot more agile and reactive, whereas the big pieces scope require like major thinking like you would with any major piece of scope.
00:32:49
Speaker
Yeah. So I think I'd want and what you want is someone that cares about the small pieces of scope in its entirety and not yeah be constantly distracted by the the big the big stuff.
00:33:01
Speaker
So I'd probably batch them into size so that you've got people that care about that particular type of project. You can have probably processes and even there'll be levels of reporting that you want at each of those because of the complexity of them.
00:33:16
Speaker
um So I'd probably have those as streams so that you don't have this split um attention or like ah consideration of importance because yeah everyone's always looking at the the big sexy thing and not the the the small bit of maintenance that um yeah isn't so fun to look at.
00:33:37
Speaker
Yeah, yeah i think i think what you've described, I think, is um is intuitively makes a lot of sense. I also think that's this is what I've seen most of the teams do as well, where you kind of like, okay, take our whole portfolio of of scope, all of the bigger pieces, you kind of make it like you're, you know, in a company, you'll have like the major projects the division. You effectively go and put them over on their own.
00:34:02
Speaker
And then I think what you end up, what I see most people do is you take the remaining scope of smaller things and you batch them into you know what type of work there. Okay, these are pipe, now installing pipe.
00:34:13
Speaker
Over here we're doing pump stations, say it's a water project. um where you batch these things together that are similar and then you can start to treat your major, you know, there's, I think we've said before this idea that there's there's two types of projects. There's production projects, which is like if I just measure how many widgets are going in the ground, then I can get a sense of the health of that project because they're repetitive.
00:34:37
Speaker
And then you have planning projects where like, There's a lot of complexity, unique things that you're tackling and the how you perform is usually due to how well you plan the work.
00:34:47
Speaker
So you end up kind of with your major projects being in this like probably planning type projects where you've got a team dedicated to that. And then you have you just treat the all the pipe projects and all the pump station projects as as you kind of manage it through production rates.
00:35:04
Speaker
You can imagine some complexity sneaking in there. But if you try to do that in P6 or in a schedule or something, that production one gets kind of like wonky because like i said before, you get this like I pull this thing seven months forward. and I push this thing back four months and it's like really what you just need to do is make sure you're getting 23 of these things done a week.
00:35:23
Speaker
Yeah. Over the period. What comes to becomes tough then potentially is resource. So you could have like a two hour drive between two pieces of scope that are similar. So if you've then got shared resource, which is like a works manager or someone, then you might have to think more regionally around oversight, even though reporting wise, you're focusing on scope type. So you can.
00:35:46
Speaker
Yeah. Well, I think, well, it depends on the specifics for sure. But like if you if you first batch up all of the like work, so you know sticking with the water example, you've got like pipelines and then pump stations.
00:36:00
Speaker
Well, then you just start from first principles and go, where are all the pipelines that we have to do And you you probably try to do them in some sequential geographic manner. There's probably also permitting and other consents and stuff that that play into it. but I'd imagine you would try to tackle the, you know, it's the effectively the like the Uber Eats driver problem of what's the right sequence to drop off all of the these packages ah along the way. There's probably a bunch of like seasoned framework managers listening to this right now thinking, yeah.
00:36:31
Speaker
It's not Uber Eats. yeah It's a little more complicated than food
Understanding Framework Projects
00:36:37
Speaker
delivery. But yeah, I think at least from, at least from, at least from our interaction, it's still, it's, it's, it's definitely easier said than done. Like it still feels like on the ground, there's a lot of, you're dealing with usually like local residents. You're usually dealing with like a lot of different geographic ah regions and local councils and like,
00:36:57
Speaker
We're about to turn up and do the work and we're missing. We haven't notified residents. so you know that's yeah i think that's what those those... Maintaining standards on something that broad is super difficult. That's where the rubber hits the road. And I think, like you said, you kind of want someone that... You you kind of want a learning curve to happen, which is like, we're the we're the team that does the pipes. We know what you know we know what the process of of that looks like.
