‘Should football clubs use fixed price or construction management for stadium projects?’

We are a consultant working with a football club who is looking to redevelop their stadium. We are concerned that we’ll struggle to get contractors to bid under a fixed-price procurement model, so we are considering construction management instead. However, we’ve heard this approach has caused delays and cost overruns on other stadium projects that have been built this way. How do we make sure that
doesn’t happen to us? 

In the UK over the past 20 years or so, there have been some memorable stadium projects. For example, Wembley (built 2000-2007) was procured under a design-and-build arrangement, with the contractor (Multiplex) being appointed to build under a fixed-price agreement. Issues with the project, and in particular with their steelwork contractor and other design changes, meant the final bill nearly doubled. The resulting legal bill included an eye-watering £1m for photocopying alone. The lesson learnt from this project was that on a fixed-price contract, the risk is only transferred when the risks have been properly considered and priced at tender stage. 

Arsenal’s Emirates Stadium (built 2002-2006) was procured as a traditional design-and-build, fixed-price contract. The project was delivered by Sir Robert McAlpine two weeks ahead of schedule and was pretty much on budget. This project was delivered with clear main contractor accountability, early design and package procurement and with a client that had a very strict budget.

Tottenham Hotspur’s new stadium (built 2015-2019), was originally procured under a fixed-price contract. However, due to economic constraints of the scheme and complexity, it was decided between contractor Mace and the employer (Spurs) that the fixed priced would be converted to a construction management contract. The employer negotiated up to 100 contracts itself rather than allowing the contractor to choose. In addition, once the employer had chosen the direct appointment, it turned the delivery model into construction management. The project eventually overran by 12 months, with the outturn cost being more than double of the original scheme. 

Achieving successful completion of a football stadium is not simple. 

Historically, when a stadium project has gone wrong, it is rarely because of the model itself. It is often the case that the client took on the delivery risk without taking on delivery capability. The construction manager effectively becomes the developer. If nobody in that position is experienced enough to hold the programme together,
then gaps will show, and it is inevitable that delays and additional costs will be experienced. 

Construction management may be a suitable procurement model, so long as some key principles are considered. Construction management doesn’t fail because packages are hard to manage; it fails when the packages are not managed correctly. To ensure good construction management, the following controls should be built in.

Appoint a contractor with genuine construction management experience. Obtain references of similar projects completed, don’t just obtain general commercial information.

The client should build a team that consists of an experienced employer’s agent or in-house project director. These appointments should be done before the construction manager provides oversight of cost reporting, package strategy and programme. The point here being not to take the construction manager’s word on how the job is going. 

Ensure one person is in charge of decision-making. This helps to define a single approval chain for contract documents, design sign-off and instructions to trade contractors. In turn, this will ensure that questions are being asked where the employer and design team haven’t agreed between themselves. 

Sequence packages to the design not programme pressures. It is good practice to resist letting a trade package early just to show progress. A trade package let against an unresolved design is the single most common source of variations and disputes. 

Ensure monthly cost reporting with a “live” contingency position, rather than having a single project-wide number that hides where the pressures are occurring. It is good practice to see committed costs, anticipated final cost, remaining contingency, as-built progress and planned works to complete for each trade package. 

Write a formal change control process into the construction management agreement. Every variation should be priced and approved before work proceeds. 

Construction management is well suited to a stadium development as it enables specialist packages to be tendered competitively. It keeps design flexible with the programme and it avoids paying a main contractor’s premium for risk which it would otherwise pass straight back to the employer. 

The projects that struggle, are the ones where the employer adopts a model without adopting any governance that has to come with it. Get the team, authority, structure and reporting right, before the appointment of trade contractors and construction management becomes a route to a better value stadium. 

Maybe the team looking to build the next new stadium in Manchester will consider using construction management – though they’ve already hit sticking points just finding land on which to place it.

Paul Gibbons is founder and CEO of Decipher.