00:37:19
Speaker
um And the more you can just turn that into a production line, the better. And that's where I think it's like a production project. Yeah, for sure. in the In the remaining minutes we've got before before we turn into pumpkins.
00:37:31
Speaker
Yeah, I've just seen the time. Let's let's start. Should we dive into this ah this enormous port project in Tanzania? Yeah, let's do it. So yeah, an enormous port that's supposed to apparently handle 20 million containers annually.
00:37:45
Speaker
which is a $10-plus billion dollar investment supported or within the China Belt and Road Initiative that has been hanging around for 10-plus years, ah looks like it might be getting some
Tanzania's $10 Billion Port Project
00:38:01
Speaker
momentum. is that is that the good Is that a good overview of the, if I was to try to summarize the entire story in 30 seconds, is that what you'd say? Yeah, I think there's ah there was ah a bit of a, it was it was on and then it was canceled and now it's back on again. But ultimately, China sees it as what would be one of the main ports that covers the logistics between Africa and Asia.
00:38:25
Speaker
Yeah, in a country that already does have a huge port in Tanzania and also in Kenya, which is just over the border to the north. So, yeah, yeah it's a ah huge logistical spot. We've spoken many times around China and it's all roads lead to China scheme.
00:38:41
Speaker
So, um yeah, it looks like they're going in and helping with funding. Yeah, I think the the the key thing that you mentioned on again, off again and back on again, um the key thing here being, the I guess, the thing that we've talked about before and like and definitely not uniquely, it's ah what's the trade-off ah for the the home country ah in taking this money from China?
00:39:06
Speaker
And the reason it was off again was the local government thinking, God, the the the terms of this this loan are starting to not look so attractive and and might put us um ah little bit like ah i don't know like a ah proxy state or you know under we're too beholden to China.
00:39:26
Speaker
Yeah, the original deal over 10 years ago was um ah China paying 85%, the Tanzanian government paying 15%, but China get a 99-year lease on the port itself. So yeah you're almost writing it off for 100 years. Yeah.
00:39:41
Speaker
Yeah. yeah So it's a difficult spot to be. And for politicians that think at best like six and a half minutes ahead of themselves, are waiting 99 years feels like a long time to get a port back.
00:39:52
Speaker
Yeah, it feels like a good move that it was cancelled. What isn't clear is how the terms might have changed or will change in the new ah negotiation. But um yeah, I guess we'll have to keep track of that.
00:40:04
Speaker
What's interesting from a bunch of the stories recently on the in this newsletter that are across ah we covered across a couple across Africa is how many of these very large infrastructure projects that are in part funded by China are in this kind of limbo state as countries try to think about the deal that they're making, um get other parties to the table to try and turn up with as much of their own money as possible to minimize the the external money from, say, China coming in.
Global Impact of China's Infrastructure Investments
00:40:36
Speaker
Yeah, so there was a port in Sri Lanka that they defaulted on the ah the loan agreement pretty quickly and now China have a 100-year lease on it. so Yeah, it so it does it does feel like the proverbial deal with the devil, you know, like the, yeah what's the what's the, is it Little Mermaid where she signs the, what's?
00:40:53
Speaker
You know the story? Tell everyone you have kids without telling everyone you have kids. No, sure everyone listening to a construction post podcast knows deeply the story of The Little Mermaid, so I don't need to explain it. Everyone gets the analogy. Job done.
00:41:09
Speaker
I'll have re-watch at the weekend. Yeah.
00:41:13
Speaker
We'll circle back. We're well and truly over time, mate. Thank you very much. That was ah super interesting. Yeah, definitely. And thank you very much, everyone, for tuning into today's show. If you did like the episode, please do think about liking the video or following us on your chosen podcast platform.
00:41:29
Speaker
We really appreciate your support and we'll see you all next week. Bye-bye.